Practise distinguishing equity from equality, explaining poverty traps and evaluating taxes, transfers, benefits and supply-side measures for distribution and work incentives.
When is a policy of income redistribution from rich people to poor people most appropriate?
when control of demand-pull inflation is the priority
when equality is valued more highly than efficiency
when monetary reward is the best incentive to risk-taking
when the rich have higher marginal utility curves than the poor
B
Which policy is most likely to contribute to people ending up in a poverty trap?
legal minimum wage
means-tested benefits
prevention of cheaper imports
proportional taxation
B
A government has a policy where income tax is paid only after the first $ 20000 of income has been earned.
What would make the government's policy more equitable?
Decreasing the threshold for paying income tax to $ 10000 for all taxpayers.
Integrating the tax and welfare systems by introducing a negative income tax.
Introducing universal benefits that are available to all citizens irrespective of wealth.
Means testing all benefits so that they remain the same even if real incomes fall.
B