Gini Coefficient Quiz: Test Your Knowledge

Gini Coefficient Quiz: Test Your Knowledge

Welcome to this quiz on the Gini coefficient, a key measure of inequality. Each multiple-choice question is based on essential concepts from the topic. Select the best answer, then check the provided answer and explanation.

Question 1: What does the Gini coefficient primarily measure?

a) Economic growth rates
b) Inequality in distributions like income or wealth
c) Inflation levels
d) Unemployment statistics

Answer: b) Inequality in distributions like income or wealth

Explanation: The Gini coefficient is the most commonly used measure of inequality, applied to distributions such as income, wealth, or even life expectancy. It summarizes how spread out the distribution is on a scale from 0 to 1.

Question 2: Who developed the Gini coefficient?

a) Adam Smith
b) John Maynard Keynes
c) Corrado Gini
d) Karl Marx

Answer: c) Corrado Gini

Explanation: The Gini coefficient was developed by Italian statistician Corrado Gini (1884–1965), and it is named after him.

Question 3: What value does the Gini coefficient take in a scenario of perfect equality?

a) 0
b) 1
c) 0.5
d) 100

Answer: a) 0

Explanation: A Gini coefficient of 0 indicates perfect equality, where everyone has the same income or share of the distribution.

Question 4: What value represents perfect inequality in the Gini coefficient?

a) 0
b) 1
c) 0.5
d) -1

Answer: b) 1

Explanation: A value of 1 signifies perfect inequality, such as one person having all the income while everyone else has none.

Question 5: How is the Gini coefficient calculated using the concept of income gaps?

a) As the sum of all incomes divided by the population
b) As the expected absolute gap between two randomly chosen people's incomes, divided by twice the mean income
c) As the total income minus the lowest income
d) As the average income multiplied by the number of people

Answer: b) As the expected absolute gap between two randomly chosen people's incomes, divided by twice the mean income

Explanation: This method expresses the Gini as the relative expected gap, where twice the mean income is the maximum possible gap in perfect inequality.

Question 6: In the Lorenz curve method, how is the Gini coefficient defined?

a) The area under the Lorenz curve divided by the total area
b) The area between the Lorenz curve and the line of equality (A) divided by (A + B), where B is the area under the Lorenz curve
c) The slope of the line of equality
d) The cumulative population share minus the income share

Answer: b) The area between the Lorenz curve and the line of equality (A) divided by (A + B), where B is the area under the Lorenz curve

Explanation: The Lorenz curve plots cumulative income against cumulative population. The line of equality is a diagonal representing perfect equality, and the Gini quantifies the deviation from it.

Question 7: To which part of the income distribution is the Gini coefficient most sensitive?

a) Changes at the very top (e.g., the richest 1%)
b) Changes at the very bottom
c) Changes in the middle of the distribution
d) It is equally sensitive to all parts

Answer: c) Changes in the middle of the distribution

Explanation: Compared to measures like the share of income held by the top 1%, the Gini is more responsive to shifts in the middle range and less so to extremes.

Question 8: Why is the Gini coefficient generally not used for distributions with negative values, such as some wealth data?

a) It always results in negative values itself
b) It can exceed 1, complicating interpretation
c) Negative values are irrelevant to inequality
d) It requires positive values for the Lorenz curve

Answer: b) It can exceed 1, complicating interpretation

Explanation: For distributions like wealth that may include negative values (e.g., debts exceeding assets), the Gini can go above 1. In practice, negatives are often dropped or set to zero.

Question 9: In comparisons across countries like the USA and Uruguay, how does the Gini coefficient relate to the share of income held by the richest 10%?

a) It tracks changes in the top 10% share more closely than the top 1% share
b) It is unrelated to top income shares
c) It always shows greater changes than top income shares
d) It only measures the bottom 10%

Answer: a) It tracks changes in the top 10% share more closely than the top 1% share

Explanation: Charts show that in countries like the USA (rising inequality) and Uruguay (falling inequality), the Gini aligns more with the top 10% metric than the top 1%.

Question 10: What is a common alternative way to express the Gini coefficient besides the 0 to 1 scale?

a) As a fraction from -1 to 1
b) As a percentage from 0% to 100%
c) As a logarithmic scale
d) As an absolute dollar value

Answer: b) As a percentage from 0% to 100%

Explanation: While typically on a 0 to 1 scale, the Gini is sometimes presented as a percentage (e.g., 40% instead of 0.4) for easier communication.