Asked by
Charmere Suggs
on Dec 12, 2024Verified
Imagine two cities, Hometown and Visitorsville, where the rich, middle, and poor income recipients in one city have annual incomes identical to their counterparts' incomes in the other city. In Hometown, the poorest families one year almost always end up as the richest families the next year and become middle-income families the year after that. In Visitorsville, however, the poor remain poor and the rich remain rich. Which of the following is true about the two cities?
A) Annual data on the distribution of income will indicate that the degree of income inequality in the two cities is identical.
B) The degree of lifetime income inequality in the two cities is identical.
C) The income mobility of people in the two cities is identical.
D) The distribution of annual income is more unequal in Visitorsville.
Income Mobility
Movement of individuals and families either up or down income-distribution rankings when comparisons are made at two different points in time. When substantial income mobility is present, a person’s current position in the rankings will not be a very good indicator of what his or her position will be a few years in the future.
Income Inequality
The uneven distribution of income within a population, leading to disparities between the wealth of different groups.
Annual Data
Information or statistics recorded over a one-year period.
- Understand the dynamics of income mobility and its impact on the assessment of income inequality over time.
Verified Answer
BC
Learning Objectives
- Understand the dynamics of income mobility and its impact on the assessment of income inequality over time.