Inequality

Question 1

Define inequality.

Answer 1

The distribution between income and wealth and how uneven it is, can be considered a macroeconomic objective

Question 2

Wealth inequality

Answer 2

The difference between the amount of assets per different house holds.

Question 3

Income inequality

Answer 3

The difference between how much you earn per household.

Question 4

Causes of income inequality.

Answer 4

Growth of finance sector and wages of high earners
Privatisation and deregulation costs
Growth in prices of the housing market
Long term unemployment
Declining manufacturing industry or industry which provides basic jobs.

Question 5

What is the Lorenz curve

Answer 5

Graph of economic distribution which compares the culmative share of income as a form of percentage and compares it to households average income. The line of equality is a perfect 45 degree line and the further and sharper the curve is away from the line the more inequality their is.

Question 6

How to plot the Lorenz curve

Answer 6

Simple inverted X - Y graph X axis is % of household by income distribution, Y axis is % of cumulative share of income as a %.
Plot the line of perfect equality at 45 degrees
Plot the curved diagram underneath it by adding up the percentage of earners.
The area between the line of perfect inequality and the curve is known as area A
The are below the line is area B

Question 7

How to calculate the Gino coefficient

Answer 7

A
——
A+B

Where A is the area above the curved line of the Lorenz curve diagram and B is the area below

The results will show a value between 0:1 The higher the value the greater the degree of income inequality.

Question 8

What is the gin I coefficient used for?

Answer 8

It is a commonly used method of calculating income inequality.