A government implements a new policy that successfully redistributes a portion of the national income from the highest-earning households to the lowest-earning households. Assuming this is the only change, what is the direct causal effect on the standard graphical and numerical measures of income inequality?

Analyzing Changes in Income Distribution

If a country's Gini coefficient decreases from 0.45 to 0.35, it indicates that the area between its Lorenz curve and the line of perfect equality has increased.

Causation in Inequality Measurement

Match each economic scenario with its direct causal effect on the graphical and numerical measures of income inequality.

Explaining the Gini Coefficient's Link to the Lorenz Curve

A direct, causal consequence of the area between the Lorenz curve and the line of perfect equality becoming larger is that the numerical value of the Gini coefficient will ________.

A country introduces a new, highly progressive income tax system where higher earners are taxed at a significantly greater rate, and the collected revenue is used to fund social programs for lower-income households. Arrange the following outcomes in the correct causal sequence that would result from this policy.

Evaluating Economic Policy Impact on Inequality

An economist compares income distribution in two countries. In Country A, the bottom 40% of households earn 10% of the total income. In Country B, the bottom 40% of households earn 15% of the total income. However, the top 10% of households in Country A earn 30% of the total income, while in Country B, the top 10% earn 40%.

Given that the numerical Gini coefficient is causally determined by the total area between the line of perfect equality and the income distribution curve, what can be defini