Chapter 16
what is the difference between poverty and income inequality?
Poverty applies to the condition of people who cannot afford the necessities of life. Economic inequality refers to the disparity between those with higher and lower incomes.
briefly explain the differences between TANF, the earned income tax credit, the supplement nutrition assistance program, and medicaid
TANF Temporary Assistance for Needy Families (TANF) is a program that provides cash assistance and supportive services to assist families with children under age 18, helping them achieve economic self-sufficiency. The United States federal earned income tax credit or earned income credit (EITC or EIC) is a refundable tax credit for low- to moderate-income working individuals and couples, particularly those with children. Supplemental Nutrition Assistance Program (SNAP) SNAP offers nutrition assistance to millions of eligible, low-income individuals and families and provides economic benefits to communities. Medicaid in the United States is a joint federal and state program that helps with medical costs for some people with limited income and resources.
how does the poverty trap discourage people from working?
because government support pays for the poor but it declines as they earn more income
how can the effect of the poverty trap be reduced?
by phasing out government benefits more slowly as well as by imposing requirements for work as a condition of receiving benefits and a time limit on benefits
what are the main reasons economist give for the increase in inequality of outcomes?
change in the structure oh households that have led to more two earner couples and single parent families and the effect of new information and communications technologies on wages
what are some reasons why a certain degree of inequality of income would be expected in a market economy?
differences in age, differences in preferences, a need for incentives, year to year fluctuations, and luck
how has the inequality of income changed in the US economy since the late 1970's
it has increased substantially
describe how a push for economic equality might reduce incentives to work and produce output. Then describe how a push for economic inequality might not have such effects
pushing too aggressively for economic equality can run the risk of decreasing economic incentives, However a moderate push for economic equality can increase economic output, both through methods like improved education and by building a base of political support for market forces
name some public policies that can reduce the level of economic equality
redistribution between the rich and the poor, and estate taxes which are taxes on inheritances
what is measured on the two axes of lorenz curve
the cumulative portion of the total wealth or income & cumulative portion of the population,
what is the safety net?
the groups of government programs that assist the poor
Who are the near poor?
the near poor ware those with low incomes who are just above the poverty line.
who is included in the top income quintile
the people
how is the poverty rate calculated? what is the poverty line?
the poverty rate is what percentage of the population lives below the poverty line. the poverty line is calculated by the amount of income that it takers to purchase the necessities of life.