Which of the following best describes the Lorenz curve for a country with no income inequality?

A. The Lorenz curve does not exist when all incomes are the same.

B. A vertical line

C. A horizontal line

D. A 45-degree line

The slope of a budget line is given by the ...

A. Marginal rate of substitution

B. Ratio of marginal utilities of the two goods

C. Ratio of prices

D. Ratio of total income and price of the good on x-axis

Which of the following describes the expenditure approach to GDP measurement?

A. GDP=gross investment + gross operating surplus

B. GDP=final consumption + investment + net exports

C. GDP=wages + salaries + profits

D. GDP=output - intermediate consumption

Suppose that a consumer spends his or her income such that Food Expenditure=30+0.5*Income. What is the income elasticity of demand for food as Income increases from $100 to $200?

A. 0.50

B. 1.00

C. 1.25

D. 0.625

Why is consumption expenditure often preferred over income to compare individual welfares in developing countries? All things controlled for, which will tend to have higher inequality - consumption or income? Explain.

Refer to the linear regression on Slide 25 of Part 2.1 ("Example: Poverty rate and overall mean"). What is the expected poverty rate of a country with mean income per person of $500? (Hint: take note of natural logs, and show your work to receive partial credit even if your final answer is wrong).

Suppose that consumers will first make fixed minimum purchases of food, transportation, and other necessities and then spend the rest on luxuries like entertainment. What does this mean for the income elasticity of demand for luxuries?

Briefly describe the two main types of measurement errors that a data collector encounters while running a survey. Explain which part of the population is linked to each type of measurement error.