Hypothetical Model of a One-Lender, Five-Borrower Economy

Consider a small economy with four individuals and the following wealth distribution: Person A has $10, Person B has $20, Person C has $70, and Person D has $100. A new policy is implemented where Person D is taxed $10, and this amount is transferred directly to Person A. How would this redistribution of wealth affect the economy's Gini coefficient?

Analyzing Sources of Economic Inequality

Interpreting the Gini Coefficient Beyond the Numbers

Analyzing the Impact of a Policy on Inequality

Match each description of an economy's wealth distribution to the most plausible Gini coefficient value that would represent it.

In an economy where the primary source of wealth inequality is the large gap between a small group of wealthy lenders and a large group of low-wealth borrowers, a government policy that imposes a progressive tax on the lenders' profits and uses the revenue to provide a uniform subsidy to all borrowers would lead to a decrease in the economy's Gini coefficient.

Evaluating Policy Based on the Gini Coefficient

Comparing Wealth Distributions with the Gini Coefficient

Decomposing Inequality in a Borrower-Lender Economy

Analyzing Components of Economic Inequality