Multiple Choice
Which of the following would represent the Lorenz curve of an nation where everyone earned equal income?
16. Income Inequality and Poverty
Lorenz Curve and Gini Coefficient
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Which of the following is true regarding the Gini coefficient?
A
The Gini coefficient will only fall when population rises quickly
B
As income inequality rises, the Gini coefficient will fall
C
As income inequality falls, the Gini coefficient will fall
D
The Gini coefficient breaks the population into quintiles based on income
Verified step by step guidance1
Understand the concept of the Gini coefficient: It is a measure of income inequality within a population, ranging from 0 (perfect equality) to 1 (perfect inequality).
Analyze the relationship between income inequality and the Gini coefficient: As income inequality decreases, the Gini coefficient decreases, indicating a more equal distribution of income.
Evaluate the statement 'The Gini coefficient will only fall when population rises quickly': This is incorrect because the Gini coefficient is not directly affected by population size but by the distribution of income.
Consider the statement 'As income inequality rises, the Gini coefficient will fall': This is incorrect because as income inequality rises, the Gini coefficient actually increases.
Examine the statement 'The Gini coefficient breaks the population into quintiles based on income': This is incorrect as the Gini coefficient does not involve dividing the population into quintiles; it is a single number representing inequality.
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