Exam 18: Who Gets What the Distribution of Income

What is the official definition of poverty in the U.S.?

What is a Lorenz curve?

When measuring income distribution according to class, how does the U.S. compare to most developing countries?

Is an equal distribution of income always the fairest distribution? What problems may arise when assessing the fairness of an equal distribution?

Explain the difference between wealth and income. How does the distribution of income compare to the distribution of wealth in the U.S. and what does this imply about the respective Lorenz curves for wealth and income?

One way to look at inequality is to look at the size distribution of income. What are two other approaches to measuring inequality? When measuring income distribution according to class, how does the class distribution in most developed countries compare to most developing countries? Recently, changes in the US class distribution of income by class have taken on what shape and why is this so?

What are three negative side effects of attempts to redistribute income from the rich to the poor?

The text discusses ten expenditure programs used in the U. S. to redistribute income. Briefly describe any five of them.

In some countries the tax system is more progressive than in the U.S. What impact does this have on income inequality? What impact do you think this has on entrepreneurial activity?

What is the Gini coefficient, and what is it used for? What would a Gini coefficient that was close to zero imply about inequality?

Philosopher John Rawls generally argued for greater income equality. Under what conditions would he have argued against greater equality of income?

The following diagram shows three Lorenz curves for countries A, B, and C. The area between the Lorenz curve and the diagonal is 1,000 for Country A, 2,000 for Country B, and 2,500 for Country C. (The entire area under the diagonal is 5,000 because the area of the triangle is ½ × (base × height) = ½ × (100 × 100) = 5,000.) (1) Calculate the Gini coefficient for each country. (2) Based on the Gini coefficient, which country has the most equal distribution of income? Which country has the least?

Economists often use a Lorenz curve to describe income distribution. What are two other approaches to the measurement of income distribution?

Give three reasons why an equal distribution of income is not necessarily fair. Discuss each of them.