ExpertMedium1 markMultiple Choice
AQA GCSE · Question 06 · How the economy works
Which pair of policies is most likely to increase income inequality?
Which pair of policies is most likely to increase income inequality?
Answer options:
A.
Less progressive income taxes and increased unemployment benefits
B.
Less progressive income taxes and reduced unemployment benefits
C.
More progressive income taxes and increased unemployment benefits
D.
More progressive income taxes and reduced unemployment benefits
How to approach this question
Analyse each policy's effect on income distribution. 'Progressive' taxes take a larger percentage from higher earners, reducing inequality. 'Less progressive' or 'regressive' taxes do the opposite. Unemployment benefits support the lowest earners. Look for the combination of policies that helps the rich and/or harms the poor.
Full Answer
B.Less progressive income taxes and reduced unemployment benefits✓ Correct
The correct answer is B. Less progressive taxes mean the rich pay a smaller proportion of their income in tax, while reduced unemployment benefits harm the poorest. Both policies widen the gap between rich and poor.
Income inequality refers to the extent to which income is distributed in an uneven manner among a population. A less progressive tax system means higher earners pay a smaller proportion of their income in tax compared to a more progressive system. This widens the gap. Reducing unemployment benefits directly lowers the income of those out of work, who are typically among the poorest in society. The combination of these two policies is therefore most likely to increase income inequality.
Common mistakes
Misunderstanding the term 'progressive tax'. Progressive means the tax rate increases as the taxable amount increases.
Practice the full AQA GCSE Economics Paper 2
29 questions · hints · full answers · grading
More questions from this exam
Q01Fiscal policy would involve changes in which of the following?EasyQ02Which of the following is an indirect tax?EasyQ03A balance of trade deficit is best described as which of the following?EasyQ04Which of the following best describes the type of unemployment caused by interest rates and tax r...EasyQ05Table 1 shows economic growth between 2017 and 2021.
**Table 1**
| Economic growth | % change in...Easy