The table shows the distribution of market income. Market income (percent of total) 1 7 14 23 55 Households Lowest 20% Second 20% Middle 20% Fourth 20% Highest 20% *** Draw points to indicate the share of market income of 1) the lowest 20 percent of households 2) the lowest 40 percent of households 3) the lowest 60 percent of households 4) the lowest 80 percent of households. Draw the economy's Lorenz curve through the points. >>> When you have finished drawing the curve press the Escape key to release the drawing tool. 100 80- 60- 40- 20- 0 Cumulative percentage of income 20 40 80 60 Cumulative percentage of households >>> Draw only the objects specified in the question. 10 it i du: rea les SI Orien 1 CH Camp NS 1

The table shows the distribution of market income. Market income (percent of total) 1 7 14 23 55 Households Lowest 20% Second 20% Middle 20% Fourth 20% Highest 20% *** Draw points to indicate the share of market income of 1) the lowest 20 percent of households 2) the lowest 40 percent of households 3) the lowest 60 percent of households 4) the lowest 80 percent of households. Draw the economy's Lorenz curve through the points. >>> When you have finished drawing the curve press the Escape key to release the drawing tool. 100 80- 60- 40- 20- 0 Cumulative percentage of income 20 40 80 60 Cumulative percentage of households >>> Draw only the objects specified in the question. 10 it i du: rea les SI Orien 1 CH Camp NS 1

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1. An economy's Lorenz Curve reveals that an economy's highest income quintile has 65% of the economy's income while the lowest income quintile only has 5% of the economy's income. Solely based on the Lorenz Curve, is this distribution of income fair? Why or why not? 2. To combat income inequality and to generate increased tax revenues to fund expenditures, government officials decide to aggressively increase how progressive income taxes are, so much so that the top income earners are marginally taxed 90% of their income (and while this marginal tax rate may seem oppressive, these top income earners still have more than enough income to satisfy all of their needs and all but the most extravagant of wants - basically, these earners have more than enough money). Argue why this tax policy is a fair approach to fund government expenditures. Why might this tax policy fail to achieve its objectives (tax revenues would actually decline as a result)?
Q75
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Suppose that the economy of Loserville has the following distribution of income: first quintile 15% of aggregate income second quintile 20% of aggregate income third quintile 20% of aggregate income fourth quintile 20% of aggregate income fifth quintile 25% of aggregate income a. From the information provided, please derive a Lorenz Curve for Loserville. Show graphically. b. From the Lorenz Curve you have drawn, find the Gini Coefficient. c. How does Loserville compare to the United States economy?
1. Working with Numbers and Graphs Q1 The following table shows the income distribution of an economy. Quintile Lowest fifth Second fifth Third fifth Fourth fifth Highest fifth Income Share (Percent) 18 19 20 21 22
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Question One The figure below shows three alternative distributions of land ownership in a village with people and 100 hectares of land. a. Draw the Lorenz curves for each case. 10 points b. For cases I and III, calculate the Girl 10 points c For case il, show on the Lorenz curve diagram how the Gini coefficient can be calculated. 5 points Question One The figure below shows three alternative distributions of land ownership in a village with 10 people and 100 hectares of land. a. Draw the Lorenz curves for each case. b. For cases I and III, calculate the Gini c. For case II, show on the Lorenz curve diagram how the Gini coefficient can be calculate 80 people own nothing 20 people own 5 hectares each 40 people own nothing 40 people own 20 people own 1 hectare each 3 hectares each 100 people own 1 hectare each
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Using the above Lorenz Curve, if Economy A decreased the progressivity of income taxes, then Economy A's Lorenz Curve would shift closer to the 45-degree reference line. shift closer to Economy B's Lorenz Curve. not shift at all
TRUE or FALSE 64. Public policy is essential in solving poverty at the local and national levels. 65. Solving poverty has to be done from macroeconomic and microeconomic levels. 66. The Kuznets Curve is a graphical presentation of the relationship between the Gini coefficient and GNI per capita
Part B: Briefly provide three reasons as to why income inequality is on the rise in Canada and the US. Secondly, briefly explain how our respective tax systems can help reduce income inequality (be specific about the type of tax you are referring to).
Using the above Lorenz Curve, answer the following questions. . . Approximately what percentage of the income does the richest 20% of Country A earn? Approximately what percentage of the income does the poorest 20% of Country B earn? If the government of Country B increased the progressivity of income taxes, would its Lorenz Curve move closer to the 45-degree reference line, closer to Country A's Lorenz Curve, or not move at all?