Article Summary in a January,2017 Report,the World Economic Forum Stated That the That

question 38

Multiple Choice

Article Summary
In a January,2017 report,the World Economic Forum stated that the growing income gap has become one of the biggest threats to the global economy and cannot be remedied solely by higher economic growth.Although income inequality has fallen over the past 30 years on a global level,in high-income countries like the United States and the United Kingdom,the top 1% of income earners have benefitted disproportionately from economic growth.This has led a growing belief that the traditional model for economic growth does not result in a population-wide increase in income.According to the report,"The growing mood of anti-establishment populism suggests we may have passed the stage where [reviving economic growth] alone would remedy fractures in society: reforming market capitalism must also be added to the agenda."
Source: Lauren Gensler,"Rising Income Inequality Is Throwing The Future Of Capitalism Into Question,Says World Economic Forum," Forbes,January 11,2017.
-Refer to the Article Summary.The article discusses income inequality and how economic growth alone is no longer resulting in a more equitable distribution of income.If governments increased equity by reducing the incomes of high-income people and increasing the incomes of the poor,would this necessarily increase efficiency?

• A)Yes,efficiency always increases when the income gap between the rich and poor is reduced.
• B)Yes,because equity and efficiency are the same.
• C)No,it is impossible to have an equitable distribution of income which is also efficient.
• D)No,a more equitable distribution of income may reduce efficiency.

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Definitions:

Budget Line

A graphical representation of all possible combinations of two goods that an individual can purchase given their income and the prices of the goods.

Quantity Discounts

Price reductions offered to buyers purchasing in large volumes, aimed at encouraging larger purchases and fostering customer loyalty.

Fixed Price

A price that does not change over time or in response to market conditions, often set by a seller or agreement.

Budget Line

An illustrated chart depicting all the different pairings of two items that are purchasable within a certain budget and cost framework.