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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

Explain what the long- and short-term consequences are of not promoting equality or working to reduce poverty.

To determine

The long-term and short-term consequences of not promoting equality or not working to reduce poverty.

Explanation

Poverty is the absence of the necessities, or, the inability to acquire the income required to be able to afford the necessities (such as food, clothing, shelter, healthcare, etc.). Economic inequality refers to the disparity in the income across individuals in an economy. It is represented by the difference in the living standards among the individuals across a country. Both inequality and poverty are bad for an economy. Thus, it is essential that government plays an active role in reducing inequality and poverty through appropriate redistribution programs.

However, if the issues of inequality and poverty are not addressed, it can result in severe outcomes spanning from social to political to economic problems for a country both in short and long-term.

To start with, if inequality and poverty persist for a significantly long time, it can result in resentment against the political system because of inability of the government to undertake appropriate redistribution measures. This can result in political instability and thus uncertainty in the country. The existence of uncertainty takes a toll on investment and output...

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