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Microeconomics class; News Article Analysis - Essay Example

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Some economists believe that for an economy to grow there must be some level of income inequality. According to the economists, this creates…
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Microeconomics class; News Article Analysis
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Microeconomics class; News Article Analysis

Download file to see previous pages... According to research by the IMF, what is important is consistency in wealth creation, which eliminates inequality at the long run. Other economics believe that, poverty does not arise from inequality, but the move by the government to increase tax against the rich in efforts of ensuring equal distribution of wealth. Countries that focus more on wealth distribution face lengthy periods of slow economic growth. This is because the level of spending within the county is not only low, but also not uniform.
According to the article, unequal countries are poor in terms of social indicators, for example, achievements in education, compared to countries that have equality in income distribution. This is an indication that poor families find it hard to invest in education, which pushes them to higher levels of poverty. Up to some levels, redistribution of wealth does not affect wealth creation. For example, in countries with substantial redistribution, the growth in wealth per individual is not substantially lower. However, countries with more redistribution may face shorter growth spells (The Economist).
According to the article, there is a positive correlation between wealth creation and income inequality. In other words, the more unequal a country is, the more the rate of income growth. High-income inequality means that only a small proportion of the population within an economy controls the wealth. Therefore, consumption within the economy is as well concentrated within the small population. There is a direct association connecting wealth creation within an economy and the level of expenditure or consumption. In unequal countries, the level of consumption is low because it is concentrated within a few citizens that own resources. Therefore, there is a lack of enough expenditure to spur growth. Developed countries across the world, create more wealth than the developing countries. This is because the level of expenditure within the economies is ...Download file to see next pagesRead More
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