Question

13. The official census measure of income unequal than it actually is not include capital gains, which makes the distribution of income less merudes capital gains, which should not be included as they are not earned income. c) includes the effects of transfer payments from the government like social security, which should not be included as these benefits cannot be spent like regular income. d) does not include the effect of transfer payments from the government like social security, because these benefits cannot be spent like regular income 14. Which of the following is correct? The U.S. distribution of income today is: a) less equal than the distribution of income 40 years ago. b) more equal than the distribution of income 40 years ago. c) about the same as the distribution of income 40 years ago. d) is unknown as measurement stopped about 20 years ago. 13The Lorentz curve shows a more UNEQUAL distribution of income when: a) the area between the diagonal and the Lorentz Curve is small, b) the area between the diagonal and the Lorentz Curve is large. c) the Lorentz curve is above and to the left of the diagonal, d) the Lorentz curve is the same as the diagonal

Answer 1

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13.

Correct option: (a) does not include capital gains, which makes the distribution of income less unequal than it actually is

Reason: The official measure of income by census does not include capital gain and taxes while calculating income. This means any gain made from sale and purchase of capital assets does not count as income, which makes the distribution less unequal than the actual numbers, because in reality these capital gains effect consumer incomes and thus their purchasing power and living standards too much.