Addressing Income Inequality: Fiscal Policy Options and Strategies

The video discusses income inequality, focusing on the Lorenz curve and Gini index as tools for analysis. It explores fiscal policies to address inequality, emphasizing employment, progressive taxes, and welfare benefits. The importance of balancing economic policies to avoid disincentives is highlighted, along with the careful application of indirect taxes to ensure fairness. The video concludes with a reminder of the complexity of achieving economic balance.

What does the Lorenz curve represent in the context of income distribution?

• The total population's wealth

• The cumulative distribution of income

• The average income of a country

• The tax rates applied to different income levels

How can employment opportunities impact income inequality?

• By decreasing the overall economic growth

• By increasing the number of people earning higher incomes

• By reducing tax revenues

• By increasing unemployment rates

What is a potential downside of making direct taxes more progressive?

• It might increase the cost of living

• It may reduce the incentive to work

• It can decrease government revenue

• It can lead to increased unemployment

Why is it important to apply indirect taxes carefully?

• They are always beneficial for low-income individuals

• They are easy to implement without any consequences

• They can have regressive effects on low-income earners

• They do not affect income inequality

What is a key challenge in completely eliminating income inequality?

• It requires making the distribution of income perfectly equal

• It necessitates eliminating all forms of employment

• It involves reducing all forms of taxation

• It demands increasing welfare benefits indefinitely

Which of the following is considered a luxury service that might be taxed indirectly?

• Long haul flights

• Essential medicines

• Public transportation

• Basic food items

What is the main purpose of using indirect taxes on demerit goods?

• To make these goods more affordable

• To provide subsidies for these goods

• To control behavior and reduce consumption

• To increase the consumption of these goods