Chapter 30 Redistribution of Income (Need a Calculator)

Chapter 30

Redistribution of Income

Multiple Choice

Which country has the highest income inequality based on the Lorenz Curve?

• A

• B

• C

Multiple Choice

Which country has the most income equality based on the Lorenz Curve?

• A

• B

• C

Multiple Choice

Inability to meet the basic needs such as food, shelter, and clothing necessary for basic survival

• absolute poverty

• relative poverty

• developed world

Multiple Choice

When a person is unable to enjoy the normal standard of living for the society in which he or she lives.

• absolute poverty

• relative poverty

• wealth

Multiple Select

What are the three ways to reduce income inequality?

• Use regressive taxation

• Redistribute tax revenue through benefit payments (welfare)

• Use progressive taxation

• Invest in education and healthcare

Multiple Choice

An individual or business entity that is obligated to pay taxes to a federal, state, or local government.

• Taxation

• Tax creditors

• Taxpayers

• Tax rate

Multiple Choice

Income tax is-

• Money your employer pays to you

• Money you earn and put into the bank

• tax paid on the money you earn from working each year

• FREE MONEY!!

Multiple Choice

Sales Tax is-

• Tax on things you buy or purchase

• tax on the house you own

• tax take out of your paycheck

• tax that you pay once a year on your income

Multiple Choice

2. Which of the following is a form of direct tax?

• Income Tax

• Sales Tax

Multiple Choice

2. Which of the following is a form of indirect tax?

• Income Tax

• Wealth Tax

• Corporate Tax

• Sales Tax (VAT)

Multiple Choice

When the tax rate increases as the income increases, the tax is called:

• Progressive

• Proportional

• Regressive

• Retrogressive

Multiple Choice

When the tax rate decreases as the income increases, the tax is called:

• Progressive

• Proportional

• Regressive

• Retrogressive

Multiple Choice

Progressive Taxation Example:

Lisa has an income before taxes of $9,875.

What is her taxable income?

• $862.50

• $962.50

• $0

• $987.50

Multiple Choice

Progressive Taxation Example:

Felix has an income before taxes of $18,000.

What is his taxable income?

• $1,862.50

• $1,962.50

• $2,000

• $2,162.50

Multiple Choice

Regressive Taxation Example:

Lisa has an income before taxes of 100,000 CHF.

She goes on vacation for 10,000 CHF and pays 1,000 CHF in indirect taxes (VAT)?

What is her indirect tax rate?

• 2%

• 10%

• 1%

Multiple Choice

Regressive Taxation Example:

Jeff has an income before taxes of 50,000 CHF.

He goes on vacation for 10,000 CHF and pays 1,000 CHF in indirect taxes (VAT)?

What is his indirect tax rate?

• 2%

• 10%

• 1%

Multiple Select

What are reasons to reduce income inequality?

• Ethical Issues

• Good for the overall society (better quality and healthier workers)

• Inequality may lead to higher crime rates and other societal problems

• The poor may not appreciate the help

Multiple Select

What are reasons not to reduce income inequality?

• Incentive for the rich to move or cheat on their taxes

• Opportunity cost for tax revenue

• May be seen as punishing success

• Higher taxes may cause cost-push inflation/higher prices