Chapter 30: Q.c - For Critical Thinking (page 684)
Who provides the more than $100 billion that Medicare spends on prescription drugs each year?
The taxpayers provide the money.
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Based on your answers to Problems 30-13 and 30-14, when A increased, did the degree of income inequality increase or decrease? Explain why your answer makes sense by referring to the implied change in the shape of the Lorenz curve.
Identify whether each of the following proposed poverty measures is an absolute or relative measure of poverty, and discuss whether poverty could ever be eliminated if that measure were utilized.
a. An inflation-adjusted annual income of \(25,000 for an urban family of four
b. Individuals with annual incomes among the lowest 15 percent
c. An inflation-adjusted annual income of \) 10,000 per person
What do you think motivates proposals to require sellers of disposable diapers to print messages on diapers encouraging parents to tell stories for or read to their babies or young children?
Suppose that a nation has implemented a system for applying a tax rate of 2 per cent to the incomes earned by the 10 per cent of its residents with the highest incomes. All funds collected are then transferred directly to the 10 per cent of the nation's residents with the lowest incomes. What is the general effect on the shape of a Lorenz curve based on incomes after collection and redistribution of the tax?
a. What is the value of the Gini coefficient if area B is twice as large as area A?
b. Suppose that the Lorenz curve becomes more bowed, with the result that area B becomes exactly the same size as area A. What will be the new value of the Gini coefficient?
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