Economics of Inequality and Poverty · Paper 1 — Free Economics HL Practice Questions

In Country A, the top $10\%$ of earners hold $50\%$ of total income, while the bottom $40\%$ hold only $10\%$. A government report identifies inheritance of wealth as a major factor in this disparity.

Country B has experienced rapid technological change, leading to high demand for workers with advanced digital skills. Meanwhile, workers in traditional manufacturing have seen their wages stagnate. The Gini coefficient for Country B rose from $0.31$ to $0.44$ over a decade of rapid automation.

In Country X, the Gini coefficient has risen from $0.32$ to $0.48$ over the past 20 years. During this period, the government reduced the top marginal income tax rate from $50\%$ to $30\%$, and trade liberalisation led to a rapid expansion of the financial services sector. Simultaneously, the minimum wage has remained unchanged in nominal terms, while the average years of schooling for the top $20\%$ of earners increased from $14$ to $17$ years, compared to an increase from $10$ to $11$ years for the bottom $20\%$.