If a country's Lorenz Curve shifts closer to the line of

Solution

Solution: · Lorenz Curve: This is a graphical representation of income distribution, plotting the cumulative percentage of total income received against the cumulative percentage of the population (ranked from poorest to richest). · Line of Perfect Equality: The 45-degree line, where the bottom X% of the population receives X% of the income. · Income Inequality: The further the Lorenz Curve bows away from the 45-degree line, the higher the inequality. · Gini Coefficient: This is a numerical measure of income inequality, calculated as the ratio of the area between the 45-degree line and the Lorenz Curve to the total area under the 45-degree line. o Gini = 0 represents perfect equality (the Lorenz Curve is the 45-degree line). o Gini = 1 represents perfect inequality (the Lorenz Curve follows the axes). Conclusion: If the Lorenz Curve shifts closer to the line of perfect equality, the area between the curve and the line decreases, causing the Gini Coefficient to decrease toward 0, reflecting a reduction in income inequality.