The Saez-Krugman Hypothesis

Description: The Saez-Krugman Hypothesis is a theory in economics that states that the top 1% of earners in a society will capture a larger share of total income as inequality increases. This hypothesis is based on the idea that the wealthy have a disproportionate amount of power and influence, which they use to extract more income from the rest of society.
Number of Questions: 5
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Tags: economics economic inequality the saez-krugman hypothesis
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Who proposed the Saez-Krugman Hypothesis?

  1. Thomas Piketty

  2. Emmanuel Saez and Paul Krugman

  3. Joseph Stiglitz

  4. Amartya Sen


Correct Option: B
Explanation:

The Saez-Krugman Hypothesis was proposed by Emmanuel Saez and Paul Krugman in 2002.

What is the main idea behind the Saez-Krugman Hypothesis?

  1. The top 1% of earners will capture a larger share of total income as inequality increases.

  2. The bottom 99% of earners will capture a larger share of total income as inequality increases.

  3. Income inequality will remain constant regardless of the level of inequality.

  4. Income inequality will decrease as the level of inequality increases.


Correct Option: A
Explanation:

The Saez-Krugman Hypothesis states that the top 1% of earners will capture a larger share of total income as inequality increases.

What is the evidence for the Saez-Krugman Hypothesis?

  1. Data from the United States shows that the top 1% of earners have captured a larger share of total income since the 1980s.

  2. Data from other countries shows that the top 1% of earners have captured a larger share of total income since the 1980s.

  3. Both of the above.

  4. None of the above.


Correct Option: C
Explanation:

Data from the United States and other countries shows that the top 1% of earners have captured a larger share of total income since the 1980s.

What are the implications of the Saez-Krugman Hypothesis?

  1. Increased income inequality can lead to social unrest and political instability.

  2. Increased income inequality can lead to a decline in economic growth.

  3. Both of the above.

  4. None of the above.


Correct Option: C
Explanation:

Increased income inequality can lead to social unrest and political instability, as well as a decline in economic growth.

What are some policy proposals to address the Saez-Krugman Hypothesis?

  1. Raising taxes on the wealthy.

  2. Increasing the minimum wage.

  3. Investing in education and job training.

  4. All of the above.


Correct Option: D
Explanation:

Policy proposals to address the Saez-Krugman Hypothesis include raising taxes on the wealthy, increasing the minimum wage, and investing in education and job training.

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