Fairfield County and a K-Shaped Economy

Answer the following questions to check your understanding of the story.

Which best defines a K-shaped economy?

a) An economy in which income inequality decreases over time.

b) An economy in which households rely on different income sources.

c) An economy in which households have unequal incomes at a single point in time.

d) An economy in which higher-income households experience rising incomes while lower-income households experience falling or stagnant incomes.

Why does Fairfield County illustrate a K-shaped economy?

a) Some towns have higher average incomes than others.

b) Some households receive government benefits while others pay taxes.

c) Income differences between households are shrinking.

d) Higher-income households are gaining income while lower-income households are losing income or experiencing stagnation.

How has the tax bill affected the Lorenz curve for income after taxes and benefits in Fairfield County?

a) The Lorenz curve has become the line of equality.

b) The Lorenz curve has moved farther away from the line of equality.

c) The Lorenz curve has moved closer to the line of equality.

d) The Lorenz curve has rotated but inequality is unchanged.

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