EC1111 - International Economic Policy RHUL - Autumn Vinay P. Nundlall Seminar 7 Suggested Answers and Feedback Question 1 MCQ - choose only one answer 1. Compensating differential, or compensating wage differential, arises when A. Employers have to compensate workers for injuries at the work place to replace wages lost due to those injuries B. Government gives transfer-in-cash to people who cannot work because of disabilities C. Employers pay an additional amount as wages for an undesirable job in order to motivate people to accept the job D. Government compensates war veterans for services to the country E. Employers pay certain workers by discriminating on grounds of ethnicity. Answer C. 2. According to Utilitarianism, government can make society better off by A. helping the poor via incentives to work and invest in human capital accumulation B. helping the poor by giving them transfers which are raised from taxes on the wealthy C. allowing people to do as they want, as long as we give everyone the opportunity to get a good, free education and access to free health care D. creating jobs targeted for the poor E. introducing regressive taxes on the super-rich because they earn more than they need Answer B 3. According to Max Roser's study, inequality has had the following pattern: I. increasing in some of the wealthiest English speaking countries over the past four decades Il. decreasing in some of the poorest English speaking countries over the past four decades III. has decreased and stabilised in western Europe IV. has decreased globally when compared with the pre-WW1 era V. is big problem in the world right now
A. I, III and IV B. I and V C. II and IV D. II, III and IV E. I and V Answer A 4. According to data from 1935 to 2010 on family income and income distribution in the USA, income inequality A. is not such a big problem because there is more mobility among the income groups since the three lower fifths groups have increased their share of total wealth B. is a big problem because the lower earners do not earn more now than they did earlier last century C. is worse because the top 20% earn a bigger share of the country's total income D. is not a big problem because of the American Dream E. cannot be determined because there is still high relative poverty. Answer A 5. In general, countries that suffer from income inequality also have other problems such as: A. gambling, drug addiction, prostitution and lack of religious beliefs B. bad debt, crime and bad weather C. inflation, unemployment and pollution D. military dictatorship, capital punishment irrelevant reality tv shows E. corruption, low education attainment, poor health provision, and low income per capita Answer E. Question 2. Debate in class: The Arab Spring was a consequence of inequality. Some preliminary notes: The persistence of inequality has repercussions on the economy: inequality, combined with market imperfections, will stultify investment, thus hindering economic