Economists study poverty and income inequality to answer which of the following questions?

• A. What is the optimal level of government spending on infrastructure?
• B. What are the causes and consequences of unequal income distribution?
• C. How can firms maximize their profits in competitive markets?
• D. How do exchange rates affect international trade balances?

Answer: (B)

Verified step by step guidance

1. Identify the main focus of the question, which is about poverty and income inequality in economics.
2. Understand that poverty and income inequality relate to how income is distributed among individuals or groups in an economy.
3. Recognize that economists studying poverty and income inequality aim to analyze the causes (why income is distributed unequally) and the consequences (effects on society and the economy) of this unequal distribution.
4. Compare the given options and note that questions about government spending, firm profits, or exchange rates are related to other areas of economics, not directly to poverty and income inequality.
5. Conclude that the correct question economists seek to answer when studying poverty and income inequality is: 'What are the causes and consequences of unequal income distribution?'