Which of the following may be the result of extending payment periods in the context of income inequality?

• A. Higher disposable income for all households
• B. Increased financial strain on low-income households due to delayed income
• C. Decreased need for social welfare programs
• D. Immediate reduction in the Gini coefficient

Answer: (B)

Verified step by step guidance

1. Understand the context: Extending payment periods means delaying when payments (such as wages, benefits, or bills) are received or due. This can affect households differently depending on their income levels.
2. Analyze the impact on low-income households: These households often rely on timely payments to meet basic needs. Delays can cause cash flow problems, leading to increased financial strain because they have less buffer to absorb delays.
3. Consider the effect on disposable income: Extending payment periods does not increase the actual income received; it only changes the timing. Therefore, it is unlikely to result in higher disposable income for all households.
4. Evaluate the implications for social welfare programs: If low-income households face more financial strain, the need for social welfare programs may increase rather than decrease, as these programs provide support during financial hardship.
5. Assess the impact on income inequality measures like the Gini coefficient: Immediate changes in payment timing do not directly reduce income inequality metrics; such measures reflect overall income distribution, which is not instantly altered by payment delays.