Economics • Economic BasicsHard
Analyze the theoretical mechanics of the 'Gini Coefficient' in measuring income distribution. If a country's Gini coefficient shifts from 0.45 to 0.30 over a decade, what structural implication does this indicate for its economy?
A. Income inequality has worsened significantly, concentrating wealth among top earners.
B. Income distribution has become more egalitarian, narrowing the gap between rich and poor.✓ Correct Answer
C. The overall poverty line has risen, increasing the absolute number of destitute households.
D. Economic growth has decelerated due to a decline in capital accumulation incentives.
💡 Solution & Explanation
A lower Gini coefficient closer to zero denotes a more equitable distribution of income across the population, whereas a value approaching one signifies extreme inequality. Alternative outcomes describe worsening disparity or changes in poverty headcount ratios rather than relative distribution patterns. The coefficient is derived directly from the cumulative Lorenz curve of income shares.
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