words Question 8 6pts a) True or False (write down your answer in the answer box
ID: 1165528 • Letter: W
Question
words Question 8 6pts a) True or False (write down your answer in the answer box; The share of income held by the wealthiest 1% in the United States is the same in 2007 as it was in 1979? (b) What is one potential explanation (seen in cass) or why ncome ditrbutionculd change? Briefly explain. (c) Briefly, in words (and no formal economic words needed, how do incomeand weath relate to each other? x below make sure you answer ALL parts (a) -id.and diearly abdl ad your answer (part (a), (b), etc.) ?Explanation / Answer
1. False.
The top 1 percent of America’s income earners have more than doubled their share of the nation’s income since the middle of the 20th century. American top 1 percent incomes peaked in the late 1920s, right before the onset of the Great Depression.
Inequality in America is growing, even at the top. The nation’s highest 0.1 percent of income-earners have, over recent decades, seen their incomes rise much faster than the rest of the top 1 percent. Incomes in this top 0.1 percent increased 7.5 times between 1973 and 2007, from 0.8 percent to an all-time high of 6 percent.
2. Age is one of the ways in which income distribution could change.
A median worker in the income distribution experiences about a 38 percent rise in his real earnings between ages twenty-five and sixty. There is an impressive amount of heterogeneity: Workers below the 20th percentile actually experience a decline in earnings, while those in the top 1 percent experience a fifteenfold increase.
While the (ceteris paribus) declining population size has a slightly equalising effect on the main sources of income accruing to working population households and pensioner households, the spread between these incomes becomes significantly wider due to a structural effect resulting from a (ceteris paribus) growing share of old-age population which leads to a faster growth of labour income due to a rapidly declining size of labour force.
3. Wealth refers to the stock of assets held by a person or household at a single point in time. These assets may include financial holdings and saving, but commonly also include the family home. Income refers to money received by a person or household over some period of time. Income includes wages, salaries, and cash assistance from the government.
In some ways, wealth is more important for understanding social inequality because wealth generates income, so income inequality depends in part on wealth inequality. Research on racial inequality argues, that a large part of inequality between African Americans and whites is due to differences in wealth and discrimination against African Americans in the acquisition of wealth, particularly housing.
Wealth generates income for if we have built up savings balances they ought to pay interest (although interest rates are low at the moment!). Shares lead to a flow of dividend payments. An occupational pension scheme will eventually allow someone to receive an income when they have retired.
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