3.7 Income Distribution and Poverty

• What does income distribution refer to?

  How national income is divided
• What does personal distribution of income highlight?

  Inequality and social welfare needs
• A Gini Coefficient of 0 represents perfect income equality.


  True
• Technological advances can displace low-skilled jobs.


  True
• Sweden's Gini Coefficient indicates a more equitable income distribution.


  True
• The Gini Coefficient is calculated using the area between the Lorenz Curve and the line of perfect equality.


  True
• What does the Lorenz Curve graph?

  Income distribution
• Sweden has a lower Gini coefficient compared to countries with more unequal income distributions
• Order the following factors affecting income distribution from most direct to least direct:

  1️⃣ Skills & Education

  2️⃣ Labor Market Dynamics

  3️⃣ Technological Advances

  4️⃣ Government Policies
• The personal distribution of income highlights inequality
• What are the two key measures used to assess income distribution?

  Lorenz Curve and Gini Coefficient
• Which country has a Lorenz Curve closer to the line of perfect equality and a lower Gini Coefficient?

  Sweden
• The poverty line is a fixed threshold for income or consumption below which an individual is considered poor.


  True
• Relative poverty occurs when an individual's income is significantly lower than the average income in their society
• Functional distribution includes wages to workers.


  True
• What does the Lorenz Curve graph?

  Cumulative income vs population
• Higher education and specialized skills lead to better job opportunities
• Nordic countries with comprehensive social safety nets have lower income inequality
• The Gini Coefficient ranges from 0 to 1
• Sweden's Lorenz Curve is closer to the line of perfect equality
• In Sweden, the Lorenz Curve is closer to the line of perfect equality
• A Gini Coefficient of 0 indicates perfect income equality.

  True
• What is one key cause of poverty?

  Lack of education
• What is the functional distribution of income?

  Income to factors of production
• Government policies like progressive taxation can reduce income inequality
• The Gini Coefficient ranges from -1 to 1.

  False
• Poverty refers to a lack of economic resources and opportunities, leading to an inability to afford a minimum standard of living
• What type of poverty occurs when an individual cannot afford basic necessities like food and shelter?

  Absolute Poverty
• The poverty gap measures the average income shortfall from the poverty line.


  True
• Which region uses progressive taxation to fund comprehensive social welfare programs to reduce poverty and inequality?

  Nordic countries
• Functional distribution divides income among factors of production
• The Lorenz Curve and Gini Coefficient are key measures to assess income distribution
• Which country is cited as an example of a lower Gini Coefficient and more equitable income distribution?

  Sweden
• What influences wage rates in the labor market?

  Supply and demand
• What does the Gini Coefficient measure?

  Income inequality
• How does the Lorenz Curve relate to income inequality?

  Further from equality means higher inequality
• A lower Gini coefficient indicates a more equitable
• Match the income distribution theory with its explanation:

  Marginal Productivity ↔️ Income based on contribution to production

  Human Capital ↔️ Income determined by skills and education

  Functional Distribution ↔️ Income allocated to factors of production

  Institutional Factors ↔️ Income influenced by labor unions and government policies
• Unemployment and underemployment can lead to poverty.

  True
• Sweden's lower Gini coefficient indicates more income equality.


  True