The Impact of Income Inequality on Economic Growth

by | Apr 1, 2024 | economics

Select at least three news articles that discuss the economic concept that you chose as a topic for
your term paper.
At least one news article should be dated within the previous two months.
Please note that the goal of this assignment is to read, understand, and discuss recent news
using microeconomic terminology. The articles should be from an on-line newspaper or
magazine. Materials posted on educational websites, like
www.thebalance.com, www.khanacademy.org , and so on, are not considered news articles
even if they were recently updated and contain material related to the term paper topic.

 

The Term paper should have the following structure:
1. Abstract (0.5 of a page) – the short description of the concepts, problems, questions
discussed in the Term paper.
2. Introduction (0.5 of a page) (optional)
3. Literature Review (about 2 pages) – please compare and contrast the opinions of the
authors of the articles, present the important information, data, statistics to support your
conclusions. It is important that the Literature review is written in your own words with
small quotes from the article. All quotes must have references in accordance with the
7th Edition APA Style.
4. Discussion (about 2 pages) – Your task for this part of the Term paper is to analyze the
issue described in the articles using the economic concepts and theory learned in this
class. Refer to the course content materials and use specific economic vocabulary within
your term paper. The articles you choose may not use these exact terms; therefore, it is
incumbent upon you to convert the article language into economic language as is
appropriate. Include at least one graph developed in our course.
5. Conclusion (0.5 of a page)

Possible concepts include:
• taxes and consumer or producer surplus
• elasticity on a particular product
• perfect competition
• imperfect competition, such as monopolies
• monopolistic competition
• oligopoly
• labor market,
• wage determination
• income inequality
• poverty and public policy
• another topic selected by the professor

Sample Answer

Sample Answer

Term Paper: The Impact of Income Inequality on Economic Growth

Abstract

Income inequality has been a persistent issue in modern economies, with profound implications for societal well-being and economic growth. This term paper aims to explore the relationship between income inequality and economic growth, analyzing recent news articles and applying relevant economic concepts.

Literature Review

In a recent article by Bloomberg dated September 2021, the author highlights how rising income inequality in the United States is hindering economic growth. The article presents data showing that as the income gap widens, consumer spending, a key driver of economic activity, is being constrained. This aligns with the concept of the multiplier effect in economics, where a decrease in consumer spending due to income inequality can have cascading negative effects on overall economic output (Bloomberg, 2021).

Contrastingly, a piece from The Wall Street Journal published in August 2021 argues that some level of income inequality is necessary for incentivizing innovation and entrepreneurship, which are crucial for sustained economic growth. The article points out that excessive redistribution of wealth through policies aimed at reducing income inequality could stifle entrepreneurial spirit and innovation, ultimately hampering economic progress (The Wall Street Journal, 2021).

Discussion

Analyzing these perspectives through an economic lens, it is evident that income inequality can have both positive and negative impacts on economic growth. While a certain level of inequality may provide incentives for individuals to invest in education and innovation, excessive inequality can lead to reduced consumer spending, social unrest, and hindered social mobility.

Applying the concept of the Lorenz curve and Gini coefficient, we can visually represent the degree of income inequality within an economy. By analyzing these measures alongside key economic indicators such as GDP growth rates and unemployment levels, we can better understand the implications of income inequality on overall economic performance.

Conclusion

In conclusion, income inequality is a complex issue that intersects with various aspects of economic growth. While some level of inequality may be inevitable and even beneficial for fostering innovation, excessive inequality poses significant risks to long-term economic stability. Policymakers must strive to strike a balance that promotes inclusive growth while incentivizing entrepreneurship and innovation.

By delving into recent news articles through an economic lens, we can gain valuable insights into the real-world implications of income inequality on economic growth, paving the way for informed policy decisions and societal progress.

 

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