Asked by AZALEA RODRIGUEZ on Apr 28, 2024
Verified
What is the difference between income and wealth? How can wealth contribute to income inequality?
Income Inequality
An uneven spread of income among entities like individuals or households participating in an economy.
Wealth
The abundance of valuable resources or material possessions or the control of such assets.
- Understand the difference between income and wealth and how wealth contributes to income inequality.
Verified Answer
JH
Jackie Hernandez25May 02, 2024
Final Answer :
Income is a flow; it represents a stream of wage and salary earnings, along with rent, interest, and profits, as depicted in Chapter 2's circular flow diagram. In contrast, wealth is a stock, reflecting at a particular moment the financial and real assets an individual has accumulated over time. Wealth is more unequal than income. This inequality of wealth leads to inequality in rent, interest, and dividends, which in turn contributes to income inequality. Those who own more machinery, real estate, farmland, stocks, and bonds and who have more money in savings accounts obviously receive greater income than people with less or no wealth.
Learning Objectives
- Understand the difference between income and wealth and how wealth contributes to income inequality.