Using the Lorenz Curve, the Degree of Income Inequality Is

question 2

Multiple Choice

Using the Lorenz curve, the degree of income inequality is measured by

• A)The line connecting all points for which a given percentage of families receives exactly the cumulative percentage of income
• B)the distance of the Lorenz curve from the line of perfect equality
• C)the flat diagonal line that applies to a perfectly elastic demand curve
• D)the number of times the Lorenz curve crosses the line of perfect equality
• E)is derived by dividing the number of people below the poverty line by the total population

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Definitions:

Gain

Refers to the profit earned from the sale of an asset or investment for more than its purchase cost, excluding income from the primary business activities.

Redeemed

The process of exchanging a financial security or voucher for cash, goods, or services.

Callable Bonds

Bonds that can be redeemed by the issuer before their maturity date at a specified call price, often to take advantage of declining interest rates.

Noncallable Bonds

Bonds that cannot be redeemed by the issuer before their maturity date, providing certainty to investors regarding the bond's interest payments and return of principal.