Which statement about the Lorenz curve is true?

• A. A Lorenz curve is used to show inequality in income distribution
• B. A Lorenz curve cannot illustrate inequality
• C. A Lorenz curve is a chart of unemployment distribution
• D. A Lorenz curve depicts government debt

Answer: (A)

The key idea is how the Lorenz curve visualizes inequality in income distribution. It plots the cumulative share of income earned by the cumulative share of households (ordered from poorest to richest). If everyone had the same income, the curve would lie along the 45-degree line of equality. The more the curve bows away from that line, the greater the inequality. This is exactly what the Lorenz curve is designed to show—inequality in income distribution.

The other statements miss what the Lorenz curve represents. It does illustrate inequality, so saying it cannot is incorrect. It isn’t a chart of unemployment distribution, which concerns who is without work rather than how income is distributed among people. It also isn’t a depiction of government debt, which is a financial stock concept rather than a distribution of income across the population.