22 Equity and Government Intervention

What is the primary source of income inequality in most societies?

•  

   

  Random chance

   

• Government welfare programmes

• Differences in educational attainment

• Inheritance

Which economic theory suggests that income and wealth inequality is necessary for economic growth?

•  Keynesian economics

• Marxist economics

• Free market economics

• Behavioural economics

Which of the following factors can contribute to income inequality?

• Progressive taxation

•  

  Access to quality education

• Social safety nets

• Discrimination in the workplace

Which of the following is an example of a regressive tax?

• Progressive income tax

• Sales tax such as VAT

• Inheritance tax

• Capital gains tax

Which government policy to counter the effects of income inequality is correctly matched with one of its advantages and one of its disadvantages?

• A

• B

• C

• D

Which statement is not an example of government failure?

• government intervention leading to a less efficient allocation of resources

• government intervention leading to a net loss of economic welfare

• government intervention leading to an increase in consumer surplus

• government intervention leading to social costs exceeding social benefits

What is the economic result of a universal basic income (UBI)?

• A

• B

• C

• D

Which combination of fiscal policy measures would be most effective in reducing income inequality?

• A

• B

• C

• D

What is consistent with a movement towards Pareto optimality?

• when negative externality lowers the utility of an individual

• when consumption of a good is non-rival

• when reallocation of resources can make someone better off without making any other person worse off

• when trade takes place to make one nation better off at the expense of its trading partner

What is most likely to increase relative poverty in a country?

• A increasing means-tested benefit levels

• increasing the power of trade unions

• making the tax system more progressive

• removing the national minimum wage