Describe the main factors economists believe cause inequality of income
What will be an ideal response?
The distribution of income is based mainly on the marginal revenue product of the factors owned by households, according to the marginal productivity theory of income distribution. Therefore, the causes of income inequality are very complex. Income inequality is determined by the quantities of factors owned by households (including labor, capital, and natural resources) and the prices of these factors of production (which are determined by the interaction of demand and supply). Income inequality is believed to have risen in the past three decades because the wage rates earned at the top end of the income distribution have risen in comparison to those at the bottom end, largely because of the effects of technological change and the globalization of markets. Government policies, especially those dealing with taxes and transfers, also have an effect on income inequality.
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A business fluctuation when the pace of economic activity is slowing down is called
A) a reduction. B) a contraction. C) a depression. D) a slowdown.
Which of the following most clearly illustrates the concept of "derived demand"?
a. An increase in the price of steak causes the demand for poultry to increase b. An increase in the demand for new houses leads to an increase in the demand for construction workers. c. An increase in consumer income leads to an increase in the demand for services provided by the government. d. An increase in the demand for new cars causes the demand for used automobiles to rise.
If people buy more than has been produced,
A) the economy is in equilibrium. B) total expenditures are greater than total production. C) there will be an increase in inventory. D) there will be a decrease in total output.
Whenever somebody deposits a check from bank A into a checkable deposit at bank B, bank A's reserves ________ and bank B's reserves ________
A) increase; decrease B) increase; increase C) decrease; decrease D) decrease; increase E) do not change; do not change