Lesson 4.1.7.1

4.1.7.1 The distribution of income and wealth Quiz: AQA Economics, Unit 1

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 4.1.7.1, The distribution of income and wealth: 20 multiple choice questions for the AQA Economics (7136), Unit 1: Individuals, firms, markets and market failure, written with Revision Ninja.

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The 20 questions

  1. Which statement best distinguishes income from wealth?

    • Wealth is a flow of money from government transfers, whereas income is a stock of land, property and shares held by households.
    • Income is a flow of earnings received over a period of time, whereas wealth is a stock of assets owned at a point in time.
    • Income is a stock of assets owned at a point in time, whereas wealth is a flow of earnings received over a period of time.
    • Income and wealth are the same measure, both referring to earnings received over a period of time from employment.

  2. On a Lorenz curve, what does a line of perfect equality look like?

    • A straight diagonal line from the origin, showing each percentage of the population receives the same percentage of income.
    • A curve bowing sharply below the diagonal, showing that the richest 10 per cent of households receive 90 per cent of income.
    • A horizontal line at 50 per cent of income, showing that half of the population receives all of the national income.
    • A vertical line at the top of the graph, showing that every household holds exactly the same amount of total wealth.

  3. What does a Gini coefficient of 0 indicate?

    • Perfect equality, where every household receives an identical share of total income.
    • Perfect inequality, where a single household receives all of the total income in the economy.
    • An equal split of income between the richest 50 per cent and the poorest 50 per cent of households only.
    • A distribution that is equitable and fair, because every household receives the same share of total income.

  4. Which statement best distinguishes equality from equity in the distribution of income?

    • Equality means everyone receives the same share, whereas equity means a fair distribution, involving a value judgement about what is just.
    • Equality and equity are identical measures of income dispersion, both calculated directly from the Gini coefficient of a country.
    • Equity refers to the number of households in the top decile, whereas equality refers to the total share of wealth they own.
    • Equality means a fair distribution based on need, whereas equity means everyone receives an identical share of income and wealth.

  5. Which factor tends to widen the distribution of earned income between households?

    • A progressive tax system that taxes higher earners at a higher average rate of tax on their total income.
    • Differences in skills and qualifications that give rise to different wage rates across occupations.
    • Equal wages paid to all workers, regardless of their skill, experience or the productivity of their work.
    • Equal access to state-provided education and training, so that all households have the same potential earnings.

  6. A household has £10,000 in savings and £200,000 in property, with no debts, and an income of £40,000 a year. What is its wealth?

    • £240,000, being the sum of its annual income, savings and property.
    • £210,000, being the value of its savings and property.
    • £40,000, being its annual income from employment and other sources.
    • £50,000, being the sum of its annual income and its savings.

  7. A country's Gini coefficient falls from 0.42 to 0.35. Which conclusion is most valid?

    • Income is now more evenly distributed, though the measure alone says nothing about whether that distribution is equitable.
    • Income is now less evenly distributed, because a smaller Gini means a larger share of income goes to the top decile in the case described.
    • Average incomes have risen by 7 per cent, since the Gini coefficient is a measure of mean income across all households.
    • The poorest households have become poorer in absolute terms, since the Gini coefficient measures absolute income levels.

  8. On a Lorenz curve diagram, the curve moves closer to the line of equality. What does this indicate?

    • The number of households in the economy has increased, so the curve has been redrawn.
    • Income has become more evenly distributed across households in the economy.
    • The top 10 per cent of households have become poorer relative to the bottom 10 per cent.
    • Total national income has fallen, pulling the curve towards the origin of the diagram.

  9. Which is a likely benefit of a more equal distribution of income?

    • A rise in the proportion of wealth held as property by the poorest households, which reduces their spending on goods.
    • Greater incentives for all workers to save, which reduces consumption demand and lowers economic growth in the economy.
    • Higher spending by lower-income households, which may raise aggregate demand as they have a higher marginal propensity to consume.
    • Lower total output, because high earners are assumed to work less when their incomes are increased by redistribution.

  10. Which is a likely cost of redistributing income more equally through higher progressive taxes?

    • A rise in the Gini coefficient, as taxation reduces the disposable income of the poorest households in the economy.
    • Lower government revenue, since progressive taxes always reduce total tax receipts in every economy regardless of design.
    • Possible disincentive effects on work effort and enterprise, as higher earners keep less of each extra pound they earn.
    • A fall in the marginal propensity to consume among lower-income households, reducing aggregate demand in the economy.

  11. Which is the best description of a Lorenz curve?

    • A graph plotting annual income against years of education for each household in the economy over a ten-year period.
    • A graph plotting the percentage of wealth held by each age group against the annual rate of inflation in the economy.
    • A graph plotting the rate of unemployment against the level of real GDP per capita over a long period of time over the period concerned.
    • A graph plotting the cumulative percentage of income against the cumulative percentage of households, ordered from poorest to richest.

  12. A Gini coefficient of 1 represents which situation?

    • Perfect inequality, where one household receives all of the total income in the economy.
    • Perfect equality, where all households receive identical incomes and identical shares of total national wealth.
    • A distribution that is equitable, because every household receives an equal share of total income and wealth.
    • A distribution in which the top 50 per cent of households receive exactly half of total income in the economy.

  13. Why can two people reasonably disagree about whether the same measured income distribution is fair?

    • Judgements about what counts as an equitable distribution differ, so the same measure can support different policy prescriptions.
    • A Gini coefficient is an objective measure of fairness, so economists reach identical conclusions from the same measured value.
    • The Gini coefficient measures total national income, so a higher value always means a richer and more productive economy.
    • Inequality can only be measured using wealth data, so income-based measures are never comparable across different countries.

  14. Which example best illustrates excessive inequality as a cause of market failure?

    • Public goods are under-provided, so the Gini coefficient falls automatically as the government reduces its spending on services.
    • A rise in national income increases savings, so the distribution of wealth becomes more equal as the economy grows over time.
    • Poorer households cannot afford private healthcare or education, so these markets fail to allocate resources efficiently for them.
    • Monopoly pricing causes the richest households to accumulate wealth faster, so inequality rises after the market failure occurs.

  15. A government wants to redistribute wealth, not just income. Which measure would most directly achieve this?

    • A rise in the minimum wage, which affects only the earnings of low-paid workers and not the stock of assets they hold.
    • A cut in unemployment benefit, which reduces income transfers to households without jobs in the economy over time in the case described.
    • An increase in the basic rate of income tax, which taxes only the flow of earnings received by households in each year.
    • A progressive tax on inherited estates and capital gains, which taxes accumulated holdings as well as the annual flow of income.

  16. Which evaluation point best challenges the claim that a more equal distribution always improves economic welfare?

    • Welfare is measured only by national income, so the distribution of income has no effect on welfare at all in any economy.
    • Its effect depends on whether lower inequality weakens the incentives that drive productivity and growth, and this is disputed.
    • A Gini coefficient of zero is always achieved in practice, so welfare must be maximised at that point on the scale in the case described.
    • Redistribution always lowers government spending, so it must increase welfare in every economy regardless of the policy used.

  17. Country A and Country B have the same mean income, but A's Lorenz curve lies further from the line of equality. What follows?

    • Country A has lower average income, because the Lorenz curve measures mean income directly across all of the households.
    • Country A has more equity, because its curve shows a larger number of households earning income in the economy.
    • The two countries must have identical Gini coefficients, since their mean incomes are equal and so are their distributions.
    • Country A has greater income inequality, because a larger share of its income is held by the richest households.

  18. The top 20 per cent of households receive 50 per cent of income and the bottom 20 per cent receive 5 per cent. Which statement is correct?

    • The top 20 per cent receive five times the share of the bottom 20 per cent, so the distribution is more equal than an even split.
    • The distribution is equitable, since each fifth of households receives an income share that is proportional to its population share.
    • The top 20 per cent receive ten times the income share of the bottom 20 per cent, so the distribution is unequal.
    • The bottom 20 per cent receive ten times the income of the top 20 per cent, indicating redistribution towards the poorest households.

  19. Why is wealth typically more unequally distributed than income?

    • Wealth accumulates over time from savings, inheritance and asset gains, so small differences compound beyond differences in income.
    • Wealth is calculated only from employment earnings, which are concentrated among a small number of very highly paid workers.
    • Wealth is distributed equally, because every household owns the same stock of physical capital in the economy over the period concerned.
    • Income is more concentrated than wealth, because all productive assets are held by the state on behalf of households.

  20. Which of the following is a factor that influences the distribution of wealth?

    • The number of hours worked per week by employees in the economy during a typical working week.
    • Inheritance and gifts received from previous generations of the same family.
    • The marginal propensity to import of the economy, which measures the share of extra income spent on imported goods.
    • The annual rate of inflation measured by the consumer prices index over the previous twelve months.

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