True/False/Uncertain. Are the following statements true, false, or uncertain? In

Question

True/False/Uncertain. Are the following statements true, false, or uncertain? In each case, back up your answer with a brief, but precise explanation.

a.         The Kuznets ratios satisfy the Dalton transfer principle.

b.         If the Lorenz curves of two situations do not cross, the Gini coefficient and the coefficient of variation cannot disagree.

c.If a relatively poor person loses income to a relatively rich person, the mean absolute deviation must rise.

d.         The Lorenz curve must necessarily lie in the lower triangle of the diagram, bounded by the 45° line at the top and the axes at the bottom. [Hint: Look at Pen’s parade.]

e. The ethical principles of inequality measurement - anonymity, population, relative income, and transfers- are enough to compare any two income distributions in terms of relative inequality.

f.         If everybody’s income increases by a constant dollar amount, inequality must fall.

Explanation / Answer

a) False. The Kuznets ratio is a measure of inequality that does not satisfy the Dalton principle. This ratio looks at the ration of x% of the rich over y% of the poor. If a regressive transfer is made within y% of the poor, there will be no change in the Kuznets ratio.

b) True.

c) False, the absolute deviation remains unchanged.

d) True.

e) True.

f) False. Inequality remains constant.

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