Question

Okun argues that society can redistribute income only in a “leaky bucket.” Match the political stance in the first column with the maximum leakage that would be acceptable in a redistribution scheme from the second column:

Extreme egalitarian socialist

Liberal

Moderate

Libertarian opposed to any taxes

A. 20%

B. 0%

C. 95%

D. 60%

0.34 points   

QUESTION 2

Which of the following is not a reason why redistribution will lower efficiency according to Okun? Choose all that apply

1.

Bureaucratic costs

2.

Increased crime

3.

Reduced work effort

4.

Reduced incentive to innovate

5.

Spread of communicable diseases

0.33 points   

QUESTION 3

Which of the following may explain why Okun is wrong and efficiency does not increase with inequality. Choose all that apply.

1.

Increased distrust and greater spending on security.

2.

Reduced work effort.

3.

Reduced investment in children.

4.

Reduced health

Answer 1

1)

Political Stance	Maximum leakage
Extreme egalitarian socialist	0%
Liberal	20%
Libertarian opposed to any taxes	60%
Moderate	95%

Extreme egalitarian socialist is the one who is in favour of having a society with equal status and equal opportunities for all.

Liberals support a society with racial equality, income equality and equal access to rights. So a liberal would not want too much leakage while redistributing income.

Some taxes like progressive taxes focus on removing inequality and differences among people in the society. Libertarian opposing any taxes including progressive taxes might accept leakage upto 60% while redistributing income.

Moderates are not in favour of major social changes like redistribution of income. So they might allow leakage upto 95%.