Question

According to the U.S. Census​ Bureau, the Gini ratio in the U.S. rose from 0.479 to 0.486 between 2015 and 2018. This implies which of the​ following?

A. The area between the Lorenz curve and the line of equality increased from 0.243 in 2015 to 0.521 in 2018. B. The area between the Lorenz curve and the line of equality decreased from 0.521 in 2015 to 0.243 in 2018. C. The Lorenz curve in the U.S. was farther away from the line of equality in 2018 than it was in 2015. D. The distribution of income in the U.S. was more equitable in 2018 than it was in 2015.

Answer 1

According to the U.S. Census​ Bureau, the Gini ratio in the U.S. rose from 0.479 to 0.486 between 2015 and 2018. This implies that the Lorenz curve in the U.S. was farther away from the line of equality in 2018 than it was in 2015.

Gini iRatio iis ia isimple imeasure iof ithe idistribution iof iincome iacross iincome ipercentage iin ia ipopulation. iA ihigher iGini iratio iindicates igreater iinequality, iwith ihigh iincome iindividuals ireceiving imuch ilarger ipercentages iof ithe itotal iincome iof ithe ipopulation. iThe iratio ivalue ilies ibetween i0 iand i1 ii.e., i0 irefers ito iPerfect iEquality iand i1 irefers ito iPerfect iInequality. iIt irepresents igraphically ithrough ithe iLorenz icurve, iwhich ishows iincome idistribution iby iplotting ithe ipopulation ipercentile iby iincome ion ithe ihorizontal iaxis iand icumulative iincome ion ithe ivertical iaxis. iThe iGini iratio iis iequal ito ithe iarea ibelow ithe iline iof iperfect iequality i(0.5 iby idefinition) iminus ithe iarea ibelow ithe iLorenz icurve iwhich iis idivided iby ithe iarea ibelow ithe iline iof iperfect iequality. iIt ican ibe isaid ithat iGini iratio iis idouble ithe iarea ibetween ithe iLorenz icurve iand ithe iline iof iperfect iequality. i

Options explanations:-

A. The area between the Lorenz curve and the line of equality increased from 0.243 in 2015 to 0.521 in 2018.

This option is false because it implies that the inequality area between the Lorenz curve and the line of equality increased from 0.243 in 2015 to 0.521 in 2018 which is doubled, but  according to the question the Gini ratio in the U.S. rose from 0.479 to 0.486 between 2015 and 2018 i.e., (0.486 - 0.479 = 0.007). Hence it is a minor increase in the area.

B. The area between the Lorenz curve and the line of equality decreased from 0.521 in 2015 to 0.243 in 2018.

This option is false because according to the question has clearly mentioned it rose from 0.479 to 0.486 between 2015 and 2018 which classifies that inequality area increased rather than decreased between these two years.

C. The Lorenz curve in the U.S. was farther away from the line of equality in 2018 than it was in 2015.

This option is true because it clearly implies that inequality gap of cumulative income distribution among the population has been increased from 0.479 to 0.486 between 2015 and 2018 i.e., (0.486 - 0.479 = 0.007). The more the lorenz curve will be farther away from the line of equality, the more the inequality gap will be increased.  

D. The distribution of income in the U.S. was more equitable in 2018 than it was in 2015.

This option is false because it implies that more equal distribution of income among the population of U.S. which is wrong.