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Exploring Economics

8th Edition
Robert L. Sexton
ISBN: 9781544336329

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BuyFindarrow_forward

Exploring Economics

8th Edition
Robert L. Sexton
ISBN: 9781544336329
Textbook Problem

How might each of the following affect the distribution of income in the near term?

a. There is a massive influx of low-skilled immigrants.

b. A new baby boom occurs.

c. The new baby boomers enter their 20s.

d. The new baby boomers reach age 65 or older.

e. There is an increase in cash transfer payments, such as Supplemental Security Income.

f. There is an increase in in-kind transfer payments, such as food stamps.

To determine

(a)

To indicate:

The effect of massive influx of low-skilled immigrants on the distribution of income.

Explanation

The massive influx of low skilled immigrants will affect income distribution because the unskilled worker receives less wage as compared to skilled labor. However, unemployment will also increase as the number of unskilled labor increases.

Concept

Income Distribution:

Income distribution refers to the way in which total GDP of a country is distributed in the economy. If everyone in the country earns almost the same amount of money, then the distribution of income is fair. If the income varies widely among the different classes of people in an economy, it is termed as unequal distribution of income.

To determine

(b)

To indicate:

The effect of occurring of a new baby boom on the distribution of income.

Explanation

A new baby boom will affect the income distribution and it will create an unequal distribution of income because a new baby boom will create high dependency on earners.

Concept

Income Distribution:

Income distribution refers to the way in which total GDP of a country is distributed in the economy. If everyone in the country earns almost the same amount of money, then the distribution of income is fair. If the income varies widely among the different classes of people in an economy, it is termed as unequal distribution of income.

To determine

(c)

To indicate:

The effect of new baby boomers which are entering in their 20s on the distribution of income.

Explanation

The new baby boomers entering their 20s that means the baby boomer are young and now they can contribute to the economy. However, the earning capacity is more in youth hence the fair income distribution will occur.

Concept

Income Distribution:

Income distribution refers to the way in which total GDP of a country is distributed in the economy. If everyone in the country earns almost the same amount of money, then the distribution of income is fair. If the income varies widely among the different classes of people in an economy, it is termed as unequal distribution of income.

To determine

(d)

To indicate:

The effect of baby boomers who are aged 65 or are older on the distribution of income.

Explanation

The new baby boomers of age 65 or older are those whose capacity of earning is decreased. As age 65 or older is the retirement age and this will create an unequal distribution of income.

Concept

Income Distribution:

Income distribution refers to the way in which total GDP of a country is distributed in the economy. If everyone in the country earns almost the same amount of money, then the distribution of income is fair. If the income varies widely among the different classes of people in an economy, it is termed as unequal distribution of income.

To determine

(e)

To indicate:

The effect of an increase in cash transfer payments on the distribution of income.

Explanation

The increase in cash transfer payment will create a fair distribution of income because cash transfer payment refers to the direct transfer of income by the federal government to the eligible person.

Concept

Income Distribution:

Income distribution refers to the way in which total GDP of a country is distributed in the economy. If everyone in the country earns almost the same amount of money, then the distribution of income is fair. If the income varies widely among the different classes of people in an economy, it is termed as unequal distribution of income.

To determine

(f)

To indicate:

The effect of in-kind transfer payments on the distribution of income.

Explanation

The increase in in-kind transfer payment will create an unfair distribution of income because it will be difficult to evaluate the value of service in-kind. However, it becomes easy to evaluate the service and provide cash accordingly.

Concept

Income Distribution:

Income distribution refers to the way in which total GDP of a country is distributed in the economy. If everyone in the country earns almost the same amount of money, then the distribution of income is fair. If the income varies widely among the different classes of people in an economy, it is termed as unequal distribution of income.

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