Chapter 14R, Problem 19MCQ

To determine

The correct option for a Gini coefficient of 0.5.

Answer to Problem 19MCQ

From the available options, the correct option is more income inequality than a Gini coefficient of 0.4.

Explanation of Solution

As a Gini coefficient is 0.5, then there would not be perfect income equality and inequality in the country because the Gini coefficient is not zero and there may be a little gap between the Lorenz curve and the equality line. It also means that there would not be a 10% population which is the poorest or 50% population which is the richest, receiving half and full proportion of the income respectively because the Gini coefficient does not indicate as much difference or inequality in the distribution of income. Therefore, it is correct that the income inequality is more than the Gini coefficient of 0.4 as it is 0.5. It means all options: a, c, d, and e are incorrect.

Therefore, the correct option is b (more income inequality than a Gini coefficient of 0.4).

Economics Concept Introduction

Introduction: The Gini coefficient refers to the measurement of the inequality among values of a frequency distribution, which is developed by Corrado Gini, and it covers the distribution of income and distribution of wealth such as the levels of income.