Category: Essentials of Economics: Ch 07

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Cutting the wealth cake

A United Nations report on wealth distribution has found that the world’s richest 1% own 40% of the world’s wealth. Europe, the US and some Asia Pacific countries account for most of the world’s wealthiest with 30% of them living in the US. So is this a problem and should we, or indeed can we, do anything about this. The article below from the Guardian looks at these issues in more detail.

World’s richest 1% own 40% of all wealth, UN report discovers Guardian (6/12/06)

Questions

1. Examine whether the fact that the richest 10% in the world own 85% of all world assets is likely to cause problems for developing countries.
2. Suggest two policies that a developed country could use to narrow wealth distribution and evaluate the likely impact of these policies on the level of economic growth.
3. “”In some ways, wealth is more important to people in poorer countries than in richer countries.” Discuss the extent to which this assertion from the article is likely to be true.
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Scrap inheritance tax?

The red top newspapers and others have recently been leading a campaign for the scrapping of inheritance tax. They argue that the growth in house prices means that increasing numbers are becoming subject to inheritance tax and that it is inherently unjustified as a tax. The article below by David Lipsey looks at these arguments and argues that this is a myth.

The ‘death trap’ menacing middle Britain is a myth Guardian (12/1/06)

Questions

1. Explain how inheritance tax is levied and the rates it is charged at. You can always use the HM Treasury budget site to find out more detail on the tax.
2. Assess the advantages and disadvantages of the scrapping of inheritance tax. What impact is the ending of a tax of this nature likely to have on the macroeconomic performance of the UK?
3. Discuss the assertion in the article that “substantial inheritance is the enemy of equality of opportunity”?