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Homework answers / question archive / STATEMENT TRUE or FALSE? (3 points each) EXPLANATION (3 points each) 1
STATEMENT TRUE or FALSE? (3 points each) EXPLANATION (3 points each) 1. One normative reason to be concerned about inequality is that a high level of inequality may reduce the growth rate of the economy because people at the bottom of the income distribution will invest less because they feel they will never catch up to those at the top. 2. The salary paid by the City of Davis to a Davis police officer are included in US GDP, but the salary paid by the Golden State Warriors (a professional basketball team) to Steph Curry (a player on the team) is not included in US GDP 3. The difference in income per capita between poor versus rich countries tends to be smaller when we convert incomes to USD using the Purchasing Power Parity Exchange rate compared to using the Official Exchange rate 4. A regressive transfer between two non- poor individuals will always leave both the Poverty Head Count Index and the Poverty Gap Index unchanged. 5. A regressive transfer between two individuals will always use a Kuznets Ratio to increase
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Qn No |
True of False |
Explanation |
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1 |
True |
People at the bottom of the income distribution experience the second rated approach in all stratas of a capitalist economy. |
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1. The occupation and sex differences: They regularly experience the inequality in the wage in spite of hardships taken towards the nation building through primary and secondary sectors works. |
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2. Homelessness make them feel the difference and being neglected. This prevent the people in the lower strata to participate less in the economy of a country. |
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3. The insufficiet health care and education facilities make the people in the lower strata or below poverty line to less active in the economy of a nation |
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2 |
FALSE |
All salaries are included in the GDP except the social security wages. |
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All compensation of workers is added to the GDP in expenditure approach as this is a clear income generated out of the services provided |
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GDP is calculated based on the market value of all goods and services |
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3 |
TRUE |
Purchasing power parity exchange rates are stable but official market rates are volatile. When per capita income in poor and rich countries are converted to US dollar in PPP rates the gap looks rarrow. |
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This happens because PPP approch looks at the ration of two economies, say Pakistan and China, it takes only a fixed set of goods and services into calculation. |
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On the other hand when the per capita income is calculated based on the official exchange rate, the value of the currency may not show the reality of the fundamentals of the economy. |
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4 |
TRUE |
A regressive transfer is the exchange of income from the not richer to the not poor. Poorer remains as poorer in spite of transfer among themselves. |
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5 |
FALSE |
Regressive transfer between two individuals will result in higher inequality. If income from A is distributed to B then A can have more unequal than the B |
