Poverty and Inequality

Income distribution for a 5-person economy with a poverty line of $5:

Person Income($) % Cumulative Population % Cumulative Income

1 1 20 4

2 3 40 16

3 4 60 32

4 7 80 60

5 10 100 100

Headcount Index: 0.6

TPG: $7

FGT: 7/25

GNI: 44/125=.352

1) To reduce the degree of inequality, which measure would you target?

2) How would you distribute the aid to reduce the degree of inequality as much as possible? What is the measure you identified in question (1) after this aid distribution?