Suppose that Spain has a Gini coefficient of 0.5, France has a Gini coefficient

Question

Suppose that Spain has a Gini coefficient of 0.5, France has a Gini coefficient of 0.4, and Germany has a Gini coefficient of 0.3. Based on this information, which of the following statements about income inequality in the three countries are correct? Check all that apply. The ratio of the total income of the lowest quintile of income distribution to the total income of the highest quintile of income distribution is higher in France than in Germany. The lowest quintile of Spain's income distribution earns a lower percentage of the aggregate Spanish income than the lowest quintile of France's income distribution does of the aggregate French income. The ratio of the total income of the lowest quintile of income distribution to the total income of the highest quintile of income distribution is higher in Spain than in Germany. France has a higher degree of income inequality than Germany but lower than Spain. Germany has a higher degree of income inequality than France or Spain.

Explanation / Answer

The Gini coefficient measures the ratio between the area between the equality line and the lorenz curve on on hand, and the area under the eqality line. The smaller the gini ratio, the closer the lorenz curve to the equality line and lower is inequality. The anges between 0 and 1 and is based on residents' net income, helps define the gap between the rich and the poor, with 0 representing perfect equality and 1 representing perfect inequality.

So the correct answer is France has higher degree of income inequality than Germany but lower than Spain. Because Spain has the highset gini coefficient.

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