The Saez-Atkinson Hypothesis

Description: The Saez-Atkinson Hypothesis is an economic theory that attempts to explain the relationship between the level of income inequality in a society and the rate of economic growth.
Number of Questions: 5
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Tags: economics economic inequality the saez-atkinson hypothesis
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According to the Saez-Atkinson Hypothesis, what is the relationship between income inequality and economic growth?

  1. A positive relationship

  2. A negative relationship

  3. No relationship


Correct Option: B
Explanation:

The Saez-Atkinson Hypothesis states that there is a negative relationship between income inequality and economic growth. This means that as income inequality increases, economic growth decreases.

What is the main reason for the negative relationship between income inequality and economic growth?

  1. Income inequality leads to lower levels of investment.

  2. Income inequality leads to lower levels of human capital.

  3. Income inequality leads to lower levels of social mobility.


Correct Option: A
Explanation:

The Saez-Atkinson Hypothesis states that income inequality leads to lower levels of investment. This is because when the rich have a disproportionate share of income, they are more likely to save their money rather than invest it. This reduces the amount of capital available for investment, which in turn slows economic growth.

What is the main reason for the negative relationship between income inequality and human capital?

  1. Income inequality leads to lower levels of education.

  2. Income inequality leads to lower levels of health care.

  3. Income inequality leads to lower levels of social mobility.


Correct Option: A
Explanation:

The Saez-Atkinson Hypothesis states that income inequality leads to lower levels of education. This is because when the rich have a disproportionate share of income, they are more likely to be able to afford to send their children to good schools. This gives their children a better chance of getting a good education, which in turn leads to higher levels of human capital.

What is the main reason for the negative relationship between income inequality and social mobility?

  1. Income inequality leads to lower levels of opportunity.

  2. Income inequality leads to lower levels of social cohesion.

  3. Income inequality leads to lower levels of political participation.


Correct Option: A
Explanation:

The Saez-Atkinson Hypothesis states that income inequality leads to lower levels of opportunity. This is because when the rich have a disproportionate share of income, they are more likely to be able to afford to give their children advantages in life, such as a good education, a safe neighborhood, and access to good health care. This makes it more difficult for people from poor families to move up the economic ladder.

What are some of the policy implications of the Saez-Atkinson Hypothesis?

  1. Policies that reduce income inequality can lead to higher levels of economic growth.

  2. Policies that reduce income inequality can lead to higher levels of human capital.

  3. Policies that reduce income inequality can lead to higher levels of social mobility.


Correct Option:
Explanation:

The Saez-Atkinson Hypothesis suggests that policies that reduce income inequality can lead to higher levels of economic growth, human capital, and social mobility. This is because reducing income inequality can lead to higher levels of investment, education, health care, and opportunity.

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