Hindriks and Myles, Chapter 14, Sections 14.1-14.4 &Sections 14.5 and 14.8.

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1.The Pigou-Dalton principle states that the inequality index must decrease if

A)there is a transfer of income from a poorer HH to a richer HH and that transfer preserves the ranking of the two households

B)there is a transfer of income from a poorer HH to a richer HH and that transfer does not preserve the ranking of the two households

C)there is any transfer of income from a poorer HH to a richer HH.

D)all of the above.

E)none of the above.

2.A key property of the Gini coefficient is that

A)it is always between 0 and 1.

B)it provides a complete ranking.

C)it satisfies the Pigou-Dalton Principle.

D)all of the above.

E)none of the above.

3.The Atkinson approach to inequality measurement

A)assumes a Rawlsian welfare function [W = min{U¹, U²}, with Uⁱ is the utility of person i].

B)makes an implicit welfare assumption.

C) makes the welfare assumptions explicit.

D)all of the above.

E)none of the above.

4.Please mark the statement that is not a measure for poverty

A)Foster Greer Thorbecke (FGT) measure.

B)head count ratio.

C)relative mean deviation.

D)income gap ratio.

E)Sen's measure.

5.Sen (1976) suggested that poverty measures should possess six properties. Mark the statement that is not one of those six properties. It should

A)be affected by transfers of income between households above the poverty line.

B)increase if a poor household becomes worse off.

C)rise after a regressive transfer among the poor.

D) give more weight to the poorest.

6. The closer the measure of inequality is to one,

A) the higher is inequality.

B) the lower is inequality.

C) the higher is poverty.

D) both, answers A) and C) are correct.

7. We typically use income poverty to measure poverty as

A) income is the most important dimension of poverty.

B) it is (relative to the other dimensions) the easiest to measure, the easiest to get data for.

C) it is the best measure for poverty.

D) both, answers A) and C) are correct.

8. Foster, Greer and Thorbecke introduced a sub-group consistent poverty measure, whereby subgroup consistency requires that a higher poverty in at least one subgroup should

A) never imply that the poverty measure of the aggregate poverty measure is higher.

B) always imply that the poverty measure of the aggregate poverty measure is higher.

C) always imply that the poverty measure of the aggregate poverty measure is lower.

D) always imply that inequality in the subgroup is higher than inequality if whole group.

9. In the Atkinson approach, we typically use a utility function: U(M) = M^{(1- )} / (1 - ). The concavity of utility (i.e., the convexity of the indifference curve) is determined by , and increases in represent a greater social concern for equity. This implies that with = 0,

A) U(M) = M, which is, you just add up all the incomes and you don't care at all about the distribution; that is, M_EDE = .

B) U(M) = M,which is, you just add up all the incomes and you don't care at all about the distribution; that is, M_EDE = 1.

C) The indifference curve would be a straight line.

D) both, answers A) and C) are correct.