Senior Secondary (HKDSE) · Economics
5 multiple-choice questions marked as you go, and 5 written questions with worked solutions. All on Equity.
In a labor market, if employers consistently pay individuals from a specific demographic group less than others for performing the same job with identical qualifications and productivity, this is an example of income inequality primarily caused by:
In Country X, statistical data indicates that the Gini coefficient decreased from \(0.45\) to \(0.38\) between 2010 and 2020.
Which of the following statements must be true regarding the change in income distribution in Country X during this period?
The following table shows the percentage of total household income received by each quintile of households in an economy for 2019 and 2024:
Household Income Distribution
Quintile | Income Share in 2019 | Income Share in 2024
Lowest 20% | 8% | 5%
Second 20% | 12% | 10%
Third 20% | 18% | 16%
Fourth 20% | 24% | 24%
Highest 20% | 38% | 45%
In 2024, the government reduced the progressivity of the income tax system and decreased transfer payments to low-income families to address a fiscal deficit. Which of the following is MOST likely correct?
A government policy that aims to significantly reduce income inequality often faces a trade-off with economic efficiency. Which of the following best describes a common mechanism of this trade-off?
To address growing income inequality, a country implements a new fiscal policy featuring significantly higher marginal income tax rates on high earners and increased conditional cash transfers to households below the poverty line. Assuming the policy successfully reduces the Gini coefficient, what is the most likely consequence that illustrates the equity-efficiency trade-off associated with this policy?
What is the purpose of using a Lorenz curve to represent income distribution?
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How does the concept of "equalizing opportunities" differ from "equalizing income" in addressing equity?
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Explain how a significant increase in human capital among the highest income earners, relative to low-income earners, could affect the Gini coefficient.
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A government implements a social welfare program that provides a fixed cash allowance to all households whose monthly income falls below a certain poverty line.
a) Explain how this policy primarily aims to improve equity in income distribution.
b) Identify and briefly explain one potential disincentive effect of such a policy on the labour supply of the beneficiaries.
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Country X has experienced a significant increase in its Gini coefficient over the past decade. This trend is largely attributed to rapid technological advancements that favor highly skilled workers, coupled with a decline in traditional manufacturing sectors.
a) Explain how a rising Gini coefficient indicates increasing income inequality.
b) The government of Country X introduces a new policy: a substantial increase in public funding for vocational training programs designed to equip low-skilled workers with skills demanded by emerging industries. Discuss how this policy aims to address income inequality by focusing on equalizing opportunities, rather than directly equalizing income.
c) Besides factors related to human capital and skills, briefly explain one other source of income inequality that this vocational training policy does not directly address.
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