Transfer of $45 (5% of Richest Decile’s Income) to: Change in average per capita

Question

Transfer of $45 (5% of Richest Decile’s Income) to:

Change in average per capita income

1.33%

1.33%

Change in Gini coefficient

-5.27%

2.65%

Change in Welfare

3.31%

2.65%

A. By adding an amount equal to 5% of the richest decile’s income raises averagehousehold income by ___________ percent.

a. 1.33%

b. 2.65%

c. .23%

d. Cannot be determined.

B. Welfare increases by ________ percent if cash is given to the ___________ decile.

a. 3.31%; poorest decile.

b. 4.31%; poorest decile.

c. 3.31%; richest decile.

d. 1.33%; poorest decile.

impact on per capita Income, inequality, and welfar the poorest decile the richest decile

Change in average per capita income

1.33%

1.33%

Change in Gini coefficient

-5.27%

2.65%

Change in Welfare

3.31%

2.65%

Explanation / Answer

Answer:

A.   By adding an amount equal to 5% of the richest decile’s income raises average household income by:

a. 1.33 %

As the addition of 5% to the income of the richest decile has changed their average per capita income by 1.33%

B.   welfare increases by ___ percent if cash is given to the ___ decile:

a. 3.31 %, poorest decile

if income will be given to poor decile it will uplift their living standard and they will be able to get better job opportunities which will increase their per capita income and will further lead to welfare of the economy.

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