Explain the Four Tools That Can Help Solve the Principal-Agent

question 1

Essay

Explain the four tools that can help solve the principal-agent problem.

---

Definitions:

Income Mobility

The ability of individuals or families to move up or down the economic ladder within a lifetime or from one generation to the next.

Income Ladder

A metaphorical representation of the distribution of income across individuals or households in a society, indicating levels of wealth or poverty.

Quintile

A statistical value that divides a group of data into five equal parts, each containing 20% of the population.

Transfer Payment

Payments made by governments to individuals without any goods or services being exchanged, such as social security benefits.