4.2.2

Question 1

Wealth inequality

Answer 1

• Wealth: total value of assets owned by individual or household
  e.g. real estate, investment, saving, possessions
• Measures unequal distribution of assets
• Disparities in accumulated financial resources

Question 2

Income inequality

Answer 2

• Income: flow of money received over a specific period - annually
• Uneven distribution of flow

Question 3

The lorenz curve to measure income inequality

Answer 3

• Graphical representation of income distribution in population
• Cumulative percentage of income received
• Perfectly equal - 45 degree line
• Greater deviation - higher inequality

Question 4

Gini coefficiency to measure income inequality

Answer 4

• Numerical index to quantify income inequality
• 0(equality) - 1(inequality)
• Area between lorenz curve and like of equality

Question 5

Causes of income and wealth inequality: within countries

Answer 5

• Education - different access to quality education - differences in skills and income
• Wage differentials
• Wealth accumulation - inheritance or savings and can earn rent or interest on assets
• Age - older people have more time to build up assets - peak time in career

Question 6

Causes of income and wealth inequality between countries

Answer 6

• Globalisation - uneven benifits - offshoring
• Historical factors - colonialism, unequal access to resources
• Geopolitical factors - conflicts, wars, political instability
• Developed countries favour eachother

Question 7

Impact of economic change + development

Answer 7

Change:
- Distribution of growth increases/ reduces inequality
- Inclusive growth policies that target marginalised - reduce income inequality

Development:
- gini coefficient reduction
- focus should be on equitable development - education, healthcare, infrastructure

• Kuznets hypothesis - inequality increases as society moved from agriculture to industry - wages of industrial workers rise faster than farmers - wealth must be redistributed
• Piketty - argued inequality rises as country develops because - rate of return on capital grows - rich get richer

Question 8

Significance of capitalism for inequality

Answer 8

Positive
- Incentivise innovation, entrepreneurship - which benefits society as a whole
- aids growth
- wealth passed on/gained

Negative:
- unregulated capitalism leads to inequality - concentration among the elite
- wage differentials vary
- excessive causes problems with efficiency and social justice