Question 1
Grade 12 Economics entrance exam, 2018 E.C. (2026)
Economic inequality is the disproportionate distribution of total national income among households. Which one of the following is correct about the alternative measurements of income inequality?
- A.Kuznets ratio is a measure of the degree of inequality between high income and low-income groups in the country.
- B.The Gini-coefficient value equals to zero implies perfect inequality.
- C.The higher is the value of Gini coefficient, the lower the inequality.
- D.In the Lorenz curve if income distribution were perfectly unequal, it would be represented by the 45-degree line.
Show the answer and explanation
Answer: A Kuznets ratio is a measure of the degree of inequality between high income and low-income groups in the country.
Why
The Kuznets ratio measures the ratio of income going to the highest earners (e.g., top 20%) to that of the lowest earners (e.g., bottom 20% or 40%), serving as a direct measure of inequality between high- and low-income groups.
