ECON Global Economics (Fall 23) The Distribution Function of Government Relevant Readings from the Required Textbooks: Economics Chapter 2, Income Distribution and Poverty Problems from the Economics Textbook: Chapter 2 Problems (Pages 24-25): 2, 6, 7, and 3 Definitions and Concepts: distribution function government policies aimed at changing the final distribution of goods/services across consumers, usually with the intention of realizing a fairer apportionment of consumption/income/wealth. redistribution government policies designed to alter the distribution of income/wealth/consumption across members of society. income support monetary payments (such as unemployment benefits and social security payments) made to certain individuals, which directly alter the distribution of income within a society. redistribution in-kind public provision of goods/services (such as healthcare, education, housing, food) for certain individuals, which alter the consumption of goods/services within society. 7 Determinants of Productivity, Income, and Wealth:. natural talent and ability ability is not distributed equally at birth; some people possess attributes (e.g., intelligence, strength) that make them more productive 2. Acquired Skills individual productivity depends in large part upon skills and experiences acquired during education, training, and work experience 3. Effort productivity is often largely dependent upon effort ( workers are more productive than shirkers ) 4. Compensating Differentials differences in wages that results from differences in working conditions (e.g., risky jobs pay more; glamour jobs pay less) 5. Inherited Wealth wealth is distributed less evenly than income (due partly to differences in inheritances) 6. Accumulated Savings the stock of wealth that a person has at any point in time is partly determined by previous consumption/savings decisions 7. Seemingly Unrelated Market Conditions income depends in part upon economic conditions beyond our control; a worker s value depends greatly upon the price of the product he helps produce (e.g., wage of a coal miner would increase if we ran out of oil) Lorenz Curve a graph illustrating the cumulative amount of income earned by each cumulative portion of the population Gini-Coefficient a quantitative measure of income inequality based upon the Lorenz Curve, defined as the ratio of the area between 45-degree line and the Lorenz Curve to the entire area below 45-degree line.
Utilitarian Justice the argument that society should strive for the greatest happiness for the greatest number of people (i.e., attempt to maximize the summation of utility or happiness over all members of society) total social welfare can be increased by transferring income/wealth from the rich to the poor, so long as the marginal utility of income/wealth is diminishing. arguments first put forth by Jeremy Bentham (748-835) and John Stuart Mill (86-873) Rawlsian Justice (Social Contract Theory) the argument that the socially best income distribution is the one which maximizes the well-being of the worst-off member of society developed by the philosopher John Rawls in A Theory of Justice (97) consider the ideal society that would be designed by someone in the beforelife behind a veil of ignorance (i.e., not knowing what their realized lot in life would be, but just knowing that it would be a random draw in this ideal society ) => Rawls argues that such a person would be particularly concerned about the situation of the poorest person (i.e., the worst possible outcome) => such an objectively ideal society should implement policies to apply the maximin criterion Maximin Criterion a claim that the government should aim to maximize the wellbeing of the worst off person in society Labor Theory of Value the theory that the value of a commodity depends upon the amount of labor used to produce it redistribution as a public good (i.e., Overcoming the Free Rider Problem) the recognition that private charity may lead to less than the socially best level of redistribution since, in many respects, income equality is a public good Social Security System a system of Federal Government social insurance programs consisting of Old Age and Survivors Insurance pays cash benefits to retired workers, their survivors, and their dependents Disability Insurance pays cash benefits to disabled workers and their dependents Medicare program which provides medical insurance to people who are over age 65 or disabled Temporary Assistance for Needy Families a welfare program that provides cash benefits to low income households Supplemental Security Income a welfare program which provides cash benefits to poor elderly people with very low entitlements under traditional Social Security Unemployment Compensation a state government program that pays cash benefits to laid-off workers Medicaid a welfare program which provides medical care for people with low incomes Food Stamps vouchers (with a face value greater than their cost) available to low income families which can be used to purchase food at grocery stores Public Housing federal government program that provides access to housing with rents capped at 3% of income
Earned Income Tax Credit a refundable Federal Income Tax Credit available to low income families with children (i.e., some people who pay no income taxes end up getting a check back from the IRS) three primary reasons for imposing taxes: generate revenue, discourage certain behaviors, redistribute income two basic notions of tax fairness or equity : Horizontal Equity two individuals of equal economic capacity should have equal tax burdens Vertical Equity individuals of greater economic capacity should not have a smaller tax burden Average Tax Rate (ATR) the amount of total taxes paid divided by income. Progressive Tax tax structure for which ATR increases as the level of income is increased. Proportional Tax tax structure for which ATR remains constant as the level of income is increased. Regressive Tax tax structure for which ATR decreases as the level of income is increased. Marginal Tax Rate (MTR) the percentage of the next dollar earned that must be paid in taxes. real world examples of progressive tax: U.S. Federal Income Tax proportional tax: flat tax with no deductions whatsoever (e.g., flat tax proposed by Steve Forbes in 996 was NOT a proportional tax, since the first $33, of earnings were not taxed; income taxes in Albania (%), Bulgaria (%), Czech Republic (5%), Iraq (5%), Jamaica (25%), Hong Kong (6%), Mongolia (%), Russia (3%), Slovakia (9%), Ukraine (5%)) regressive tax: U.S. Social Security Payroll Tax first $2, taxed at a marginal rate of 6.2%, while additional earnings are not taxed at all
Distribution of Income in the U.S. over time: United States 98 989 998 27 Real Per Capita GDP $25,64 $3,877 $37,238 $43,926 % of Income earned by Bottom 5% 7.68% 4.96% 3.67% 2.26% % of Income earned by Bottom 75% 43.3% 37.72% 34.37% 3.29% % of Income earned by Bottom 9% 67.87% 6.% 56.23% 5.95% % of Income earned by Bottom 99% 9.54% 85.8% 8.53% 77.7% Not only did Real Per Capita GDP increase over this time, but Real Household Income (i.e., adjusted for inflation) increased for every segment of the population over these years => table below reports the income cutoff level (in real terms, that is adjusted for inflation) for each stated percentile in each year. Real Household Income 98 989 998 27 2 th Percentile $24,96 $25,837 $27,439 $27,864 4 th Percentile $4,95 $45,27 $47,882 $49,5 6 th Percentile $59,45 $65,873 $7,64 $75, 8 th Percentile $83,372 $96,45 $6,38 $2,638 95 th Percentile $3,766 $59,779 $84,452 $97,26 Over the past three decades in the U.S. the rich have become richer => 35.% increase ($83,372 to $2,638) in cutoff of 8 th Percentile the middle class has become richer => 8% increase ($4,95 to $49,5) in cutoff of 4 th Percentile the poor have become richer =>.8% increase ($24,96 to $27,864) in cutoff of 2 th Percentile
Lorenz Curve and Gini-Coefficient: Fraction of Total Income 45 Line or Line of Perfect Income Equality.777.595.329.226 Lorenz Curve for U.S. (27).5.75.9.99 Fraction of Total Population (Gini-Coefficient) = Green Green Blue Fraction of Total Income 45 Line or Line of Perfect Income Equality Lorenz Curve for U.S. (27) Fraction of Total Population
Extreme Equality => Lorenz Curve on 45-degree line => Gini-Coefficient equal to zero: G 2 Fraction of Total Income Fraction of Total Population Extreme Inequality (one person having all income) => Lorenz Curve lies along 2 horizontal axis => Gini-Coefficient equal to one: G 2 Fraction of Total Income Fraction of Total Population United States 98 989 998 27 Gini Coefficient.43.43.456.463
Comparison of Income Inequality across countries: in general there is a trend for societies with higher levels of per person income to have a more even distribution of income (or equivalently, for societies with lower levels of per person income to have a less even distribution of income ). Notable exceptions: U.S., Hong Kong, Singapore (economies closer to the free market side of the spectrum) Per Capita Gini Country: GDP (PPP): Coefficient: Norway $55,6.28 Singapore $48,9.52 United States $46,.45 Canada $38,2.32 Sweden $36,9.23 United Kingdom $35,3.34 France $33,8.28 New Zealand $26,.36 Russia $4,6.4 Mexico $2,5.5 South Africa $,3.65 Brazil $,.57 Turkey $9,4.44 Colombia $7,2.54 India $2,7.37 Zimbabwe $5.5
Overview of history of and current outcomes from the U.S. Federal Income Tax: 6 th Amendment to the U.S. Constitution ratified on 2/3/93 authorized congress to levy an income tax U.S. Federal Income Tax established in 93 Progressive Tax (increasing MTR) Primary source of U.S. Government tax receipts (I) Historical Tax Rates ( married couple filing jointly ) Year: # of Brackets: Low MTR: High MTR: 93 7 brackets.% 7.% 92 56 brackets 4.% 73.% 928 23 brackets.5% 25.% 932 55 brackets 4.% 63.% 94 32 brackets.% 8.% 945 24 brackets 23.% 94.% 954 24 brackets 2.% 9.% 964 26 brackets 6.% 77.% 98 6 brackets % 7.% 992 3 brackets 5.% 3.% 2 5 brackets 5.% 39.6% 22 6 brackets.% 35.% 23 7 brackets.% 39.6% (in reality the effective Low MTR has always been %, due to the presence of exemptions and deductions) (II.A) Disproportionate amount of tax dollars come from The Rich Group s Group s % Range Income Share of Share of of Income Split Income Taxes Income Top % $343,927+ 36.7% 6.9% Top 5% $54,643+ 58.7% 3.7% Top % $2,24+ 7.5% 43.2% Top 25% $66,93+ 87.3% 65.8% Top 5% $32,396+ 97.7% 86.5% Top 5% pay 58.7% of all income tax dollars => Bottom 95% pay 4.3% Top % pay 7.5% of all income tax dollars => Bottom 9% pay 29.5% Top % pay more income taxes than the Bottom 9% (36.7% versus 29.5%) Top % pay almost as much in income taxes as the Bottom 95% (36.7% versus 4.3%) Top 5% pay 97.7% of all income tax dollars => Bottom 5% only pay 2.3% 37.98 million tax returns with positive AGI. Of these, 59 million (or 42.76% of the filed returns) had federal income tax liability of $ => people who not only got back every single dollar the Federal government withheld, but in some cases received money back from the IRS (recall the EITC)
(II.B) U.S. Federal Income Tax is clearly progressive % Range Average of Income Tax Rate Top % 24.% Top 2%-5% 6.4% Top 6%-%.4% Top %-25% 8.25% Top 26%-5% 5.56% Bottom 5%.85% (II.C) Across income levels, ATR has evolved over time Top % Top -25% Top 26-5% Bottom 5% 98 34.47% 4.8%.9% 6.% 988 24.4%.82% 9.6% 5.6% 992 25.5%.39% 9.42% 4.39% 2 27.45% 2.4% 9.28% 4.6% 28 23.27% 9.29% 6.75% 2.59% 29 24.% 8.25% 5.56%.85% Between 2 and 29: ATR of every income group decreased % decrease in ATR: o 2.53% ([27.45 24.]/[27.45]) decrease in ATR for Top % o 3.48% decrease in ATR for Top -25% o 4.9% decrease in ATR for Top 26-5% o 59.78% decrease in ATR for Bottom 5%
Problems:. The country of Roncoazakhstan has just enacted an income tax as follows. For each of the first, CoaseMarks (their national currency) earned a worker does not have to pay any taxes; for each CoaseMark earned beyond the, th and 2, th a worker must pay % to the government; and for each CoaseMark earned beyond the 2, th a worker must pay 2% to the government. A. Without doing any calculations, is this tax Regressive, Proportional, or Progressive? Explain. B. Adam earns 5, CoaseMarks per year. How much must he pay in taxes? What is his Average Tax Rate? What Marginal Tax Rate does he face? C. Smith earns 4, CoaseMarks per year. How much must he pay in taxes? What is his Average Tax Rate? What Marginal Tax Rate does he face? D. Are your answers to parts (A), (B), (C), and (D) consistent with or inconsistent with one another? Explain. 2. The graph below illustrates the Lorenz Curves for Algeria and Burundi. Answer the following questions based upon the information conveyed in this graph. Cumulative share of total income Lorenz Curve for Algeria Lorenz Curve for Burundi Cumulative share of total population 2A. In which country is there a more even distribution of income? Explain. 2B. For which country will the value of the Gini-Coefficient be greater? Explain.
Multiple Choice Questions:. Charles income is higher than Debbie s income. Two of the notable differences between their jobs are that Charles must work outside year round (even when it is very hot in the summer and very cold in the winter) and Charles runs a greater risk of being injured on the job. This would seem to suggest that the difference in incomes between the two individuals is A. due to gender discrimination. B. an indication of the Labor Theory of Value. C. a compensating differential. D. a consequence of Debbie being paid a wage rate below the minimum wage. 2. Under the current U.S. Federal Income Tax, the Top % of wage earners pay A. about 36.7% of all taxes collected, an amount which is greater than the 29.5% of all taxes collected paid by the bottom 9% of wage earners. B. about 6.9% of all taxes collected, an amount exactly equal to their share of total adjusted gross income earned. C. about 4.8% of all taxes collected, an amount which is slightly less than their share of total adjusted gross income (which is 6.9% of total adjusted gross income). D. virtually no taxes, due to all of the loopholes in the current tax code. 3. wrote A Theory of Justice (97), in he argued that a social contract designed behind a veil of ignorance would aim to maximize the wellbeing of the worst-off member of society. A. Karl Marx B. Jeremny Bentham C. John Rawls D. Robert Nozick 4. The Gini-Coefficient provides a quantitative measure of A. the rate at which a society is depleting its natural resources. B. income equality/inequality within a society. C. average levels of income in society. D. the rate at which prices are increasing in an economy over time. 5. One of the 7 Determinants of Productivity, Income, and Wealth is effort, which refers to the recognition that differences in income or wealth across individuals could result from differences in A. the amount of money that individuals receive as inheritances during their lifetime. B. the natural talents that people are endowed with at birth. C. the skills and experiences that people acquire through education, training, and work experience. D. how hard individuals choose to work.
6. The Function of Government refers to government policies aimed at changing the final distribution of goods/services across consumers, usually with the intention of realizing a fairer apportionment of consumption, income, and wealth. A. Allocation B. Distribution C. Stabilization D. Free Rider 7. The U.S. Federal Income Tax A. was first established in 93 (and authorized by the passage of the 6 th Amendment to the U.S. Constitution). B. is a Progressive Tax. C. was abolished by President Barack Obama during his first year in office. D. More than one (perhaps all) of the above answers is correct. 8. Examining how Real (i.e., inflation adjusted) Household Incomes have changed over time in the U.S., between 98 and 27 the household at the 6 th Percentile of the income distribution saw its Real Income A. decrease from about $39,5 down to $3,95 B. remain relatively constant at roughly $45,. C. increase from about $59,45 up to $75,. D. increase from about $22,96 up to $87,26. 9. In 27: George earned $923,87 of income, of which he paid 24.% in U.S. Federal Income Taxes; John earned $386,527 of income, of which he paid 3.7% in U.S. Federal Income Taxes; and Joe earned $39,853, of which he paid 2.7% in U.S. Federal Income Taxes. If income provides a measure of economic capacity and average tax rate provides a measure of tax burden, then these figures would suggest that the U.S. Federal Income Tax A. violates the notion of vertical equity. B. satisfies the notion of horizontal equity. C. generates enough revenue to cover all Federal Government expenditures. D. results in the rich paying too little in taxes.. Incomes may differ across different individuals in a free market society due to A. only factors which are beyond the control of the individual (such as their endowment at birth of natural talent and ability ). B. only factors which are under the direct control of the individual (such as how much education to acquire ). C. some factors which are under the control of the individual (such as how much education to acquire ) and some factors which are beyond the control of the individual (such as their endowment at birth of natural talent and ability ). D. None of the above answers are correct (since in general, income levels in a free market society are essentially entirely random ).
. says that in order for a tax to be fair, two individuals of equal economic capacity should have equal tax burdens. A. John Rawls B. The notion of vertical equity C. The notion of horizontal equity D. The notion of monetary equity 2. Suppose that the Lorenz Curve for the U.S. in 2 lies completely below the Lorenz Curve for France in 2. This implies that A. Per Capita Incomes are higher in France than in the U.S. B. the Unemployment Rate is lower in the U.S. than in France. C. incomes are distributed more equally in France than in the U.S. D. incomes are distributed more equally in the U.S. than in France. 3. The Labor Theory of Value, which states that the value of a commodity depends upon only the amount of labor required to produce the commodity, is most closely associated with the ideas of A. John Rawls. B. Jeremy Bentham and John Stuart Mill. C. Robert Nozick. D. Karl Marx. 4. Which of the following countries currently has a progressive income tax? A. The Czech Republic. B. The United States. C. Iraq. D. More than one (perhaps all) of the above answers is correct. 5. Based upon to the values of Gini-Coefficients noted in lecture, incomes in the market oriented economies of Singapore ( G Sing. 52 ) and the United States ( G US. 45) are distributed less equally than in the less market oriented economies of Sweden ( G Swdn. 23 ) and France ( G Fr. 28 ). Which of the following statements is also true? A. Also, each of the former countries is currently experiencing very negative annual rates of GDP growth (-5.3% in Singapore and -4.4% in the United States), while each of the latter countries is currently experiencing very positive annual rates of GDP growth (8.2% in Sweden and 6.4% in France). B. Further, GDP Per Capita (PPP) is higher in the latter countries ($55,6 in Sweden and $55,2 in France), than in the former countries ($39,29 in Singapore and $36,5 in the United States). C. However, GDP Per Capita (PPP) is higher in the former countries ($48,9 in Singapore and $46, in the United States), than in the latter countries ($36,9 in Sweden and $33,8 in France). D. None of the above answers are correct.
6. Focusing on the real household income of the household at the 2 th percentile and real household income of the household at the 8 th percentile in the U.S. over the past three decades, over this time period A. the rich became richer while the poor became poorer (i.e., the real income cutoff level of the 8 th percentile increased while the real income cutoff level for the 2 th percentile decreased). B. both the rich and the poor became richer (i.e., the real income cutoff level of both the 2 th percentile and the 8 th percentile increased). C. both the rich and the poor became poorer (i.e., the real income cutoff level of both the 2 th percentile and the 8 th percentile decreased). D. the rich became poorer while the poor became richer (i.e., the real income cutoff level of the 8 th percentile decreased while the real income cutoff level for the 2 th percentile increased). 7. Focusing on the benefits provided through the Temporary Assistance for Needy Families (TANF) welfare program, the maximum monthly payment to a oneparent family of three in January 23 A. was $5 in every single state in the U.S. B. was $ in every single state in the U.S. (due to this program being abolished by George W. Bush on his first day as President). C. varied by state (due to benefit levels being set by each state) from a low of $7 in Mississippi to a high of $923 in Alaska. D. None of the above answers are correct. 8. Focusing on the Average Tax Rate of the Bottom 5% of Income Earners, this figure between 98 and 2 and then between 2 and 29. A. increased from 2.34% up to 3.78%; increased more from 3.78% up to 4.95% B. decreased from 6.% down to 4.6%; decreased more from 4.6% down to.85% C. decreased from.9% down to 3.6%; increased from 3.6% up to 7.36% D. remained constant at 2.7%; sharply increased to 2.43% 9. Consider three taxpayers: Amy, Bill, and Cindy. Amy and Bill have exactly equal economic capacities when it comes to being able to bear the burden of taxation, while Cindy has a greater economic capacity than Amy and Bill. Considering the notions of fairness discussed in lecture, A. to satisfy the notion of Vertical Equity, Cindy should have a greater tax burden than both Amy and Bill. B. to satisfy the notion of Horizontal Equity, Cindy should have a greater tax burden than both Amy and Bill. C. to satisfy the notion of Horizontal Equity, Amy and Bill should have exactly equal tax burdens. D. More than one (perhaps all) of the above answers is correct.
2. In 26, the value of the Gini-Coefficient in the United States was.45, while the value of the Gini-Coefficient in South Korea was.35. These values directly suggest that in 26 A. incomes were distributed more equally in South Korea than in the United States. B. average incomes were higher in the United States than in South Korea. C. fewer workers were unemployed in South Korea than in the United States. D. the economic system in South Korea was closer to Capitalism, while the economic system in the United States was closer to Socialism. 2. were two of the central figures in the formulation of the ideas of Utilitarianism, which argues that total social welfare can be increased by income redistribution, so long as people have a diminishing marginal utility of income. A. Yair Tauman and Pradeep Dubey B. Jeremy Bentham and John Stuart Mill C. Ronald Coase and Adam Smith D. James Buchanan and Gordon Tullock 22. is a welfare program which provides cash benefits to poor elderly people with very low entitlements under the traditional Social Security system. A. Temporary Assistance for Needy Families B. Medicaid C. Supplemental Security Income D. The Earned Income Tax Credit 23. In the United States, the highest Marginal Tax Rate currently imposed under the federal income tax is A. 7%, since every dollar earned by every worker in the U.S. is taxed by the federal government at a Marginal Rate of 7%. B. 39.6%, a highest Marginal Tax Rate which is lower than the highest Marginal Tax Rate of 7% which was in place in 98 but higher than the highest Marginal Tax Rate of 35% which was in place in 22. C. 83%, a rate so high that it caused Brian Johnson (the lead singer of AC/DC) to move from Hawai i to England to avoid having to pay such a large fraction of his income in taxes. D. 9%, the highest level that the highest Marginal Tax Rate has ever been in the history of our country. 24. is a broad term which refers to monetary payments made by the government to certain individuals in society, with the impact of altering the distribution of income within a society. A. Monetary Policy B. Redistribution In-Kind C. Income Support D. Income Taxation
25. Regarding the notions of fairness of taxation discussed in lecture, the idea of A. low income equity suggests that individuals with very low economic capacity should never be burdened with having to pay any taxes. B. horizontal equity suggests that individuals of equal economic capacity should have equal tax burdens. C. vertical equity suggests that individuals with greater economic capacity should have smaller tax burdens. D. political equity suggests that the only people who should have to pay taxes are those individuals who voted for the politicians implementing the taxes. 26. For a Regressive Tax A. the Average Tax Rate becomes negative at very high levels of income. B. the Average Tax Rate increases as the level of income increases. C. the Average Tax Rate decreases as the level of income increases. D. the Average Tax Rate remains constant as the level of income increases. Answers to Problems: A. A tax is progressive if the Average Tax Rate increases as income increases. Recalling the general relation between any average and the corresponding marginal, the Average will never decrease if the Marginal Value always increases as income increases. Thus, since the Marginal Tax Rate becomes higher at higher level of income, it follows that this tax is a Progressive Tax. B. Adam must pay % of the 5, CoaseMarks earned between, and 5,. Thus, his total tax liability is 5, CoaseMarks. It follows that his Average Tax Rate is (5,)/(5,)=()/(3) or approximately 3.33%. His Marginal Tax Rate is %, since if he were to earn more CoaseMark his total tax liability would increase by (.) CoaseMarks. C. Smith must pay % of the, CoaseMarks earned between, and 2, and 2% of the 2, CoaseMarks earned between 2, and 4,. Thus, his total tax liability is (.)(,)+(.2)(2,) = 5, CoaseMarks. It follows that his Average Tax Rate is (5,)/(4,)=2.5%. His Marginal Tax Rate is 2%, since if he were to earn more CoaseMark his total tax liability would increase by (.2) CoaseMarks. D. Yes, the above answers are consistent with one another. From (B) and (C) we see that the individual with higher income has a higher ATR. This is consistent with the answer to part (A), where it was noted that this tax is a progressive tax. 2A. Based upon the Lorenz Curves that are illustrated, there is a more even distribution of income in Algeria than in Burundi. Observe that in comparison to the Lorenz Curve for Burundi, the Lorenz Curve for Algeria is closer to the 45- degree line. Thus, for each possible cumulative fraction of the population, a greater cumulative share of the total income of society is earned by individuals in Algeria than in Burundi. This implies that the distribution of income in Algeria is
closer to the extreme of perfect equity (in which all individuals have equal incomes or equivalently, the case in which the (x)% of individuals with the lowest incomes earn exactly (x)% of the total income of society.) 2B. Based upon the Lorenz Curves illustrated, we can infer that the value of the Gini- Coefficient is greater for Burundi than for Algeria. Recall that the Gini- Coefficient is defined as the ratio of the area between the 45-degree line and the Lorenz Curve to the entire area below the 45-degree line. When computing each different Gini-Coefficient, there is always a common area below the 45- degree line. However, since the Lorenz Curve for Burundi lies below the Lorenz Curve for Algeria, the area between the 45-degree line and the Lorenz Curve is greater for Burundi than for Algeria. As a result, the value of the Gini-Coefficient is greater for Burundi than for Algeria. Equivalently, looking at the graph below, the value of the Gini-Coefficient for Algeria is the blue area divided by the sum of the blue, red, and green areas. Likewise, the Gini-Coefficient for Burundi is the sum of the blue and red areas divided by the sum of the blue, red, and green areas. Again, when calculating either of these ratios, the sum of the blue, red, and green areas is the same, so that the Gini-Coefficient is greater for Burundi than for Algeria since the sum of the blue and red areas is greater than the blue area. Cumulative share of total income Lorenz Curve for Algeria Lorenz Curve for Burundi Cumulative share of total population Answers to Multiple Choice Questions:. C 2. A 3. C 4. B 5. D
6. B 7. D 8. C 9. A. C. C 2. C 3. D 4. B 5. C 6. B 7. C 8. B 9. D 2. A 2. B 22. C 23. B 24. C 25. B 26. C