Which of the Following Would Likely Reduce Income Inequality

question 33

Multiple Choice

Which of the following would likely reduce income inequality?

• A) a reduction in the number of high school dropouts
• B) a reduction in Social Security benefits
• C) greater inequality in the distribution of wealth
• D) more stringent requirements to obtain occupational licenses

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Definitions:

Financial Risk

The possibility of losing money on an investment or business venture, usually due to changes in market conditions or poor financial management.

Levered Firms

Companies that use debt in addition to equity in their capital structure.

Unlevered Firms

Companies that operate without the use of borrowed money or financial leverage.

M&M Proposition II

A theory proposing that the cost of equity for a leveraged firm increases linearly with its level of debt, holding the cost of debt constant.