Which one of the following statements about the Gini coefficient is not true? A. The Gini...

Which one of the following statements about the Gini coefficient is not true? A. The Gini coefficient increases as income inequality increases. B. The Gini coefficient equals zero when there is perfect equality. C. The Gini coefficient must fall when the amount of income in an economy increases. D. The Gini coefficient equals one when there is perfect inequality. E. The Gini coefficient reflects the data shown in the Lorenz curve.

Solutions

Expert Solution

Since Gini coefficient is a statistical tool for measuring income inequality in the country. The value of gini coefficient ranges from 0 to 1. The zero 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.

The correct statement about the Gini coefficient are

The Gini coefficient increases as income inequality increases.

The Gini coefficient equals zero when there is perfect equality.

The Gini coefficient equals one when there is perfect inequality.

The Gini coefficient reflects the data shown in the Lorenz curve.

But statement C is not correct about the Gini-coefficient. This is because there is no need that the Gini coefficient must fall when the amount of income in an economy increases.

Hence option C is the correct answer.

Rahul Sunny answered 11 months ago

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