Economic Curve Quiz

Economic Curves

• The Laffer Curve shows the relationship between tax rates and government revenue, indicating that as tax rates increase, revenue initially increases, but then decreases as high tax rates discourage economic activity.
• The Phillips Curve illustrates the inverse relationship between unemployment and inflation rates, suggesting that as unemployment falls, inflation rises, and vice versa.

Income Inequality

• The Lorenz Curve is a graphical representation of the distribution of wealth or income, showing the proportion of the population against the proportion of total income or wealth held by that population.
• The Gini Coefficient is a measure of income inequality, ranging from 0 (perfect equality) to 1 (perfect inequality), used to quantify the degree of inequality in a society.

Economic Growth and Inequality

• The Kuznets Curve shows the relationship between economic growth and income inequality, suggesting that as an economy grows, income inequality initially increases, but then decreases as the economy reaches a certain level of development.

Policy Dilemmas

• The Phillips Curve poses a dilemma for policy makers, as they must balance the trade-off between reducing unemployment and controlling inflation, as policies aimed at reducing unemployment may lead to higher inflation, and vice versa.