Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

5) (10 points) Consider an economy with 1 million people and the following income distribution. 400,000 people earn $30,000 per year and 600,000 people earn

image text in transcribed
5) (10 points) Consider an economy with 1 million people and the following income distribution. 400,000 people earn $30,000 per year and 600,000 people earn $80,000 per year. (You can simplify the numbers in the question to make the calculations easier) a) (4 points) What is the Gini coefficient associated with this income distribution? b) (5 points) Suppose 600,000 people with an income of $80,000 per year pay 12.5 percent income tax and the other group does not pay any tax. Tax money is equally distributed to low-income group. What is the Gini coefficient associated with this redistribution plan? c) (1 point) What does the difference between two Gini coefficients tell us about the tax policy? Does the Gini coefficient change in the way that you expect

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Climate Policy And Nonrenewable Resources The Green Paradox And Beyond

Authors: Karen Vollebergh, Rick Van Der Ploeg

1st Edition

0262319845, 9780262319843

More Books

Students also viewed these Economics questions

Question

A greater tendency to create winwin situations.

Answered: 1 week ago