1. Answer: a) The distribution of income is how a nation’s gross domestic product is distributed in the midst of its population. There are two main income distributions need to mention: perfectly equal income distribution and perfectly unequal income distribution. The perfectly equal income distribution means everyone has the same income. Some of the European countries have this fairly equal income distribution. Perfectly unequal income distribution means few people have all or almost all of the income and the rest people only have a small amount. Less developed countries fully reflect this unequal income distribution. But for the United States, it has examining percentile distributions. The US is using five groups to show the percentage of income received. As we can see from the table U.S. Census Bureau, the proportion received by the poorest Americans has remained virtually unchanged. Most of the observed changes occurred between 1929-1970, probably reflecting the impact of the great depression and new government programs in the 1930s, as well as World War II from 1950-1980, so there was a little change in the overall distribution (from textbook). Therefore, many things can influence the income distribution, such as wage payment systems change, tax laws change, transfer payment systems change, property rights change, economic systems change and general economic conditions change.

b) As we know, the income for workers, it might be wages or salaries for a month. The dividend is the income for stock owners. Interest is the income for holders of savings accounts. Individuals will have several sources of income, but labor income is the main source of income for many individuals and families. The labor income could affect by age, skill and human capital, worker preferences, and job preferences. Younger people with few skills tend to make little income when they begin their working careers. The wage earning increase up to the age of 50 and falls at retirement age. Some worker who have more productive than others earn higher wages. If the distribution is deemed unacceptable, the worker could improve their innate skills and human capital by training and education to change the income distribution. The worker who work longer hour, they earn more than others with comparable skills. For job preferences, someone who works with difficult, risky, or unappealing nature of their job has higher earning.
Ways to change the distribution of income if the distribution is deemed unacceptable: “laws are set up such that a person is paid according to the value of the work she or he performs or the value of the output of the assets that they own. Then, if a person wishes to work very hard, she or he will receive more than the person that does not have the desire to work as hard” (from NDSU ECONOMIC GOALS).

2. Answer: a) Poverty is the state or condition of one who lacks a certain amount of material possessions or money. The poverty can be measured by using a set of money income thresholds that vary by family size. If the family’s total income is less than the established family threshold, then the family, and every individual in it, is considered poor (from textbook). b) The federal income tax is designed to be a progressive tax system- one that imposes higher marginal tax rates on higher incomes. It is one way to reduce poverty and redistribute income. This tax system can restrict rich people who become richer. Also use negative income tax collects taxes from high-come families and gives subsidies to low income families. Government provides low cost public services. Such as subsidized public transport and public parks are services that serve the poor to greater extent than the rich. Government also provides some welfare programs to poor people. Social security, Medicare, and unemployment compensation are social insurance programs, for which a person or a family must prove they have a low enough income to qualify. Supplemental Security Income is a welfare program designed for the most needy, elderly, disabled, and blind. Temporary Assistance for Needy Families is a welfare program designed to help families that have few financial resources. The earned Income Tax credit is welfare a program that allows the working poor to receive income refunds that can be greater than the taxes they paid during the last year. Means-tested income transfer program is a program in which eligibility is dependent on low income; food stamps, Medicaid, and housing subsidies are examples of means-tested income transfer programs. (From textbook). These programs all provide living guarantee to poor people.