Economics (AS & A Level) · Oct / Nov 2022 · Paper 32 · Question 14

Governments often aim to reduce income inequalities. The diagram shows the effects of using taxation and benefits to try to achieve this aim. What can be concluded from the diagram about the effects of taxes and benefits?

1. AAll income groups are better off except those originally earning more than $40 000 per year.
2. BBenefits paid to the lower income groups are not a burden because they are not paid out of tax revenues.
3. CThe average final income of the top 20% exceeds the combined final incomes of the other groups.
4. DThe progressive taxation system still favours the top 20% over the bottom 20% of households.

As printed in the paper