Answer to Question 1
The government redistributes income using income taxes, income maintenance programs, and subsidized services. Income taxes redistribute income because they are generally progressive so that higher-income households pay more in income taxes than lower-income households. In addition, poor households receive money from the income tax through the earned income credit. Income maintenance programs are programs such as social security, unemployment compensation, and welfare. These programs tend to give more income to poorer households than richer households. Finally, the government provides subsidized services, such as below-cost health care and below-cost schooling.
Answer to Question 2
This statement is false. The reason is that nations don't trade according to their absolute advantage but rather their comparative advantage. Even though the nation of Berdundi has an absolute disadvantage in the production of everything it is very unlikely that it won't have a comparative advantage in the production of at least one good or service vis--vis the United States.
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