The following questions pertain to the income distribution depicted in the figur
ID: 1121630 • Letter: T
Question
The following questions pertain to the income distribution depicted in the figure below. Share of Annual Income Received by Each Fifth and Top 60 50 5% ofAmerican Families, 2016 51.5 40 30 20 10 t- 31 22.9 22.5 14.2 8.3 Lowest Second Middle Fourth Highest Top 5% Fifth Fifth Fifth Fifth Fifth Income Categories a. Each of the bars represents a group of American families. How many families are in the b. What share of the total income was received by the richest quintile of American families c. Hypothetically, if income were distributed according to perfect equality, what percent of d. If you wanted to reduce the level of income inequality in this population, name a policy first bar, labeled lowest fifth? (As a percent is ok). in 2016? What about the poorest quintile? total income would go to the top 5% ? that could be implemented to achieve this goal, and explain why.Explanation / Answer
The income distribution in an economy refers to the pattern of distribution of income in an economy. This depends on certain demographic features:
a.In the first bar there is 10% of the family
b.The richest quantile receive 22,5% of the income
c. If there is equal distribution of income the top 5% will get 5% of the income.
d. The most common and widely used policy for equalization of income is redistribution of income through means tested income transfer program . The means tested income transfer program allows the working poor to receive income refunds that can be greater than the taxes they paid during the last year in the form of food stamps, Medicaid, and housing subsidies. Funds for these transfers is made out of the tax collected from richer section of the economy. This ensures a redistribution of income from rich to poor amd ensures income equality.
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