Understanding Economic Curves

What does the Lorenz Curve illustrate?

• Relationship between inflation and unemployment

• Distribution of income or wealth

• Tax rates and government revenue

• Consumption and income

• Growth and environmental damage

A perfectly equal income distribution is represented by:

• A steep Lorenz curve

• A 90-degree line

• The line of equality

• A horizontal line

• A curve below the diagonal

The farther the Lorenz curve is from the diagonal, the:

• Lower the inequality

• Greater the equality

• Greater the income inequality

• Lower the Gini coefficient

• Higher the government revenue

What area does the Gini coefficient use from the Lorenz Curve?

• The area above the curve only

• Total income

• Area between the Lorenz curve and the line of equality

• Area under the demand curve

• Government tax revenue area

A Gini coefficient of 0.85 would indicate:

• Near equality

• Moderate equality

• Extreme inequality

• Moderate inequality

• No inequality

If the Lorenz curve moves closer to the line of equality, this indicates:

• More inflation

• Reduced unemployment

• Decreased income inequality

• Increased government revenue

• A higher Phillips trade-off

What does the Phillips Curve illustrate?

• Income and consumption

• Inflation and unemployment

• Tax and spending

• Trade and tariffs

• Debt and equity

In the short run, the Phillips curve shows:

• No relationship between inflation and unemployment

• A positive relationship

• A negative relationship

• A constant trade-off

• No trade-off

A flattening of the Phillips curve suggests:

• Stronger inflation-unemployment link

• Inflation is unrelated to unemployment

• Perfect competition

• Less GDP growth

• Higher tax revenue

What economic condition can break the Phillips Curve’s trade-off?

• Recession

• Fiscal expansion

• Stagflation

• Balanced budget

• Full employment