1.8.7 An inequitable distribution of income and wealth

• What does income refer to in economics?

  Earnings over time
• Income is received over a period of time
• Wages, salaries, bonuses, and commissions are examples of income from employment.


  True
• What is one example of self-employment income?

  Business profits
• Wealth is calculated as the total value of assets minus total liabilities
• The closer the Lorenz curve is to the line of equality, the more equal the income distribution.


  True
• A Gini coefficient of 1 indicates perfect inequality
• Match the concept with its example:

  Income ↔️ A salary of $60,000 per year

  Wealth ↔️ House worth $300,000 with a mortgage of $150,000
• Wealth is calculated by subtracting liabilities from assets.


  True
• What is another term for the total value of assets minus total liabilities?

  Net worth
• What does the Lorenz curve measure?

  Level of inequality
• A Gini coefficient closer to 1 indicates greater inequality
• Match the factor with its impact on income inequality:

  Education ↔️ Increases inequality if uneven

  Technology ↔️ Widens income gap

  Globalization ↔️ Exacerbates disparities

  Government Policies ↔️ Mitigates gaps
• Significant wealth gaps can lead to social tensions and undermine social cohesion
• What is the primary goal of welfare programs?

  Ensure a basic standard
• Order the government policies based on their primary focus on reducing income inequality:

  1️⃣ Progressive Taxation

  2️⃣ Welfare Programs

  3️⃣ Minimum Wage
• How is wealth defined in economics?

  Assets minus liabilities
• Wealth is also known as net worth.
• Match the term with its definition:

  Income ↔️ Earnings received over time

  Wealth ↔️ Net worth (assets - liabilities)
• What is one example of a wealth liability?

  Mortgages
• What does the Lorenz curve measure?

  Income equality
• What does a Gini coefficient of 0 indicate?

  Perfect equality
• Order the following steps in calculating a Gini coefficient:

  1️⃣ Plot the Lorenz curve

  2️⃣ Calculate the area between the curve and the line of equality

  3️⃣ Divide the area by the total area under the line of equality
• Wealth is also known as net worth.
• What is one example of a wealth asset?

  Stocks
• Wages, salaries, bonuses, and commissions are examples of income from employment
• A Gini coefficient of 0 indicates perfect income equality.


  True
• How does education impact income inequality?

  Increases it if uneven
• How does high income inequality affect economic efficiency?

  Reduces social mobility
• A progressive tax system requires higher income earners to pay a larger percentage of their income in taxes.


  True
• Setting a minimum hourly wage can help reduce the income gap between the lowest and highest earners