20 Book Notes – Econ 201

20 Book Notes – Econ 201 - 20 Book Notes...

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20 Book Notes – Econ 201 A person’s income depends on the demand for their labor. When the government enacts policies to make the distribution of income more equal, it distorts incentives, alters behavior and makes the allocation of resources less efficient. Separate all income families into 5 categories. Top 5 th receives much more of the total money supply than the bottom fifth. Increases in international trade with low-wage countries and changes in technology have tended to reduce the demand for unskilled labor and raise the demand for skilled labor. Data from different countries is collected differently, so a major difference may only come from the way the data is collected. The degree of inequality varies substantially around the world US is in the middle when it comes to income equality. Poverty Rate: the percentage of the population whose family income falls below an absolute level called the poverty line Poverty Line: An absolute level of income set by the federal government for each family size below which a family is deemed to be in poverty “A rising tide lifts all boats” Inequality has increased in recent years in the US - Poverty is correlated with race – blacks and Hispanics are poor - Poverty is correlated with age – children are more poor than old folks - Poverty is correlated with family composition – single parents are much poorer than married couples 3 reasons that data on the income distribution and the poverty rate give an incomplete picture of inequality in living standards: 1. In-Kind Transfers: Transfers to the poor given in the form of goods and services rather than cash
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This note was uploaded on 10/13/2011 for the course EC 201 taught by Professor Haider during the Spring '10 term at Michigan State University.

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20 Book Notes – Econ 201 - 20 Book Notes...

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