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earned income
comes from households selling their labour/ supplying intellectual or physical talents to businesses
unearned income
received for allowing others to use your property or savings includes rent and interest
transfer income
a one way transaction from govt to individuals with nothing in return, derived from govt welfare payments
fringe benefits
a special non-monetary reward given to a selected employee by an employer in lieu of income, eg free house, company car
gross income
sum of all income received by an individual from various sources before the taxes
disposable income
the income of a person from all sources including govt welfare after the payment of taxes
social wage income
disposable income plus the value of additional govt services such as health care
nominal income
number of dollars of income received by an individual measured over a period of time
real income
nominal income after taking into account the inflation or deflation rate in consumer prices
wealth
a stock of assets or things of value owned by private individuals or govts measured at a point in time
private wealth
the value of property, houses, shares, bonds, savings, superannuation contribution antiques or collectables
govt/public wealth
land, buildings, equipment/other infrastructure associated with the provision of collective public services such as power, transport, health, education
Gini coefficient
is a number between 1 and 0 where 0 is perfect equality, and 1 is perfect inequality
absolute poverty
serious material deprivation and the absence of the real necessities to sustain life
relative poverty
where material living standards are low compared with the rest of the community
what happens when demand for labour is high but supply is low
influx of high paying jobs
what happens when supply for labour is high but demand is low
influx of low paying jobs
some causes of income inequality
unemployment/ reduced hours of work
ownership/ inheritance of wealth
personal influences (age, inflation, overseas economic conditions, growth of technology)
employee income and wealth perspective
might feel wages too low and profits are to high allowing business owners to live a prosperous life they can only dream of
business owner income and wealth perspective
would like to pay staff less to cut cost, improve international competitiveness
consumer income and wealth perspective
they like cheap goods even if it requires depressing wages and profits
govt income and wealth perspectives
they realise it isn’t possible to keep everyone happy as for example cutting taxes for one group, reduces funds available for other purposes
negative effects on inequality
affects educational outcomes
divides society
increase economic instability
positive effects of inequality
increased incentive to work hard and gain improved skills