Income and assets in Novara

Read the extracts and answer the questions that follow.

Text A — Unequal factor incomes

1. Novara has a competitive market economy. Most low-income households depend entirely on wages, whereas high-income households receive wages, rent, interest and profit. The resulting income distribution reflects the quantity and market value of factors owned rather than household need.

2. Rapid growth in financial services has raised demand for highly qualified workers. Meanwhile, wages in routine services have remained low. Some low-paid households cannot afford training that would increase their earning capacity.

Text B — Accumulating assets

1. High-income households save a larger proportion of their earnings and acquire shares and rental property. These assets increase their wealth and generate additional factor income. Low-income households spend nearly all their earnings on necessities.

2. The government is considering matched savings accounts for low-income workers. For every 100 novos deposited, the government would add 50 novos, up to a specified annual limit.

Table 1 — Annual finances of representative households

Annual finances of representative households in Novara.

Table 2 — Distribution indicators

Income distribution indicators in Novara, 2018 and 2024.

Inherited housing wealth in Aurelia

Read the extracts and answer the questions that follow.

Text A — Housing ownership

1. House prices in Aurelia have increased rapidly. Older owner-occupiers have experienced large capital gains, while many young adults rent and own few assets. Equity has become an important political issue.

2. Rental-property owners receive rent in addition to labour income. Renters transfer part of their wages to landlords and often have insufficient income left to save for a deposit.

Text B — Transfers between generations

1. Some young households receive inherited housing or large deposits from relatives. Others receive no inheritance and remain dependent on wages. This contributes to wealth inequality even when workers earn similar wages.

2. The government is considering an inheritance tax whose revenue would finance deposit grants for first-time buyers from low-wealth households.

Table 1 — Two young households

Annual income, housing costs and inheritance of two young households in Aurelia.

Table 2 — Housing distribution

Housing distribution by income quintile in Aurelia.

Land ownership in Calidia

Read the extracts and answer the questions that follow.

Text A — Agricultural income

1. A small number of families own most farmland in Calidia and receive substantial rent. Tenant farmers supply labour but pay landowners a share of each harvest. Land is a factor of production whose ownership affects the distribution of income.

2. Larger landowners can obtain bank loans using land as collateral. Tenant households often cannot finance irrigation or education.

Text B — Proposed reform

1. The government proposes secure titles for long-term tenants and grants to purchase small plots. Supporters argue that broader asset ownership would improve equality of opportunity.

2. Critics predict fragmented farms and lower efficiency. Landowners argue that unequal outcomes can still be equitable if they reflect investment and risk.

Table 1 — Representative farms

Representative farm revenues and production costs in Calidia.

Table 2 — Land distribution

Land distribution and agricultural income inequality in Calidia.

Regional inequality in Elysia

Read the extracts and answer the questions that follow.

Text A — Unequal opportunities

1. High-productivity firms and skilled workers are concentrated in Elysia's coastal cities. Inland households mainly supply low-paid labour and own few businesses or financial assets. Their factor income is therefore lower.

2. Weak internet connections restrict inland access to remote employment, education and financial services. Firms respond to profitable demand in wealthy cities rather than the needs of sparsely populated regions.

Text B — Digital infrastructure

1. The government proposes publicly funded broadband for inland communities. Supporters expect improved opportunities and a more equitable distribution of income. However, effective demand for digital services may remain low where households cannot afford devices.

2. Critics prefer cash grants, arguing that broadband infrastructure alone will not change ownership of productive assets.

Table 1 — Regional household data

Regional household factor-income data in Elysia.

Table 2 — Distribution data

Broadband access and within-region income inequality for coastal and inland households in Elysia.

Work capacity and need in Frevia

Read the extracts and answer the questions that follow.

Text A — Market income

1. Frevia's free market distributes earnings according to factors supplied and owned. Households containing people unable to work therefore receive little market income, even though their need for healthcare and accessible housing may be high.

2. Other households own shares and businesses, receiving dividends and profit without supplying additional labour.

Text B — Minimum income

1. The government proposes an unconditional minimum payment to every adult. Supporters argue that it would ensure a basic standard of living and increase equity.

2. Opponents argue that universal payments are expensive and should instead be targeted at households unable to work.

Table 1 — Representative adults

Representative adults' annual market-income sources in Frevia.

Table 2 — Income distribution

Income and expenditure indicators in Frevia.

Business ownership in Galena

Read the extracts and answer the questions that follow.

Text A — Profits and wages

1. Galena's largest food-processing firms have become highly profitable. Shareholders receive dividends from company profits, while production workers receive wages. Entrepreneurship is therefore an important source of household income.

2. Most shares are owned by the richest households. Workers spend most wages on consumption, whereas shareholders reinvest much of their income.

Text B — Employee ownership

1. The government proposes tax incentives for firms that transfer shares to employee ownership trusts. Supporters expect a broader distribution of wealth and dividend income.

2. Critics argue that workers would face greater risk because their wages and savings would depend on the same firm.

Table 1 — Annual household income

Annual income and saving of two household types in Galena.

Table 2 — Share ownership

Share ownership concentration and employee-share dividend yield in Galena.

Housing costs in Hesperia

Read the extracts and answer the questions that follow.

Text A — Owners and renters

1. Housing demand has risen in Hesperia. Property owners have gained wealth and rental income, while renter households face increasing costs. Rent is a payment to owners of land or property.

2. Many renters cannot save for a deposit. Owners can use existing property as collateral to buy additional homes, reinforcing differences in asset ownership.

Text B — Affordable housing

1. Private developers construct apartments expected to earn the highest returns. Low-income households have substantial need but limited effective demand for new homes.

2. The government proposes building social housing financed by a tax on vacant investment properties.

Table 1 — Representative households

Representative households in Hesperia.

Table 2 — Housing indicators

Housing indicators in Hesperia, 2019 and 2024.

Intergenerational assets in Jandor

Read the extracts and answer the questions that follow.

Text A — Starting positions

1. Children in wealthy Jandorian households commonly receive financial assets and privately funded education. Other children begin adulthood with debt. Net wealth therefore differs substantially before labour-market choices are made.

2. Asset-owning households receive interest and dividends and can finance unpaid internships or business start-ups.

Text B — Child investment accounts

1. The government proposes depositing 5000 jands into an investment account for every newborn, with an additional amount for low-wealth households. The account could be used for education or enterprise at age 18.

2. Supporters argue this would promote equality of opportunity. Critics argue that families would still differ in saving, financial knowledge and inherited property.

Table 1 — Household assets

Household assets and annual asset income in Jandor.

Table 2 — Proposed accounts

Proposed child investment account deposits and assumed growth to age 18.

Income distribution in Arandia

Arandia has experienced rapid economic growth, but its government is concerned that the free market has produced large differences in household income. Each income quintile contains the same number of households. Market income includes wages, rent, interest and profit. Table 1 shows average annual income, direct taxes and cash transfers per household.

Average annual household market income, direct taxes and cash transfers across five equal-sized income quintiles in Arandia.

The government is considering making income tax more progressive and increasing targeted cash transfers. Some businesses argue that higher marginal tax rates could weaken incentives to work, save and invest.

Wealth ownership in Bellaria

Bellaria has relatively moderate wage inequality but a highly unequal distribution of wealth. Wealthy households commonly own rental property and financial assets, while many lower-income households have debts. Table 1 compares two representative households.

Table 1: Asset values, liabilities and annual returns for households in Bellaria.

The government is considering an annual tax on the amount of net wealth exceeding 500 000 Bellarian dollars. Revenue would finance grants that help households with little wealth obtain education, housing or business capital.

Skills, factor incomes and inequality in Costavia

In Costavia, workers with advanced qualifications are scarce and receive substantially higher wages. High-income households also own more financial assets. The government is considering a tuition subsidy for approved vocational courses to improve access to skills.

Table 1: Annual labour and asset information for representative workers in Costavia.

A vocational course currently charges tuition of 12 000 Costavian pesos. Under the proposed policy, each eligible student would receive a tuition subsidy of 3000 pesos.

The accumulation of wealth in Estland

A study in Estland found that households with high labour incomes also tend to own more assets, earn higher returns and save a larger proportion of their income. The study assumes that each household's annual saving is added to its wealth at the end of the year and that there are no capital gains or new liabilities.

Table 1: Wealth, labour income, saving rates and asset returns for representative Estland households.

The government is considering giving every child from a household in the lowest wealth group a publicly funded investment account worth 10 000 Estland crowns. The account could be used for education, housing or starting a business when the child reaches adulthood.

Market income and household need in Faron

Faron's government is reviewing support for households whose members have limited ability to participate in paid employment. The free market pays households according to the factors of production they supply and own, but it does not automatically provide income according to need.

Table 1 shows annual information for three representative household types. Faron contains 1000 households of each type.

Annual market income components, household numbers and estimated basic needs for three representative household types in Faron.

The government is considering a targeted transfer that would raise the income of each household type whose market income is below its estimated expenditure on basic needs to that level. Household types whose market income is already above their estimated basic needs would receive no transfer.

Income distribution and consumer influence in Kalmora

Read the extracts and answer the questions that follow.

Text A — Consumer influence

1. Kalmora's firms respond to changes in market demand. High-income households spend heavily on private recreation and investment services, while low-income households struggle to purchase nutritious food. Consumer sovereignty therefore operates through unequal purchasing power.

2. The market efficiently coordinates many voluntary exchanges, but it has no built-in rule ensuring that every household receives a minimum living standard.

Text B — Social dividend proposal

1. Most productive capital is owned by a small group of households. The government proposes a national investment fund that would acquire diversified shares and distribute an equal annual social dividend to every resident.

2. Supporters expect broader participation in capital income. Critics argue that equal payments ignore differences in need and that taxation used to finance the fund could reduce private investment.

For calculations using Tables 1 and 2, assume that each household in Table 1 contains one resident.

Table 1 — Household expenditure

Annual household income and expenditure in Kalmora, with one resident per household.

Table 2 — Capital ownership and proposed dividend

Capital ownership and proposed annual social dividend in Kalmora.