Question 1

Figure 1 
-Refer to Figure 1. The red line refers to

Accepted Answer

The red line in Figure 1 refers to the Lorenz curve, which is a graphical representation of income distribution. It plots the percentage of total income earned against the percentage of recipients, arranged from the poorest to the richest. The Lorenz curve is used to calculate the Gini coefficient, which measures income inequality. The line of perfect inequality represents a situation where only one person or group has all the income, while the line of perfect equality represents a situation where income is distributed equally among all individuals or groups.

Question 2

Figure 1 
-Refer to Figure 1. The blue 45 degree line refers to

Accepted Answer

The blue line in the graph is the line of perfect equality, which represents a scenario where every individual or household has an equal share of the total income. This line serves as a benchmark against which actual income distribution can be compared.

Question 3

Figure 2 
-Refer to Figure 2. The Gini coefficient is

Accepted Answer

The Gini coefficient measures income inequality, with 0 representing perfect equality and 1 representing perfect inequality. A coefficient less than 0.3 indicates relatively low inequality.

Question 4

The political philosophies of utilitarianism and liberalism both suggest that income should be equalised across the population.

Accepted Answer

While liberalism focuses on individual freedoms and equal opportunities, utilitarianism emphasizes maximizing overall societal happiness. Equalizing income is not a core principle of either philosophy, although some interpretations or policy proposals may suggest it as a means to achieve their goals.

Question 5

A Gini coefficient of 0.7 suggests a country has a very unequal distribution of income.

Accepted Answer

A Gini coefficient ranges from 0 (perfect equality) to 1 (perfect inequality), so a Gini coefficient of 0.7 suggests a significant amount of income inequality in a country.

Question 6

Permanent income is

Accepted Answer

Permanent income refers to a person's normal or average income, taking into account expected changes in income over time. It is often used in economic analysis to understand how individuals and households make consumption and savings decisions based on their expected long-term income rather than just their current income. It is not related to Social Security income, maximum lifetime earnings, union wages, or minimum wage.

Question 7

Permanent income is more equally distributed than is current income because:

Accepted Answer

Current income is subject to transitory changes which sometimes raise a person's income and sometimes reduce it. On the other hand, permanent income is an estimate of a person's average income over their lifetime and is therefore less subject to these transitory changes. This means that permanent income is more stable and predictable, and therefore more equally distributed among individuals.

Question 8

Because in-kind transfers are not accounted for in standard measures of income distribution, the standard measures of income distribution

Accepted Answer

The answer of Because in-kind transfers are not accounted for...

Question 9

Libertarians are more concerned with equal opportunity than with equal outcome.

Accepted Answer

Libertarians believe in maximizing individual freedom and limiting government intervention. Therefore, they believe that individuals should have equal opportunities to achieve their goals, but they do not believe in equalizing outcomes through government redistribution or intervention.

Question 10

Figure 1 
-Refer to Figure 1. The middle quintile group earn

Accepted Answer

According to the legend, the middle quintile group is represented by the orange section, which corresponds with the 20% option in the answer choices.

Question 11

There is an easy and perfectly acceptable solution to the problem of poverty traps: recipients' benefit income should be reduced more gradually as they increase their earnings.

Accepted Answer

The answer of There is an easy and perfectly acceptable...

Question 12

John Rawls argues that economic justice would result if society chose a set of rules for the redistribution of income from behind a "veil of ignorance" and he argues that the set of rules would be the maximin criterion.

Accepted Answer

The answer of John Rawls argues that economic justice would...

Question 13

It is more efficient for the government to provide in-kind transfers instead of cash payments.

Accepted Answer

The answer of It is more efficient for the government...

Question 14

Because of in-kind transfers to the poor and because people's incomes vary from year to year and across their lifetimes, standard measures of income distribution exaggerate the degree of inequality in standards of living.

Accepted Answer

In-kind transfers, such as government assistance programs, provide support to those with lower incomes and can improve their standard of living. Additionally, many individuals experience changes in income over time, meaning that using a single snapshot of income can overstate inequality. Therefore, standard measures of income distribution may overstate the degree of inequality in standards of living.

Question 15

When households are divided into deciles, each group covers what percentage of the population?

Accepted Answer

Deciles divide the population into 10 equal parts, so each decile covers 10% of the population. Therefore, choice B, which is 10%, is the correct answer.

Question 16

Figure 1 
-Refer to Figure 1. The top 20% of the population have what % of the income

Accepted Answer

According to the graph, the top 20% of the population have about 60% of the total income.

Question 17

Utilitarianism is based on the assumption of diminishing marginal product.

Accepted Answer

The answer of Utilitarianism is based on the assumption of...

Question 18

If permanent income were utilised to measure the income distribution instead of current annual income, the income distribution would appear to be wider.

Accepted Answer

Permanent income tends to smooth out temporary fluctuations in income, leading to a narrower distribution compared to current annual income, which can vary significantly year to year.

Question 19

Lerato had a big win at the casino on her birthday. The money she won is considered to be

Accepted Answer

Transitory income refers to temporary or non-recurring income, such as a casino win, which is not expected to be a regular source of income.

Question 20

Figure 2 
-Refer to Figure 2. The Gini coefficient is calculated by

Accepted Answer

The answer of Figure 2 
-Refer to Figure 2. The...

Quiz 18: Income Inequality and Poverty

Figure 1 -Refer to Figure 1. The red line refers to

Figure 1 -Refer to Figure 1. The blue 45 degree line refers to

Figure 2 -Refer to Figure 2. The Gini coefficient is