This assignment covers the second half of Part 2.1 and Part 2.2 (EOP Chapters 4 and 5).

1. Which of the following does the Minimum Income Question ask?

A. At what income do you think the poverty line should be set?

B. Do you earn enough income to make ends meet?

C. How much income do you need to make ends meet?

D. Do you consider someone with your income to be poor or not poor?

2. What is the mean/median ratio for the following distribution of income: (1, 2, 3, 6)?

A. 0.83

B. 1.20

C. 1.00

D. 1.50

3. What is the poverty gap index for the following distribution of income if the poverty line is 2.5: (1, 2, 3, 6)?

A. 0.25

B. 0.50

C. 0.40

D. 0.20

4. Which of the following statements about the Gini coefficient is true:

A. If we transfer a part of the income of the rich to the poor, the Gini coefficient would decrease.

B. Suppose person A earns $100 and person B earns $50. If the researcher mistakenly records the incomes as A earns $50 and B earns $100, then the Gini coefficient will increase.

C. The Gini coefficient will change if the incomes of all members of the population are doubled.

D. Total inequality measured by the Gini coefficient accounts for, both, between-group and within-group inequality.

5. Which of the following statements about poverty lines is false?

A. An absolute poverty line is unresponsive with respect to mean income.

B. The relationship between mean income and the poverty line is non-linear for a weakly relative poverty line.

C. A strongly relative poverty line is unresponsive with respect to mean income.

D. The relationship between mean income and the poverty line is linear for a strongly relative poverty line.

6. Explain the main difference between the consumer demand approach and the capabilities approach to welfare measurement.

7. Suppose your research team is measuring income inequality in the US over the past decade and decides to use the difference between the median and mean of the income distribution as a measure of inequality. What does the mean income lying to the right of the median income imply? Explain one issue with the use of this measure. When comparing the median-mean difference measure, the Gini coefficient, and the Mean Log Deviation measure - which do you think is the best measure of income inequality? Why?

8.Describe a government program that is paternalistic (a real world example is preferred, but you may invent a realistic one). What is paternalistic about it? What are the costs that will be incurred by the government while implementing this paternalistic program?

9. Discuss two shortcomings of using Gross Domestic Product as the primary measure of a country's economic performance.