4.1.7

• what is meant by equality

  things being the same - fact based so done with positive statements
• define income

  the flow of money over a period of time
• list some potential income sources

  employment

  benefits

  dividends

  interest
• define wealth

  a stock of assets with financial value
• whats the link between income and wealth

  high income can lead to more wealth as you have more money to buy assets

  higher wealth can lead to more income as the wealth generates more money. e.g. having more savings means you earn more in interest
• what groups of people can income and wealth be divided between

  rich/poor households

  geographical

  age

  gender

  ethnicity
• what is the current differences in income for the richest and poorest 20%

  richest 20% = 66K /year

  poorest 20% = 15k / year
• what factors can influence household income levels

  the number of people in the household

  level of skills / qualifications

  availability of education

  availability of job opportunities

  discrimination faced

  hours worked

  amount of wealth - assets generate income
• what can cause wealth to vary between households

  the level of income earned

  amount of pension contributions

  inheritance

  extent to which wealth is taxed
• what is the lorenz curve

  a graphical way of showing income or wealth distribution in a country
• draw and explain the lorenz curve

  the further away the curve from the equality line the more unequal the distribution of the income or wealth

  
• what is the Gini coefficient

  a number that shows the distribution of income or wealth varies from equal
• explain the gini coefficient

  a number between 0-1

  0 means equal

  1 means unequal
• what are the impacts of unequal income distribution

  can lead to unequal access to opportunities / resources - can lead to un optimal results

  can alter incentives to work - work harder or not try as its not fair

  resentment in society - crime

  unequal access to health / education

  can effect economic growth

  unequal access to property

  positive feedback so the problem gets worse

  trickle down effect is created
• explain how income inequality affects AD

  people have different marginal propensity's to consume depending on their earning levels

  low earners spend more of their pay check

  this means increases to low earners spend more of it

  this can lead to economic growth greater than if the income was given to high earners
• What is one impact of unequal wealth distribution?

  Unequal access to resources and opportunities
• How does unequal wealth distribution create societal issues?

  It creates resentment in society
• What are two areas affected by unequal wealth distribution?

  Healthcare and education access
• What happens in speculative bubbles due to unequal wealth distribution?

  Wealthy people invest unsustainably in markets
• How do Chelsea house prices illustrate unequal wealth distribution?

  They become inaccessible for lower earners
• How do pension sizes affect individuals?

  Pension sizes affect later life incomes
• What is a consequence of unequal access to property?

  It contributes to wealth inequality
• What is positive feedback in the context of wealth distribution?

  More wealth allows greater financial risk-taking
• How does unequal wealth distribution affect entrepreneurs?

  Best entrepreneurs may not afford risks
• What are intergenerational issues related to wealth distribution?

  Wealth inequality affects future generations
• What is the trickle-down effect in economics?

  Wealth benefits trickle down to lower classes
• what are the 2 types of poverty

  absolute

  relative
• define absolute poverty

  an inability to access the basic necessities for life
• define relative poverty

  being poor relative to others
• explain the trickle down affect

  the belief that high levels of income and wealth filters through the economy eventually benefitting the poorer

  this happens through more tax paid, makes more jobs, lower income people earn more
• what are some of causes of poverty

  unemployment

  low wages

  sickness and disability

  old age

  poverty traps

  lone parenting

  lack of information on benefits

  reluctance to claim benefits
• what are some effects of poverty

  worse health / lower life expectancy

  negative impacts on education opportunities and attainment

  negative impact on society

  more government spending and lower tax revenue
• what's the expected life difference between professionals and unskilled workers

  8 years
• define gross income

  the level of income before deductions
• define net income

  the level of income after allowing for deductions
• whats a tax threshold

  the level of income someone must earn before paying tax
• explain fiscal drag

  when tax thresholds don't rise with inflation and earnings growth so people are dragged into higher tax bands reducing net incomes
• whats the marginal tax rate

  the tax rate levied on the next pound earned
• whats a universal benefit

  benefits not dependant on the claimants income
• give an example of a universal benefit

  child benefits - allowed for anyone with a child dependant