How can the government reduce the wealth gap in a mixed market economy?

The goverment should intervene in the economy, to certain extent, in order to conduct income redistribution.

Using progressive taxes, for example, through which each citizen pays a certain amount proportional to the size of his income. Using subsidies to favour those who suffer poor economic conditions and injecting money so that each citizen, independently of their origins, can enjoy equal opportunities. This means investing on public education, healthcare, social services, etc.

In a mixed market economy, a progressive taxation system can be used by the government to lower the wealth gap.  

Further explanation:

Mixed market economy: A mixed market economy is an economy where the private ownership is allowed but the state has the power to intervene in the market to prevent the economy from market failures. There is a scope of government intervention in a mixed market economy for solving various economic issues like unemployment, income inequality, and poverty.

Progressive taxation system: A progressive taxation system is a system in which low tax-rates are imposed on low-income earners while high-tax rates are imposed on high-income earners. This type of taxation system lowers down income inequality in an economy. This is because it lowers the purchasing power of rich people whereas it raises the purchasing power of poor people.  

Thus, the government can reduce the wealth gap in a mixed market economy through a progressive taxation system.  

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Answer details:

Grade: Middle School

Subject: Economics

Chapter: Income Inequality

Keywords: how can the, governments, reduce, the wealth gap, in a mixed market economy, private ownership is allowed, income inequality, income distribution, the government can intervene, low-income earners, high-income earners, taxes, taxation system, the purchasing power of rich people.

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