Cambridge International as and a level Economics Ebook

1
Explain 
one
likely consequence of the widening 
gap in the incomes of the urban and rural 
populations.
2 
Comment upon how the Pakistani government and 
businesses might be able to improve the well-being 
of the rural population.
Source:
Adapted from F. Tirmizi,
 Express Tribune
, 30 July 2012.
202
Cambridge International A Level Economics

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every person or family would receive a fi xed annual benefi t 
of, say, $4,000. If the tax paid on earnings is less than this 
annual benefi t then the person receives the diff erence from the 
government; in other words, a negative income tax. Where the 
diff erence is positive, in the case of higher earners, then this is 
the amount of direct tax that has to be paid.
A fi nal issue to consider is that of 
intergenerational equity
. 
Th
is relates back to sustainability and the need for the present 
generation to take responsibility for the well-being of future 
generations. Wealth can be passed down from one generation 
to the next. Although taxes on wealth can marginally reduce 
inequality, it is important that current government policies 
work in such a way as to not compromise the opportunities 
for there to be a more equitable future distribution. Th
is 
represents a substantial challenge for policy-makers.
Negative income tax: 
a unified tax and benefits system 
where people are taxed or receive benefits according to a 
single set of rules.
Intergenerational equity: 
the responsibility that 
government has to provide for a more equitable future 
distribution of income and wealth.
KEY TERMS
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