Gini Coefficient Calculation in a Three-Person Population (Figure 5.25)

Calculation of Average Income Difference in the One-Lender, Five-Borrower Model

Consider a population where, due to uniform, non-proportional income growth, the average income doubles. However, the absolute difference in income between every pair of individuals remains exactly the same. Based on the formula that relates the Gini coefficient to the average income difference, what is the resulting effect on the Gini coefficient?

Calculating the Gini Coefficient

Evaluating Economic Policies and Income Inequality

Calculating Income Inequality in a Small Economy

True or False: If a government implements a policy that gives every individual in a population the same fixed amount of money (e.g., a $1,000 universal payment), the Gini coefficient will remain unchanged because the absolute income differences between all pairs of individuals have not changed.

A government is considering several economic policies. Based on the formula that defines the Gini coefficient as a function of average income and the average difference in income between all pairs of people, match each policy scenario with its most likely direct effect on the Gini coefficient.

In an economy, the average income is $60,000, and the average absolute difference in income between all pairs of individuals is $36,000. According to the formula that relates these values, the Gini coefficient for this economy is ____.

To calculate the Gini coefficient from a set of individual incomes using the formula based on average difference, one must follow a specific sequence of calculations. Arrange the following steps in the correct logical order, from first to last.

Two countries, Equatoria and Polaristan, have the exact same average income per person. In Equatoria, incomes are distributed very evenly, with most citizens earning an amount close to the national average. In Polaristan, there is a vast gap between a small, extremely wealthy elite and a large population with very low incomes.

Based on the formula that defines the Gini coefficient in terms of average income and the average difference between all pairs of incomes, which of the following statements is most likely true?

An economic policy is implemented that transfers a sum of money from the single wealthiest individual in a population to the single poorest individual. This transfer is designed so that the total income in the population, and therefore the average income, remains unchanged. Assuming there are more than two people in this population, what is the most likely effect on the measure of inequality that is calculated as half the ratio of the average income difference to the average income?