Income
Income is the amount an individual earns after offering their services to a company or selling products during a business transaction. It could be on a weekly or monthly basis, but an income is usually considered to be regularly. Investments made can also generate you an income if managed well since their primary function is to make profits.
Answer
Income inequality is the extent of the difference between the revenue of the rich and the poor. Considering how stratified societies are, there is always the likelihood of the rich and poor existing. In the US, there is a considerable degree of income inequality. Due to this amount of degree experienced, the US ranks first in the industrialized world. In the US, income inequality has gradually increased during the last two decades due to changes in taxation and income distribution policies. The policies put in place tend to favor the rich and oppress both the middle and the poor’s economic standing. As a result, poverty levels have increased. Massive loss of manufacturing jobs has seen many Americans jobless and struggling to have a sustainable life. When you earn less, the taxes are high, and you have multiple needs to cater for in life becomes hard, and it is only a matter of time before you start borrowing to make ends meet.
- In the long run, is it true that the economy will always correct itself, leading to a return to the natural rate of output? Explain
Economy
The economy is the value of a state’s general wealth, considering processes such as production, distribution, and consumption by using the available resources. The money supply is also involved. A country’s economy is a demonstration of progress. Therefore, if the economy doesn’t grow or declines, then the government has to look for new ways to enhance productivity.
Answer
It is true that in the long run, an economy will correct itself, returning to the natural rate of output. Such a situation is achievable if there is an aggregate demand decrease. It will force price levels to move up hence increasing the aggregate supply, which will trigger a full-employment output. When the aggregate supply is high, producers will want to maximize the opportunity to produce more, thus employing more workers.
Although the real Gross Domestic Product (GDP) will return to normalcy and return to full employment while the unemployment rate is at the natural rate of output, the price levels will permanently remain higher in the long run.