Questions Explain three methods of measuring the income inequality of a nation?
1.kuznet ratio
2. Lorenz curve
3. Gini coefficient
As in the case of income distribution, calculation of wealth distribution is done by different entities using different measurements,
resulting in a disparity in outcomes. In fact, commonly, wealth is narrowly defined as financial wealth—namely, cash on hand and the money value of tangible and nonliquid assets. Even just the market valuation of financial portfolios is commonly used to define financial wealth. However, some may extend the definition to include the value of income streams and insurance rights that, for the most part, cannot be transacted or encumbered. These include Medicare, Medicaid, and Social Security. When such transfers and public assistance are included, the poor and many elderly could benefit, reducing the wealth disparity (Galbraith 2016). To obtain net wealth, the value of the debts are subtracted subtracted from the value of the assets. Galbraith stated that financial wealth is the most unequal and that much of the US population has no net financial wealth, and this is especially true for African American and immigrant households. Even for the middle class, the value of financial assets may be smaller than the value of a mortgage debt, held against housing. In measuring global poverty, the World Bank Group (2016) and the World Bank national accounts (2015) first created a measure of well-being that shows the differences in the quality of life across an entire population. To determine the standard for well-being, a survey was conducted. The survey determined the quality of life based on the data range of consumption and income, which is created by dividing the population into those with the highest and lowest of well-being. This is done in order to better compare the data, which are the monetary values that are given to different variables that establish a point where income and consumption are deemed insufficient to have good quality of life. When that point
Transcribed Image Text:Capitalism and Inequality
poverty. In the United States, the US Census Bureau defines
the poverty status by comparing pretax cash income against a
threshold that is set at three times the cost of a minimum food
diet in 1963 (Frumkin 2000). It is annually adjusted for inflation,
family size, composition, and age of the householder. In 2014,
the
threshold for a family of four was US $24,230. The
poverty
official national poverty rate was 14.8%. There were 46.7 million
people in poverty in the United States.
Another important measurement in analyzing global inequality
and that poverty among nations is income per capita. It measures
a country's standard of living and can show the relative economic
performance of different countries. In using the measurement for
different periods, the real gross domestic product (GDP) per capita
is used rather than a nominal measurement in order to adjust for
inflation. In comparing the developed and developing countries,
there is a huge difference in real GDP per capita. According to
Investopedia (2017),
per capita GDP are
exemplified by comparisons between developed
and developing economies. At US $132,099, Qatar
had the highest 2015 worker output in the world
when adjusted for purchasing power parity (PPP),
the vast differences in
a measure that pegs each nation's currency to the
US dollar for comparative purposes. By contrast,
Ethiopia, which sits toward the bottom of the global
scale, held a per capita GDP of US $687 in 2015.
The marked disparity experiences a reversion when
GDP per capita growth is examined. Ethiopia,
in which crude exploration activity ramped up
in 2014, experienced the highest global growth
in output per worker in 2015, at 8.5%, whereas
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Transcribed Image Text:Albert Duncan
is statistically defined, it is called the poverty line. There is also
an established point that marks the minimum food consumption
that can sustain life, which is called the extreme poverty line. That
point will differ from one country to the next due to a change in
the circumstances of the population, but the process remains the
same. With that information, we can understand how many people
live below the poverty line. In addition, the World Bank uses the
International Comparison Program in order to create a benchmark
to measure extreme poverty, which was at US $1.90 a day in the
2011 purchasing power parity (PPP). This would mean that at US
$1.90, a person would be able to purchase a sufficient quantity and
quality of food to meet his or her daily caloric need. Most of the
world's extremely impoverished people live in Sub-Saharan Africa
and Southern Asia. While over one in ten people live in extreme
poverty globally, in Sub-Saharan Africa, that figure is four in ten,
representing 389 million people, which is more poor people than
all other regions combined (World Bank Group 2016).
The international measure of poverty is not applicable to
advanced countries, like the United States, due to their relative
prosperity. In fact, the measurement of inequality and poverty in
America is complex and multidimensional that, at times, can cause
the official figures not to be an accurate reflection of the economic
well-being of households and individuals. Given that there are
diverse ways of calculating income, there must be disparities in the
measurements of the income mean, median, and Gini coefficient.
In the United States, poverty is income that is measured below
a certain minimum level, and in there, the US Census Bureau
and the Department of Commerce prepare annual measures
of poverty. According to Frumkin (2000), “Poverty has an
evolving dimension over time and involves raising the standards
periodically to reflect improvement in living conditions and higher
aspirations afforded by the advancements in technology" (p. 86).
This situation normally raises the number of persons living in
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