1 The Capitalization Method Imagine an economy with 2 people: Michael and Fredo. The national accounts data provide the following information on aggregate wealth and capital income from various assets: Bonds Stocks Value $50 $150 Capital Income $1 $10.8 Housing $250 $11.25 The following estimates for individual capital incomes are also available: Fredo Michael Bonds $0.7 $0.3 Stocks Housing $5 $3.6 $7.2 $6.25 1. What are the aggregate returns to each asset type? 2. Under the assumption that each person receives the same return on each asset type, how much wealth does each person have? 3. Using the wealth estimates from (2), construct the Lorenz curve for wealth. What is the Gini coefficient? 4. Now suppose that we can observe the actual returns each person earns: