Over the past few decades, income inequality in the United States, measured by the relative shares of total income earned by the top and bottom 20% of individuals, has increased. Which of the following choices represent plausible causes of income inequality? Check all that apply.

A. Some people choose to work longer hours than their peers.

B. Some individuals become wealthy by chance, while others have bad luck.

C. Some risk-takers end up earning exceptionally high incomes, while other risk-takers end up failing and earning little or no income.

D. Differences in ability make some people more adept at earning income than others.

All the options(A-D) are correct.

Explanation:

Income inequality is the disparity of income distributions. A high concentration of income is in the hands of few people. Income inequality leads to a large gap between the wealth of a population segment when compared to another. Usually, one of government's macroeconomic aim is to redistribute income and to bridge the gap between the rich and the poor.

Several factors can be attributed to income inequality such as experience, longer hours at work, talent, skills possessed, and becoming wealthy by luck. All the four options given here are correct. People that work longer hours than others usually earn more than their colleagues. People can also become wealthy by chance e.g winning a huge amount through lottery, investing in a business which brings a huge profit. Differences in talent and ability also leads to income inequality. For example footballers or musicians possess talents which results in them making huge income.

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.