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Practice mode Income Inequality

What kind of tax is VAT a good example of?

Correct answer D. Ad valorem

Explanation

VAT is charged as a percentage of the price of a good or service, such as 20 percent in the UK. A tax set as a proportion of value is called ad valorem, unlike a specific tax per unit.

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Question 01 Income Inequality

Since standard measures of income distribution leave out in-kind transfers, how do they relate to the true inequality of living standards?

Correct answer A. They exaggerate the inequality of living standards

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Question 02 Income Inequality

What effect will a spell of unemployment caused by a recession have on a worker’s income?

Correct answer D. It will reduce current income but not necessarily permanent income

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Question 04 Income Inequality

Under the maximin criterion from Rawls’s theory of justice, what should the government aim to do?

Correct answer D. Maximise the well-being of the worst-off person in society

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