EBK ECONOMICS: PRINCIPLES AND POLICY
13th Edition
ISBN: 8220100605932
Author: Blinder
Publisher: Cengage Learning US
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Question
Chapter 20, Problem 1DQ
To determine
Leaky bucket analogy.
Expert Solution & Answer
Explanation of Solution
When the government introduces the process of redistribution of income among its citizens to reduce the income inequality of the economy, there merges many leaks in the income, and they are together known as the leaky bucket. When the topic of leaky bucket analogy is discussed, the students who are interested in more equitable distributionwould be willing to accept a greater leakage in percentage terms. On the other hand, the students who are more interested in efficiency, they will accept a much lesser percentage.
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Students have asked these similar questions
Assume a society consists of two economic groups: one group is rich and the other group is poor. Suppose that
50
percent of the population is rich while the other
50
percent of the population is poor. Consider two scenarios.
Scenario A: The rich have
$80,000
each, while the poor have
$5,000
each.
Scenario B: The rich have
$11,000
each, while the poor have
$900
each.
If you only care about average income and not about equity, you would prefer
▼
Scenario A
Scenario B
,
which has an average income of
$........??
(Enter
your response to the nearest
dollar.)
Now suppose that you only care about equity or inequality.
In this case, you would prefer
▼
Scenario B
Scenario A
,
which has a rich-to-poor ratio of
.........??
(Round
your response to one decimal
place.)
Finally, suppose you only care about living standards.
In this case, you would prefer
▼
Scenario A
Scenario B
because it has lower poverty.
Is it just to tax the rich to give to the poor? Should the government tax Bill Gates and other wealthy people and use the money to supplement the income of unemployed people, single mothers with low incomes, or other poor people? Should the government tax rich people and loan the money interest free to poor kids so that they can go to college? Or would all of that be unjust? Make sure to mention ethical egoism, and altruism in your answer.
Which of the following statements is not correct?
Select one:
a.
The economic life cycle theory explains why gifts of goods and services reduce poverty for the very young and the very old.
b.
Because people can borrow and save to smooth out changes in income, their standard of living in any one year depends more on lifetime income than on a particular year's income.
c.
The percentage of the population that suffers from long-term poverty is far smaller than the percentage of the population that suffers from short-term poverty because there is a high level of economic mobility in the United States.
d.
Permanent income is a better measure of a family's ability to buy the necessities of life than is transitory income.
Chapter 20 Solutions
EBK ECONOMICS: PRINCIPLES AND POLICY
Knowledge Booster
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