Refer to Figure 14-1. Given that the economy is on curve A, it is least likely t

Question

Refer to Figure 14-1. Given that the economy is on curve A, it is least likely to achieve curve C or beyond if it allocates resources to produce at

Select one:

a. point m.

b. point n.

c. point p.

d. point q.

After a revolution in a country with exceptionally high income inequality, a government institutes an extreme income transfer program from wealthy families to impoverished ones. How is this represented in the Lorenz curve?

Select one:

a. Movement from D to C.

b. Movement from C to A.

c. Movement from C to B.

d. Movement from B to D.

Refer to Figure 14-1. An decrease in investment is illustrated by moving from

Select one:

a. point m to point n on curve A.

b. point q to point p on curve A.

c. point v on curve C to point s on curve B.

d. point w on curve C to point r on curve B.

Refer to Figure 14-1. A movement from point n to point p on curve B is likely to cause the economy to shift from

Select one:

a. curve B to curve A.

b. curve A to curve B.

c. curve B to curve C.

d. curve C to curve A.

Refer to Figure 14-1. Suppose the economy is operating at point m on curve A. The decision to move to point p

I. requires a sacrifice of current consumption.

II. requires a sacrifice of future consumption.

III. adds to the economy’s capital stock assuming depreciation remains at a level corresponding to point m.

IV. enables the economy to increase both its consumption and investment in the future.

Select one:

a. I and II only

b. I and III only

c. I, III, and IV only

d. I, II, III, and IV

In this Lorenz Curve, the formula for the GINI coefficient is: (Yellow Area) / (Yellow Area + Green Area). If the Yellow Area is 0.1 and the Green Area is 0.4, what is the GINI coefficient?

Select one:

a. 0.1

b. 0.2

c. 0.4

d. 0.5

e. 1.0

Explanation / Answer

1) The answer is B) point N

Because at point N , country producing both capital and consumer good efficiently and equally.

2) The answer is A) movement from D to C.

Because lorenz curve shown inequality in the country. After revolution a country facing high income inequality and country lorenz curve is D and programs of transfer payment reduces income inequality so thus lorenz curve shift back to C.

3) The answe is c) point V on curve to point s on curve B.

Because, a decreased in investment slow down the economy and thus the PPC curve aslo shifts downward from curve C to curve B.

4) The answer is B) Curve A to curve B.

When there is a movement along the curve A from point N to point P which means a country able to Produce more of capital good which leads the economy to growth hence their PPC curve shifts rightward and higher.

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