Article Summary
In a January, 2017 report, the World Economic Forum stated that the growing income gap has become one of the biggest threats to the global economy and cannot be remedied solely by higher economic growth. Although income inequality has fallen over the past 30 years on a global level, in high-income countries like the United States and the United Kingdom, the top 1% of income earners have benefitted disproportionately from economic growth. This has led a growing belief that the traditional model for economic growth does not result in a population-wide increase in income. According to the report, "The growing mood of anti-establishment populism suggests we may have passed the stage where [reviving economic growth] alone would remedy fractures in society: reforming market capitalism must also be added to the agenda."
Source: Lauren Gensler, "Rising Income Inequality Is Throwing The Future Of Capitalism Into Question, Says World Economic Forum," Forbes, January 11, 2017.
-Refer to the Article Summary.The article discusses income inequality and how economic growth alone is no longer resulting in a more equitable distribution of income.If governments increased equity by reducing the incomes of high-income people and increasing the incomes of the poor, would it be possible that fewer goods and services would be produced and less saving would take place?
A)No, an increase in equity will result in a more efficient level of production and saving.
B)No, greater production and saving will take place regardless of the level of equity.
C)Yes, there is often a trade-off between efficiency and equity.
D)Yes, a reduction of the income gap necessitates a reduction in production and saving.

Question

Article Summary
In a January, 2017 report, the World Economic Forum stated that the growing income gap has become one of the biggest threats to the global economy and cannot be remedied solely by higher economic growth. Although income inequality has fallen over the past 30 years on a global level, in high-income countries like the United States and the United Kingdom, the top 1% of income earners have benefitted disproportionately from economic growth. This has led a growing belief that the traditional model for economic growth does not result in a population-wide increase in income. According to the report, "The growing mood of anti-establishment populism suggests we may have passed the stage where [reviving economic growth] alone would remedy fractures in society: reforming market capitalism must also be added to the agenda." 
Source: Lauren Gensler, "Rising Income Inequality Is Throwing The Future Of Capitalism Into Question, Says World Economic Forum," Forbes, January 11, 2017.
-Refer to the Article Summary.The article discusses income inequality and how economic growth alone is no longer resulting in a more equitable distribution of income.If governments increased equity by reducing the incomes of high-income people and increasing the incomes of the poor, would it be possible that fewer goods and services would be produced and less saving would take place?
A)No, an increase in equity will result in a more efficient level of production and saving.
B)No, greater production and saving will take place regardless of the level of equity.
C)Yes, there is often a trade-off between efficiency and equity.
D)Yes, a reduction of the income gap necessitates a reduction in production and saving.

Quizplus · Accepted Answer

There is often a trade-off between equity and efficiency in economic policy. Reducing the incomes of high-income individuals and increasing the incomes of the poor may result in a reduction of production and saving, as high-income earners may reduce their investment and consumption. However, the extent of the trade-off depends on how much income redistribution takes place and the incentives that it creates. It is important for governments to strike a balance between equity and efficiency when designing economic policies.

Article Summary In a January, 2017 Report, the World Economic Forum Stated