Economics Unit 2

What is the difference between income and wealth?

Income is a flow of funds over time; wealth is stock of valuable assets or possessions.

How are income and wealth connected?

Higher income increases a household’s capacity to accumulate wealth, improving financial security over time.

What are the main time of income sources?

Salary
Wages
Interest
Rent
Dividends
Capital
Transfer payments
Pensions
Government Benefits

What is the difference between salary and wages?

Salary is fixed regular monthly payments; wages are payments for specific hours worked.

Define rent and interest income.

Rent is a payment to the landlord for land use; interest is return from lending money or deposits.

What are dividends and capital gain?

Dividends are distributed company profits to shareholders; capital gain arise from selling appreciated assets.

What are transfer payments and indirect benefits?

Transfers are government redistributions like pensions, unemployment; indirect benefits include subsidies, health, housing and education.

What is absolute poverty?

Extreme poverty where people lack basic needs.

What is the world Bank’s poverty line?

Less than $2.15 per day, adjusted for inflation and living costs

How many people around the world live in extreme poverty?

700 M

How many Australians are in relative poverty?

20%

What are reasons for income and wealth inequality?

Personal traits, occupational conditions, opportunities, sickness, disability, age or luck

Give 3 examples of direct income.

Salary, wages, and income from private employments such as rent, or business profit

Using an example, explain what is meant by indirect income.

Indirect income includes subsidies or concessions, e.g., government providing healthcare, education, or housing benefits.

What is meant by disposable income?

Money that is left after direct and indirect taxes deducted.

What is the difference between disposable income and final income?

Disposable income is after tax; final income adds indirect benefits like education, health, and housing services.

What are 3 examples of transfer payments?

Pensions, unemployment benefits, and center link welfare payments.

What are 3 examples of indirect benefits?

Education, healthcare, and social housing.

What are some examples of dividends?

Woolworths, Commonwealth bank payments or BHP.

Give examples of Interest.

Bank savings account, term deposit, or loan.

explain why there is a need for government to provide indirect benefits?

Without government support, large families may struggle to afford healthcare or education.

Give 4 reasons for income & wealth inequality in Australia.

1. Personal traits

2. Occupational conditions

3. Opportunity differences

4. Health issues