Question

1) Why are incomes distributed so unevenly?

2) Who pays the economic cost of social security? In what ways?

3) What would be the effects of a law requiring bilateral trade balances?

4) In what sense do fixed exchange rates permit a country to "export its inflation"?

5) Why should Americans care about extreme poverty in Haiti, Ethiopia, or Bangladesh?

Answer 1

1. Income includes the revenue streams from wages, salaries, interest on a savings account, dividends from shares of stock, rent, and profits from selling something for more than you paid for it. Unlike wealth statistics, income figures do not include the value of homes, stock, or other possessions. Income inequality refers to the extent to which income is distributed in an uneven manner among a population. Two major causes for the creation and distribution of wealth and income in the world are government policies and economic markets. As nations industrialize, they tend to move from a manufacturing-based economy towards a service-based economy. This shift favors the educated and disfavors skilled laborer.

2. Social security is "any government system that provides monetary assistance to people with an inadequate or no income. In the United States, this is usually called welfare or a social safety net, especially when talking about Canada and European countries. Social Security is primarily funded by payroll taxes assessed on wages in the United States.

3. A bilateral trade is the exchange of goods between two nations promoting trade and investment. The two countries will reduce or eliminate tariffs, import quotas, export restraints, and other trade barriers to encourage trade and investment. In the United States, the Office of Bilateral Trade Affairs minimizes trade deficits through negotiating free trade agreements with new countries, supporting and improving existing trade agreements, promoting economic development abroad, and other actions.

4. A country experiencing inflationary pressures will result in the population switching over completely to imported goods if exchange rates are fixed. This will drive up demand in foreign countries, causing prices in those countries to increase, thus exerting inflationary pressure on the other countries.

5. These are economic considerations, the world has limited resources and unlimited wants. The economy of US is prosperous and booming and can definitely help the other poor countries to do better and revive themselves. Most of the unlimited wants could be satisfied if the human resources in those nations were not wasted by poverty. These countries would be potential markets for US goods and would ultimately help the US monetary system to prosper as well.