If a Nation's Lorenz Curve Lies on the 45 Degree

question 14

Multiple Choice

If a nation's Lorenz curve lies on the 45 degree line of income equality, then

• A) more of the nation's income is received by the lowest 20 percent of families than by the highest 20 percent.
• B) income is unequally distributed.
• C) more of the nation's income is received by the highest 20 percent of families than by the lowest percent.
• D) the income received by each 20 percent of families is 20 percent of the total income.

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Definitions:

Full Employment Output

The highest level of output an economy can achieve without causing inflation, when labor resources are fully employed.

The Classicals

Refers to the classical economists, a group that primarily includes thinkers like Adam Smith, David Ricardo, and John Stuart Mill, who focused on the ideas of free markets, the theory of comparative advantage, and the role of government.

Short Run

A period in economics during which some factors of production are fixed, typically under a year, making some adjustments impossible or difficult.

Long Run

A period in economics where all factors of production and costs are variable, allowing companies and industries to adjust to market changes.