Question

Which of the following is true?

A

If area A increases, income equality falls.

B

The Gini coefficient can be calculated as the proportion of area A to area A + B.

C

Countries with lower Gini coefficients have less equal income distributions.

D

The Gini coefficient takes the value 1 when everyone has the same income.

Answer 1

Since gini coefficient is a statistical tool for measuring income inequality in the country. The value of gini coefficient vary from 0 to 1. 0 value shows perfect equality while 1 represents perfect inequality.

Gini coefficient= Area A ( area between line of equality and lorenz curve) / area (A+B) (below the equality line .

So if Area A increases, then income inequality will rise.

Countries with lower Gini coefficients have more equal income distributions.

The Gini coefficient takes the value 0 when everyone has the same income.

It means only option B are correct.

Hence option B is the correct answer.

B; The Gini coefficient can be calculated as the proportion of area A to area A + B.