Income, wealth and measures

Match the below income types with their descriptions.

• Unearned Income

• derived from government cash welfare payments made to the neediest individuals with little or no income or wealth

• Earned Income

• comes from households selling their labour (i.e. supplying intellectual talents and/or physical power to businesses)

• Gross Income

• the total of private or market income received before tax, along with income received from government welfare benefits

• Transfer Income

• includes rent and interest, and is received for allowing others to use your property and savings

• Nominal Income

• number of dollars of income received by an individual measured over a period of time

If the average level of household’s nominal incomes went up by, say, 4 per cent during 2022 and average consumer prices during the year went up by 6 per cent, then real incomes or purchasing power would have...

• Risen by 4%

• Fallen by 4%

• Risen by 2%

• Fallen by 2%

How can wealth help increase your income and material living standards? (2 marks)

Answer explanation

Wealth usually generates income as it can very simply be invested to receive returns. Those returns can be used to improve material living standards through bigger homes, education opportunities, etc.

Match the following

• Disposable Weekly Income

• level of spendable income available for individuals, after adjustments have been made to reflect the effects of different-sized households

• Final Income

• regressive and add to inequality because their value represents a higher % of a low-income earner’s income than for a high-income earner purchasing a particular item

• Market or Private Income

• income after the effects of government income redistribution policies including welfare, free or subsidised public services, direct personal income tax and indirect taxes

• Indirect Taxes

• Income available for spending after the receipt of welfare benefits and deduction of personal taxes

• Equivalised disposable income

• personal income including wages, salaries, profits, rent, interest and dividends

Explain this editorial cartoon using what you have learning in Topic 4.3. (2 marks)

Answer explanation

Despite government redistribution policies, there is a consistent trend of growing income inequality in Australia. Any wage growth does not keep up with cost of living increases.