Question 1

Suppose 60 percent of all households earn 60 percent of all income.Based on this information it follows that

Accepted Answer

There is not enough information to determine the percentages of all households earning all income other than the given 60 percent of households earning 60 percent of income. The given information only applies to a specific portion of the population, and cannot be generalized to represent the entire population.

Question 2

The Gini coefficients for countries A and B are 0.25 and 0.30,respectively.We can definitely conclude that

Accepted Answer

The Gini coefficient measures income inequality within a country, with 0 representing perfect equality and 1 representing perfect inequality. It does not specify the exact percentage of income received by any specific portion of the population, such as the lowest 20% or 50%. Therefore, none of the statements A, B, C, or D can be definitively concluded from the Gini coefficients alone.

Question 3

In 2009,the lowest 20 percent of households in the United States earned approximately what percent of the total income of all households?

Accepted Answer

The answer of In 2009,the lowest 20 percent of households...

Question 4

A person's labor income is equal to the __________ times __________.The return on savings that a person receives is referred to as __________.

Accepted Answer

A person's labor income is calculated by multiplying the wage rate they earn by the number of hours they work. The return on savings is referred to as asset income, not transfer income, liabilities income, or labor income.

Question 5

The Gini coefficient measures the degree of

Accepted Answer

The Gini coefficient is a measure of income inequality, specifically the extent to which the distribution of income or wealth among individuals or households within an economy deviates from a perfectly equal distribution. It is not directly related to discrimination based on race, age, sex, or wages.

Question 6

When the actual Lorenz curve is a 45-degree line,there is

Accepted Answer

A 45-degree line represents a situation where each person or household in the population receives the same percentage of income as their percentage of the population. This means that there is perfect income equality as everyone receives the same share of income.

Question 7

The closer the Gini coefficient is to 1,the

Accepted Answer

The Gini coefficient measures the degree of income inequality in a society, with 0 representing perfect equality and 1 representing perfect inequality. Therefore, the closer the Gini coefficient is to 1, the greater the degree of income inequality in the society. Option A correctly states this relationship. Option B is incorrect, as a lower Gini coefficient indicates less income inequality. Options C and D are irrelevant to the definition and measurement of the Gini coefficient.

Question 8

If the Gini coefficient is one (1),this means that there is

Accepted Answer

A Gini coefficient of one indicates complete income inequality, meaning that only one person or group has all of the income and everyone else has none. There is no area between the line of perfect income equality and the actual Lorenz curve, as shown by a completely flat Lorenz curve.

Question 9

Economists often assert that a person who receives an in-kind transfer payment (from government)has a higher income as a result.But an in-kind transfer is not money income,so what are economists thinking?

Accepted Answer

Economists are equating the added value of in-kind benefits to a higher income because the benefit provides the recipient with more goods and services, which they equate to a higher income.

Question 10

A Gini coefficient of 1 means there is

Accepted Answer

A Gini coefficient of 1 indicates perfect income inequality, with one individual or group holding all the wealth or income and everyone else having none.

Question 11

The closer the Gini coefficient is to zero,the

Accepted Answer

The Gini coefficient measures income inequality, with a value of zero indicating perfect equality (where everyone has the same income) and a value of one indicating maximum inequality (where one person has all the income and everyone else has none). Therefore, the closer the Gini coefficient is to zero, the less the degree of income inequality.

Question 12

When the actual Lorenz curve is as far away from the 45-degree line as possible,there is

Accepted Answer

The Lorenz curve is a graphical representation of income distribution. The 45-degree line represents perfect income equality, where each percentile of the population holds an equal percentage of the total income. If the actual Lorenz curve is as far away from the 45-degree line as possible, it represents a situation where a small percentage of the population holds a significantly larger share of the total income, resulting in perfect income inequality. Therefore, the correct choice is B.

Question 13

The Lorenz curve is a graph of the __________ of the population.

Accepted Answer

The answer of The Lorenz curve is a graph of...

Question 14

In order to make the income distribution more equal,the federal government could

Accepted Answer

Both A and D involve redistributive policies that aim to make income distribution more equal by either taxing the rich more or increasing transfer payments to those with lower incomes (the poor or the middle class).

Question 15

A winner-take-all market

Accepted Answer

A winner-take-all market refers to a market in which the top producer or performer in the market earns significantly more than others in the same market. While this concept may apply to certain industries like sports and entertainment, it can also apply to other markets like technology and finance. Option B is incorrect as winner-take-all markets are not exclusive to sports and entertainment, and option C is incorrect as the top producer may earn the majority of profits, but not necessarily all of them.

Question 16

If a person's asset income rises and his or her transfer payments (received)decline,it follows that that person's

Accepted Answer

The answer of If a person's asset income rises and...

Question 17

If the Gini coefficient is equal to 2,we can conclude that

Accepted Answer

The Gini coefficient is a measure of inequality of a distribution, such as income or wealth, within a nation or a social group. It is defined as a ratio with values between 0 and 1: a Gini coefficient of 0 expresses perfect equality, where all values are the same (for example, where everyone has the same income), while a Gini coefficient of 1 (or 100%) expresses maximal inequality among values (for example, where only one person has all the income or consumption, and all others have none). Therefore, a Gini coefficient equal to 2 is impossible.

Question 18

If the Gini coefficient is zero (0),this means that

Accepted Answer

A Gini coefficient of zero indicates perfect income equality, meaning that everyone in the population has the same amount of income.

Question 19

Suppose the data show that each year between 1962 and 2012,10 percent of all income earners (in the United States)earned little enough to be considered poor.It follows that

Accepted Answer

The statement that 10 percent of income earners were considered poor each year does not imply that the same individuals remained poor throughout the years, allowing for the possibility of income mobility (B). Additionally, the fact that a consistent percentage of people were poor suggests income inequality (D).

Question 20

A Gini coefficient of zero means there is

Accepted Answer

A Gini coefficient of zero represents perfect income equality, where every person in the population earns the same amount of income.

Quiz 29: The Distribution of Income and Poverty