Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 23, Problem 3DQ
To determine
The Gini ratio and Lorenz curve.
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Which would be evidence of an increase in income inequality over time in the United
States?
O a decrease in the percentage of total personal income received by the highest quintile
O an increase in the percentage of total personal income received by the highest quintile
O an increase in the percentage of total personal income received by the four lowest quintiles
O an increase in the percentage of total personal income received by the lowest quintile
%24
A household with income that is two-thirds of the poverty threshold has ratio of income to poverty of
O 0.67.
O 1.50.
O 3.20.
O0.23.
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The government announces programs designed to reduce the share of income going to the top quintile from 60% to 20%.
You predict that the most likely result is that:
O mean household income will fall, because the highest income earners will earn less and work less.
median household income will rise, because some of the 40% of redistributed income will be transferred to the third
quintile.
after redistribution, each quintile will receive 20% of total wealth.
O the lowest quintile will receive the 40% taken from the top quintile and switch places.
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- As income transfer programs accompanying the War on Poverty increased beginning in the latter half of the 1960s, what happened to poverty in the United States? Check all that apply. O The adjusted poverty rate has declined rapidly and is now less than half of the official poverty rate. O The poverty rate declined substantially in the period before the War on Poverty, but not in the period after the start of the War on Poverty. O In 2018, the adjusted poverty rate was only 4 percentage points lower than the official rate in 1970. O The War on Poverty has been largely ineffective in reducing the rate of poverty in the United States.arrow_forward"Growth and improvement in inequality are important to alleviate poverty.' а. Examine any FOUR (4) factors that can influence poverty eradication and income distribution in Malaysia. [12 marks] b. Describe any FOUR (4) factors that affect the income distribution in Malaysia.arrow_forwardWealth, earnings, and disposable income are just three of several ways of looking at inequality. Imagine a household that earns $80,000 per year from labor. In that year, it also receives an income of $3,000 from investments, pays $12,000 in tax, and receives $7,000 in transfers from the state. Which of the following is its market income and its disposable income? O $83,000; $71,000. O $83,000 $78,000. O $80,000; $68,000. O $80,000; $75,000. Jarrow_forward
- 2. Assume there is a community with 8 households and income distribution (1, 4, 5, 8, 10, 12, 15, 17). Let us call this community, group 1. a) If the government takes one unit of income from each of the three richest consumers and gives one unit to each of the three poorest, plot the Lorenz curve for this group. How has this inequality now changed? Explain b) Without plotting the Lorenz curve, show that the Lorenz curve for group 2 with the income distribution (1, 3, 4, 9, 11, 13, 16, 17) crosses the Lorenz curve for the distribution of group 1. c) Calculate the Gini for group 1.arrow_forwardThe area between the Lorenz curve of a country and the diagonal of perfect equality represents: O A. the area of equality. ОВ. the area of inequality. C. The Gini coefficient. O D. The quantile ratio. O E. the cumulative percentage of the population.arrow_forwardQ7.1) The following question refers to income inequality and the Lorenz curve. Answer the question below: - Does it matter if some people are much richer than others?- Who are the top 1 percent in income and what are the effects of demography on socialinequality in various regions of the world today?- Why has income inequality worsened?- Does wealth distribution follow a similar pattern from generation to generation? What do experts say is the best way to shrink the wealth gap?arrow_forward
- The figure below is the Lorenz curve of a population. Based on this figure, which of the following statements are correct? Cumulative share of land (%) Landowners' share of land 100- 30 ר 0 Perfect equality line 50 80 100 Cumulative share of the population from least to most land owned (%) O 50% of the population owns 20% of the land. 30% of the population owns 1% of the land each. O 20% of the population owns 2% of the land each. The bottom 80% own 70% of the landarrow_forwardIf the area between the diagonal line of absolute equality and the Lorenz curve is greater for China than for the United States, we can conclude that the Distribution of income in China is less equal than in the United States. Relative distributions of income in the two countries are the same. O Distribution of income in China is as equal as in the United States. O Distribution of income in China is closer to being equal than in the United States.arrow_forwardConsider a Lorenz curve given by f(2) = 2" for 0 1. What happens to the Gini index G. I as n+ 00, and what's the interpretation of that result? Select the correct answer below: O As n+ 00, G.1 - 0, denoting complete income inequality. As n+ 00, G.I- 100, denoting perfect income equality. As n0, G.I- 100, denoting complete income inequality. O As n 0, G.I 0, denoting perfect income equalityarrow_forward
- If there are two communities, one with ten families have incomes of $100,000 each and ten families have incomes of $20,000 each. In the other community, ten families have incomes of $250,000 each and ten families have incomes of $25,000 each. Which community is the distribution of income more unequal? In which community is the problem of poverty likely to be worse?Which distribution of income would Rawls prefer? Explain.Which distribution of income do you prefer? Explain.Why might someone have the opposite preference?arrow_forward3. Comparing Gini coefficients of different countries Aa Aa The following diagram shows the Lorenz curves for three countries. Country X's Lorenz curve is shown in blue, Country Y's Lorenz curve is shown in red, and Country Z's Lorenz curve is shown in green. Region I is the area above Country X's Lorenz curve and below the 45-degree line. Region II is the area below Country X's Lorenz curve and above Country Y's Lorenz curve. Region III is the area below Country Y's Lorenz curve and above Country Z's Lorenz curve. Region IV is the area below Country Z's Lorenz curve. INCOME (Cumulative percent) 100 80 60 40 20 0 The Gini coefficient for Country Z is given by Couny X 20 Country Y Country Z 11 III 60 IV 40 100 HOUSEHOLDS (Cumulative percent) 80 has the highest Gini coefficient.arrow_forward10. Consider the following distribution of income in a 12-person economy, with the modern urban wage 3, the traditional rural income = 1, and the informal urban wage = 2: (1,1,1,1,2,2,2,2,3,.3,3,3). The poverty line through expanded agricultural exports. What happens to relative inequality? Absolute poverty? Calculate the Ahluwalia-Chenery welfare index for terciles (3 fractiles) under GNP weights and equal weights. Why is the equal-weighted index higher? 1.25. Suppose rural incomes are raised to 1.5arrow_forward
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