List and briefly describe the three key reasons for income inequality in a market-based economy.
What will be an ideal response?
1. Differences in labor skills and effort: some people have better labor skills, work longer hours, and/or work at more demanding jobs, and therefore earn more income.
2. Luck and misfortune: some people are luckier than others at investing their money, starting a business, picking an occupation, and having good health, and these people tend to earn more income.
3. Discrimination: some people are paid lower wages or have limited opportunities for education and work because of their race or gender.
You might also like to view...
If Miguel expects to earn a higher income next month, he may choose to
a. save more now and spend less of his current income on goods and services. b. save less now and spend more of his current income on goods and services. c. decrease his current demand for goods and services. d. move along his current demand curves for goods and services.
Which of the following generates allocative efficiency in a market economy?
A) national government intervention B) voluntary exchange between buyers and sellers C) United Nations rules for competition D) equity
Going to college to get more knowledge and skills is considered to be an increase in
A. net exports. B. human capital. C. physical capital. D. consumption.
A tax reduction of a specific amount will be more expansionary the:
A. smaller is the economy's MPC. B. larger is the economy's MPC. C. smaller is the economy's multiplier. D. less is the economy's built-in stability.