Quiz 21: Poverty, Inequality, and Discrimination
One would personally allow leaking 40 percent from the bucket for transferring money to poor people from rich. Rich people should transfer 40 percent of their income for poverty alleviation. Government should impose higher taxes on higher income group of people. This would help to redistribute income level in the country. People differ in terms of their opinion regarding income distribution from rich to poor because of their income level. Higher income group of people would prefer lower leakages where as poor people prefer higher leakages.
The percentage of people whose annual income declines below the poverty line is regarded as the poverty rate. Poverty rate indicates the percentage of people living below poverty line. During recession, the poverty rate tends to increase considering an increase in the unemployment rate. Average income of the people declines during the recession. Aggregate demand and total output tends to decline during recession. Reduction in the aggregate demand and total output leads to an increase in unemployment rate. Increasing unemployment rate induces poverty rate. For example, the percentage of people living below poverty line has risen significantly due to the adverse effect of recession in 2009.
One would pick a guaranteed income of $18,000 and a 50 percent of tax rate. The guaranteed income level is determined at higher level considering the rise in general price level. The negative income tax is referred to a tax system in which poor people are likely to receive guaranteed income. The following is a table which shows a negative income tax plan. The above table indicates that the guaranteed income is given to the families whose income is zero. This program aims to reduce the poverty level in the country. In the above table, the break-even level of income is $36,000. At this level of income, people are not given financial support.