The Gini Coefficient is a standard measure of income or wealth inequality derived from the Lorenz Curve. Which of the following correctly explains the Gini Coefficient and what its extreme values signify?

The Gini Coefficient, developed by Italian statistician Corrado Gini in 1912, measures income or wealth inequality within a population. The Lorenz Curve plots the cumulative share of income received by the bottom x% of the population. A perfectly equal distribution would produce a 45-degree diagonal line (the line of perfect equality). The Gini Coefficient = Area between the Lorenz Curve and the line of perfect equality divided by the total area under the line of perfect equality. A Gini of 0 means perfect equality — everyone earns the same. A Gini of 1 means maximum concentration — all income is held by one person. Higher values indicate greater inequality. Higher Gini values indicate greater inequality, while lower values indicate a more equal distribution. Cross-country comparisons should be interpreted carefully because Gini estimates may differ depending on whether they measure income or consumption, the survey methodology used, and the reference year.