What is the difference between income and wealth? How can wealth contribute to income inequality?
What will be an ideal response?
Income is a flow that typically represents a stream of wage and salary earnings over a period of time. Wealth is a stock that reflects the financial assets owned by the individual. Some people may have a high level of wage or salary income but little wealth. Others may have little year-to-year salary or wage income but great wealth. This wealth can produce additional income in the form of rents, dividends or interest payments to an individual. There is great inequality in the distribution of wealth, which in turn creates inequality when wealth becomes a source of income for people.
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The exchange rate is
A) the price of one currency relative to gold. B) the value of a currency relative to inflation. C) the change in the value of money over time. D) the price of one currency relative to another.
When nominal interest rates increase, the opportunity cost of holding money will ________, and the quantity of money demanded by households and firms will ________
A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease
A study of consumers in an area found that as family income increased from $25,000 per year to $35, 000 per year, other factors held constant, the number of houses purchased increased from 7,000 per year to 11,000 per year. This finding indicates an income elasticity of demand coefficient for housing over this family income range of:
a. 0.22. b. 0.75. c. 1.33. d. 4.50.
Supply-side economists believe reductions in tax rates can
A) shift the aggregate demand curve to the left. B) shift the short run aggregate supply curve to the left. C) increase output and lower prices. D) decrease output and lower prices.