Gini Coefficient or Gini Ratio can be associated with which one of the following measurements in an economy?
- A.Rate of inflation
- B.Poverty index
- C.Income inequality
- D.Personal income
Correct answer
Explanation
The correct answer is C, income inequality. The Gini coefficient is the standard single number used to show how unequally income or wealth is shared among the people of a country. It was devised by the Italian statistician Corrado Gini in 1912 and is worked out from the Lorenz curve, which plots the share of income earned by successive shares of the population. The coefficient ranges from 0, where everyone earns exactly the same, to 1 (or 100 when shown as a percentage), where one person earns everything. The larger the gap between the Lorenz curve and the line of perfect equality, the higher the Gini value. Option A is wrong because inflation is measured by price indices such as the CPI and WPI. Option B is wrong because poverty is measured by headcount ratios or the Multidimensional Poverty Index, which count the poor rather than the spread of income. Option D is wrong because personal income is an amount in money, not a measure of how it is distributed. Exam tip: Lorenz curve is the picture, Gini coefficient is the number.
Practice Questions
View allWhich one of the following central features is not associated with Capitalist Economy?
- A.There is generalised commodity production - it has market value.
- B.Productive wealth is held predominantly in private hands.
- C.Economic life is organised according to market principles.
- D.Economic organisation is based on planning, a supposedly rational process of resource allocation.
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Allocation of resources through central planning is the mark of a socialist or command economy, not a capitalist one. In a capitalist economy, the means of production such as land, factories and capital are owned mainly by private individuals and firms.
Read the full explanation →Consider the following statements:
I. The Second Five-Year Plan sought to promote development which would establish socialistic pattern of society in India.
II. Between 1966 and 1969, three Annual Plans were formulated.
III. The Ninth Five-Year Plan could not take off at its stipulated time in the 60th year of India's Independence.
Which of the statements given above are correct?
- A.I and II only
- B.I and III only
- C.II and III only
- D.I, II and III
Show answer
Statements I and II are true, but the Ninth Plan began in 1997, the fiftieth year of Independence, not the sixtieth.
Read the full explanation →According to the National Multi-dimensional Poverty Index (MPI) constructed by the NITI Aayog, a household is considered deprived if 1. a single member of the household is identified as under-nourished 2. the body mass index of a woman member, between 15 years and 49 years of age, is below 18.5 kg/m2 Select the correct answer using the code given below.
- A.1 only
- B.2 only
- C.Both 1 and 2
- D.Neither 1 nor 2
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Under the nutrition indicator, a household is deprived if any one eligible member is undernourished, and a woman of 15 to 49 with a BMI below 18.5 counts as undernourished.
Read the full explanation →Which one of the following canons of taxation was not advocated by Adam Smith?
- A.Canon of equality
- B.Canon of certainty
- C.Canon of convenience
- D.Canon of fiscal adequacy
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Adam Smith laid down four canons of taxation, and fiscal adequacy was not one of them; it was added by later economists.
Read the full explanation →Which one of the following is a good statistic to evaluate where an economy stands in the financial cycle ?
- A.Tax/GDP Ratio
- B.Fiscal Deficit/GDP Ratio
- C.Household Consumption/GDP Ratio
- D.Credit/GDP Ratio
Show answer
The financial cycle is the rise and fall of credit and asset prices, and the ratio of credit to GDP shows how far borrowing has run ahead of the economy.
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