Income inequality is measured by which concept?

• A. CPI price index
• B. Gini coefficient
• C. Unemployment rate
• D. Budget balance

Answer: (D)

The Gini coefficient measures income inequality. It comes from the Lorenz curve, which shows cumulative income earned by the bottom x percent of people. The farther the curve is from the line of perfect equality, the higher the Gini coefficient. A value of 0 means perfect equality; a value of 1 (or 100) means maximal inequality. This focuses on how income is distributed across households, not on prices, unemployment, or government finances. The CPI price index tracks changes in the cost of a typical basket of goods, the unemployment rate measures the share of people without jobs, and the budget balance shows government fiscal position. So measuring income inequality is about the Gini coefficient.