Briefly explain how most economists feel about a total equal redistribution of income.
What will be an ideal response?
If some income redistribution is good, why not go all the way and completely
equalize everyone’s income, taxing the rich extremely heavily and giving massive
subsidies to the poor? Nearly all economists oppose that scenario because our incomes
would all be equal but much smaller, providing little incentive to work, invest, and save.
Why help make the economic pie (total output) if they will give you a piece if you don’t
work? Who would take on the risky jobs if everyone were paid the same? Why would
you go to school if your investment in human capital was so low? Most economists
believe, for efficiency and equity (fairness) reasons, that there ought to be some limits
on redistributive efforts.
You might also like to view...
Suppose the price of a tie rises from $45 to $55. Using the midpoint method, what is the percentage change in price?
A) 10 percent B) -10 percent C) 20 percent D) -20 percent E) 100 percent
Suppose Molly has an income of $35,000 annually and has inherited a savings account of $20,000. Wyatt has a job that pays $35,000 annually, but has debts totaling $6,000. Which of the following is TRUE?
A) We can expect Wyatt and Molly to save the same proportion of their incomes this year. B) We can expect Molly to save more than Wyatt this year. C) We can expect Wyatt to save more than Molly this year. D) We can expect Wyatt and Molly to have equal amounts of consumption this year.