The comparison of income inequality between US and other countries.

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Chapter 20, Problem 2CQQ

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The comparison of income inequality between US and other countries.

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A10. What is “relative inequality” and how is it measured? How is relative inequality different to absolute inequality?

The figure below shows the distribution of income across and within countries in 2014. The height of each bar represents the annual income of the population (for each decile), measured in 2005 US$, while the width of each country's bar represents its population. The red countries were the poorest countries in 1980, while the green countries were the richest in 1980. 80,000 60,000- 40,000- 20,000- India Nigeria Indonesia Botswana China Brazil Japan US UK Norway Poorer countries 2014 Richer countries Annual income (2005 $ PPP)

Economists experience difficulties in accurately measuring income inequality because of which of the following? Choose one or more: A. The Gini index calculation discriminates against the poor in developed economies. B. Government programs are inefficient and difficult to monitor. C. large, underground economies that lack the reporting of income to the government D. Measurements tend to use "before tax" income, not "after tax" income (disposable income), which is the income people actually have available to purchase goods and services. E. The population size of an economy impacts the distribution of data, causing large economies to show more inequality than smaller economies. F. do-it-yourself production of goods and services (such as growing own food or making own clothing) that are not bought or sold in the market G. in-kind transfers where goods and services are given as aid to the poor instead of cash