Use the Lorenz curve diagram to answer the questions. a. Did the distribution of income become more equal in 2020 than it was in 2019, or less equal? It became equal in 2020. b. If area A = 2,150, area B = 250, and area C = 2,600, calculate the Gini coefficient for 2019 and the Gini coefficient for 2020. The Gini coefficient for 2019 is rounded to two decimal places.) The Gini coefficient for 2020 is rounded to two decimal places.) (Enter your response (Enter your response ☐☐☐ Income (cumulative percent) 100- 90- 80- 70- 60- 2019 50- 2020 40- A B 30- 20- 10- 0 0 20 40 60 80 100 Households (cumulative percent)

What are some reasons why a certain degree of inequality of income would be expected in a market economy?

Explain how a country may experience greater equality in the distribution of income, yet still experience high rates of poverty. Hint: Look at the Clear It Up 'How do governments measure poverty in low-income countries?' and compare to Table 15.5.

How does the TANF attempt to loosen the poverty trap?

What do you think is more important to focus on when considering inequality: income inequality or wealth inequality?

If a family of three earned 20,000, would they be able to make ends meet given the official poverty threshold?

The following income distribution data are for Brazil. Quintile Percent Share Lowest 20% 3.0% Second quintile 6.9% Third quintile 11.8% Fourth quintile 19.6% Highest 20% 58.7% Highest 10% 43.0% a. Carefully graph the Lorenz curve, labeling the axes. b. Brazil’s national income is about $300 billion. What is the approximate dollar income of the bottom 20%? Bottom 40%?

A Lorenz curve is a graph whose axes measure the: a. total amount of income in dollars on one axis and the total number of individuals or families receiving that income or a lower one on the other. b. percentage of people (10 percent, 20 percent, etc.) on one axis and the percentage of total income received by the lowest 10 percent, the lowest 20 percent, etc., on the other. c. number of individuals or families receiving a certain income on one axis and the percentage of the total population represented by that number on the other. d. number of individuals or families in different occupations on one axis and the median income received in that occupation on the other. e. income classes (e.g., $0 to $1999 and $2000 to $3999) on one axis and the percentage of individuals or families in each such income class on the other.

1. An economy's Lorenz Curve reveals that an economy's highest income quintile has 65% of the economy's income while the lowest income quintile only has 5% of the economy's income. Solely based on the Lorenz Curve, is this distribution of income fair? Why or why not?   2. To combat income inequality and to generate increased tax revenues to fund expenditures, government officials decide to aggressively increase how progressive income taxes are, so much so that the top income earners are marginally taxed 90% of their income (and while this marginal tax rate may seem oppressive, these top income earners still have more than enough income to satisfy all of their needs and all but the most extravagant of wants - basically, these earners have more than enough money). Argue why this tax policy is a fair approach to fund government expenditures. Why might this tax policy fail to achieve its objectives (tax revenues would actually decline as a result)?

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