Which pair of policies is most likely to increase income inequality?

Answer options:

Less progressive income taxes and increased unemployment benefits

Less progressive income taxes and reduced unemployment benefits

More progressive income taxes and increased unemployment benefits

More progressive income taxes and reduced unemployment benefits

How to approach this question

Analyse each policy's effect on income distribution. 'Progressive' taxes take a larger percentage from higher earners, reducing inequality. 'Less progressive' or 'regressive' taxes do the opposite. Unemployment benefits support the lowest earners. Look for the combination of policies that helps the rich and/or harms the poor.

Full Answer

B.Less progressive income taxes and reduced unemployment benefits✓ Correct

Income inequality refers to the extent to which income is distributed in an uneven manner among a population. A less progressive tax system means higher earners pay a smaller proportion of their income in tax compared to a more progressive system. This widens the gap. Reducing unemployment benefits directly lowers the income of those out of work, who are typically among the poorest in society. The combination of these two policies is therefore most likely to increase income inequality.

Common mistakes

Misunderstanding the term 'progressive tax'. Progressive means the tax rate increases as the taxable amount increases.

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Which pair of policies is most likely to increase income inequality?

How to approach this question

Full Answer

Common mistakes

Practice the full AQA GCSE Economics Paper 2

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