Economics Exam 2 - Income And Wealth

Front 1

Higher income

Back 1

emphasis on hard work

Front 2

Lower income

Back 2

emphasis on luck

Front 3

Key to fairness

Back 3

Equality of Opportunity

Front 4

• Capitalist class

Back 4

defined by ownership and control of the capital goods used in production and its power to dispose of the resulting surplus product
o There are management personnel who lack wealth but control labor of others

Front 5

4 Facets of inequality

Back 5

Race, wealth, sex, schooling

Front 6

5 points of Inequality

Back 6

o Living standards – peoples well being depends on health, material goods, material comfort, access to social/natural environment, economy
o Inequality of both income and wealth decreased sharply during the last 3 decades of 20th century and early 21st century
o Children in high income families – more likely to have a high income
o African Americans – continue to earn less
o Jobs in US – segmented – “women’s work” is less well-paid

Front 7

2 different kinds of wealth

Back 7

ownership of houses, cars, personal items
ownership of stocks, companies

Front 8

Net worth

Back 8

sum of all persons assets minus outstanding debt

Front 9

o Factors of increasing inequality

Back 9

• Globalization
• Overseas operations
• Decline of unions
• Improvements of technology

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o Liberal economists

Back 10

inequality leads to crime

Front 11

o Radical economists

Back 11

wages for working class are determined by working class power in the economy – globalization, technology, and decline of unions undermine workers power and increase capitalistic power

Front 12

o Lorenz curve

Back 12

degree of inequality in the distribution of income

Front 13

Gini Coefficient

Back 13

Area A compared to Area A plus Area B
• Lower the ratio, lower the degree of inequality and vice versa

Front 14

Transfer income

Back 14

Social Security, Unemployment Compensation, Veteran Benefits

without transfer income - more unewual

Front 15

Male-Woman income ratio

Back 15

for every dollar a male makes, a woman makes 77 cents

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• Poverty

Back 16

falling below a certain level of income needed for a basic standard of living

Front 17

• Poverty line

Back 17

specific amount of income needed for a basic standard of living

Front 18

• Inequality

Back 18

when one group receives a higher share of total income of wealth than others

Front 19

• Poverty Trap

Back 19

when anti-poverty traps are set up so that the government benefits decline substantially as people earn more income – working provides little financial gain

Front 20

• Near Poor

Back 20

those who have incomes just above the poverty line

Front 21

• Safety Net

Back 21

nickname for the group of government programs that provide assistance to the poor and the near poor

Front 22

TANF – Temporary Assistance for Needy Families

Back 22

replaced AFDC

o Fixed amount of money to each state
o Those receiving TANF must be working/attending school
o Can’t receive TANF for over 5 years in a lifetime
o Avoids poverty trap

Front 23

• Earned Income Credit (EIC)

Back 23

method of assisting the working poor through the tax system –for every dollar a family receives a tax refund
o Single most expensive government agency

Front 24

• Food Stamps

Back 24

federally funded food agency – started in 1964 – contributes to poverty trap

Front 25

• Medicaid

Back 25

1965 – medical insurance for low income people
o Can become part of poverty trap – some low paying jobs pay enough to work but they lose their health insurance – people choose not to work

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• Women, Infants, Children (WIC)

Back 26

food assistance for pregnant women and newborns

Front 27

Changes in family structure

Back 27

o 2008 61% married women in workforce compared to 41% in 1970

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• Redistribution

Back 28

taking income from those with high income and providing for those with lower incomes

Front 29

• Estate tax

Back 29

tax imposed on the value of an inheritance

Front 30

How to labor markets determine wage

Back 30

according to supply and demand

Front 31

Years for substantial increase in inequality and why

Back 31

1970-2000

o Due to the structure of households (single parent)
o Due to increase in information and technology and its effect on wages

Front 32

How to help the inequality Gap

Back 32

o Reform tax policies
o More people in labor force
o Good wages

Front 33

• Relative mobility

Back 33

how likely children are to move from their parents place in income distribution

Front 34

• Absolute Mobility

Back 34

most American’s have higher incomes than their parents because the country has grown richer (81% true)

Front 35

Where is the stickiness/fluidness in economic mobility

Back 35

sticky on top and bottom, fluid in middle

Front 36

Mobile countries

Back 36

Canada, Norway, Denmark, Finland

Front 37

Correllation between ricnhess and life expectancy in US, in Britain?

Back 37

US - no correlation
Britain - there is a correllation

Front 38

Health and social problems correlation with income inequality and GDP?

Back 38

Health and social problems correllate with income inequality but not GDP

Front 39

Child well-being corellation to inequality and GDP?

Back 39

correllates with income inequality but not GDP

Front 40

Trust and income inequality among 50 states corellates with?

Back 40

mental illness

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• How to get greater equality

Back 41

o Taxes
o Welfare state

Front 42

• Demand for labor affected by

Back 42

o Change in consumer demand
o Change in technology

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• Conservative view of labor markets

Back 43

o Fair; you get what you deserve

Front 44

• Liberal view of labor markets

Back 44

o Somewhat fair; roadblocks/impediments

Front 45

• Radical view of labor markets

Back 45

o Coercive, exploitive
o Objectifies

Front 46

• Consequences of Inequality

Back 46

• Drive to commit crimes
• 2x more likely to dropout of school

Front 47

What do we do about inequality

Back 47

Focus on poor
EITC
Increase opportunity
Redistribution of income

Front 48

bifurcated effect

Back 48

help some, but others struggle – if you’re already employed it helps, if not, it harms

Front 49

effects on focusing on power

Back 49

• Increase minimum wage
• Could put some people out of work because being paid more for the same skills
• Increase minimum wage, increase unemployment
• **A bifurcated effect: help some, but others struggle – if you’re already employed it helps, if not, it harms

Front 50

effects on EITC

Back 50

• Helps people at lower end of income tax
• Employers can pay on wage they want
• A credit you can get when filing taxes
• Up to a certain amount you get extra cents per hour
o Based on each dollar earned
o Doesn’t distort the labor market
o Provides incentive to earn money
o Doesn’t create unemployment

Front 51

effects of increased opportunity

Back 51

• Educational opportunities (k-12ed for everyone)
o Higher education
• Head start programs/preschool
• Healthcare access
• Inheritance
o Tax inheritance (death tax)
• Creates double taxation
• Opportunity vs outcomes – outcomes vary
o Trying to level the playing field at the start (giving the same chance)

Front 52

effects of redistribution of income

Back 52

• Deserve vs don’t deserve income
• Moral of redistribution of wealth
• Ulitarian – maximize societal well-being
o Bill Gates example with $1000 from him and give it to a struggling college kid
o Bill Gates satisfaction stays the same but the college student becomes more satisfied