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Economics
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1 Nov 2020

7. Government redistribution makes the income distribution more equal. True or False.

a. True

b. False

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Evaluating the Government Policies to Reduce Income Inequality
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Raushan Raj
Raushan RajLv8
1 Nov 2020

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Related questions

8. The fact that some degree of redistribution occurs now through the federal income tax and government antipoverty programs does not settle the questions of how much redistribution is appropriate. True or False.

a. False

b. True

3. In the United States, the wealth distribution is more unequal than the income distribution, because differences in income can accumulate overtime to make even larger differences in wealth. True or False. 

a. True

b. False

4. Redistributive philosophies and incentives consider a society comprised of two people. Lorenzo earns an income of $120,000 per year, and Neha earns an income of $35,000 per year. The government considers a redistribution plan that would impose a 20% tax on Lorenzo's income and give the revenue to Neha. Without any incentive distortion, Lorenzo would retain $96,000, and Neha would end up with $59,000. However, let us assume that since Lorenzo will not receive all the income he earns, he decides to work less and earn an income of only $110,000, which will be owed in taxes. With the redistribution plan, Lorenzo will take home an income of _________.

5. The $22,000 that Lorenzo pays in taxes will be transferred by the government to Neha. Let us assume that since Neha now receives payment from the government, she will not work as many hours and will earn an income from work of only $34,000 instead of her initial $35,000. With the redistribution plan, Neha's total income (including the government received) is now______.

6. Without a redistribution plan, total income in this society is______.

7. After the redistribution plan is implemented, the total income in this society is______

8. Therefore, the redistribution plan total income in this society_______(increases/decreases).

9. According to the utilitarian political philosophy, the $22,000 transferred from Lorenzo to Neha will benefit Neha than it hurts Lorenzo. Which of the following statements is true according to this philosophy?

A.The government should definitely institute the plan because it will increase overall utility.

B.The government should not institute the plan because it has no right to take money from one person and give it to another.

C. The redistribution may or may not be desirable, depending on the utility gain's relative magnitude and efficiency loss.

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