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This chapter uses the analogy of a “leaky bucket” to explain one constraint on the redistribution of income. a. What elements of the U.S. system for redistributing income create the leaks in the bucket? Be specific. b. Do you think that Republicans or Democrats generally believe that the bucket used for redistributing income is leakier? How does that belief affect their views about the amount of income redistribution that the government should undertake?

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Principles of Economics (MindTap C...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305585126

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Chapter
Section
BuyFindarrow_forward

Principles of Economics (MindTap C...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305585126
Chapter 20, Problem 5PA
Textbook Problem
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This chapter uses the analogy of a “leaky bucket” to explain one constraint on the redistribution of income.

a. What elements of the U.S. system for redistributing income create the leaks in the bucket? Be specific.

b. Do you think that Republicans or Democrats generally believe that the bucket used for redistributing income is leakier? How does that belief affect their views about the amount of income redistribution that the government should undertake?

Subpart (a):

To determine
The leaky bucket as a constraint to the redistribution of income.

Explanation of Solution

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 there is income inequality in the economy, the government can make use of the income redistribution which is the process of taxing the rich people and providing assistance and financial supplement to the poor.

When the government introduces the process of redistribution of income among its citizen to reduce the income inequality of the economy, there emerges many leaks in the income and they are altogether known as the leaky bucket...

Sub part (b):

To determine
The leaky bucket as a constraint to the redistribution of income.

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