Explanation The income inequality represents the unequal distribution of income across various economic participants of the economy. When there is income inequality, the poor people of the economy will earn very small income, whereas the rich will earn very high level of income from the economy. When the income inequality is lower, the difference between the income earned by the poorest fifth and richest fifth will be the minimum. When gauging the inequality, the life cycle income has more importance than the transitory income...

The importance of life cycle income in gauging the inequality.

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN: 9781285165875

Author: N. Gregory Mankiw

Publisher: Cengage Learning

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Question

Chapter 20, Problem 4QR

To determine

The importance of life cycle income in gauging the inequality.

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Why is there reluctance on the part of some in the United States to redistribute income so that greater equality can be achieved?
Describe how a push for economic equality might reduce incentives to work and produce output. Then describe how a push for economic inequality might nut have such effects.
If a family of three earned 20,000, would they be able to make ends meet given the official poverty threshold?
Here is one hypothesis: A well-funded social safety net can increase economic equality but will reduce economic output. Explain why this might be so, and sketch a production possibility curve that shows this tradeoff.
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