CHAPTER 18
The Two Americas
Inequality, Class, and Conflict
LEARNING OBJECTIVES
Describe the sources of income and purchasing power for households.
OUTLINE OF CHAPTER
I. Inequality: Income
II. Inequality: Wealth
KEY WORDS
class
a group of people who obtain their income in a way that distinguishes them from other groups
and shows their relationship to other groups in the economic process
Gini coefficient
specific time period
ANSWERS TO END OF CHAPTER REVIEW QUESTIONS
Describe the sources of income and purchasing power for households.
1. What is the difference between income and wealth?
Income is the stream of receipts from work or property generated by an individual or
2. Personal income can be broken down into five sources or categories. What are these
categories and what percentage of personal income comes from each of these sources?
3. Which sources of income are generated from work and which from the ownership of
Compare and contrast relevant statistics on income and wealth for the United States.
4. Use Table 18.2 to describe how the distribution of income has changed in the United
States over the last three decades. Has inequality increased or decreased? How do you
know?
The percentage of income going to the highest quintile has increased from 43.6% to
5. How does the distribution of income in the United States compare with other countries?
6. What is a Gini coefficient? What would it mean if the Gini coefficient were equal to
zero? What if it were equal to one?
A Gini coefficient is a calculation of income inequality that falls between zero and one. A
7. Which countries in the world have a more equal distribution of income than the United
States? Which countries have a more unequal distribution of income?
According to Table 18.3, the following countries have a more equal distribution of
8. What is the poverty threshold for a family of three in the United States in 2005? What
percentage of the population has income below this level?
9. One percent of households own what share of total stock market value?
10. Use Table 18.5 to compute the ratio of net worth for the highest income quintile with that
of the lowest income quintile. Given the other evidence in this chapter, do you suspect
that this ratio has increased or decreased over the last 30 years?
11. What has caused the increases in income and wealth inequality over the last three
Define class and explain how the definition ties into the sources of income to households.
12. What do the authors mean by class? What is the largest class?
The definition of class used in this text is a group of people who obtain their income in a
13. Which is more important in determining class: the level of income a person earns, or their
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