A-Level - Addressing income and wealth inequality

What is a Gini coefficient?

• A. a measure of the extent of wealth inequality in a country

• B. a measure of the extent of income inequality in a country

• C. the difference in income between the rich and poor in a country

• D. the difference between a country’s average income and the international poverty line

The table below shows the Gini coefficients for four countries in Sub-Saharan Africa.

Use the data in the table to say which of these statements is correct.

• A. The income distribution is more equal in Botswana than Zambia.

• B. Tanzania has the lowest income in the group.

• C. The income distribution is more equal in Tanzania than in the Central African Republic.

• D. Poverty is more widespread in Botswana than in Tanzania.

The government of a middle-income country is reviewing its tax system to give a more equal distribution of income. The current arrangements are:

• no income tax is paid where annual earnings are below $5000

• the tax rate increases more than in proportion to incomes above $5000

• there is a 5% general sales tax

• exemptions from the sales tax apply to necessities.

Which of the combinations below will help the government to achieve its objective of a more equal distribution of income?

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Which of these policies would be effective in achieving a more equal distribution of wealth?

• A. a progressive income tax system

• B. an increase in the minimum wage rate

• C. providing universal benefits

• D. a new tax on property ownership

A more equitable distribution of income and wealth is likely to lead to which of the following consequences for an economy?

• A. People will be better motivated to work harder to improve the standard of living.

• B. A budget deficit is required to pay for additional government spending.

• C. Workers will be able to retire earlier.

• D. Rich people will leave the country.