CLEP Microeconomics chapter practice4 questions

31 Income Distribution, Lorenz Curves, and the Gini Coefficient

These questions come directly from the chapter practice in the book. Choose the best answer, check your reasoning, and use the explanation to correct any gap.

Question 1

Question 1 of 4

A Lorenz curve plots cumulative percentage of households against cumulative percentage of

The graph compares cumulative population shares with the cumulative share of income or wealth they receive.
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C. income or wealth

The graph compares cumulative population shares with the cumulative share of income or wealth they receive.

Question 2

Question 2 of 4

Greater measured inequality is represented by a Lorenz curve that

The farther the curve bows below the equality line, the larger the cumulative distribution gaps and measured inequality.
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D. bows farther away from the line of equality

The farther the curve bows below the equality line, the larger the cumulative distribution gaps and measured inequality.

Question 3

Question 3 of 4

A Gini coefficient of zero represents

A Gini of zero corresponds to the Lorenz curve lying on the line of equality.
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A. complete measured equality

A Gini of zero corresponds to the Lorenz curve lying on the line of equality.

Question 4

Question 4 of 4

Two countries have the same Gini coefficient. What can be concluded?

The Gini compresses a distribution into one relative measure; countries with the same value can differ in average income and distributional shape.
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E. Only their summary degree of relative inequality is the same.

The Gini compresses a distribution into one relative measure; countries with the same value can differ in average income and distributional shape.

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