What does the Gini coefficient measure and what does a higher value indicate?

• A. The Gini coefficient measures income inequality on a 0 to 1 scale; higher values indicate greater inequality.
• B. The Gini coefficient measures average GDP growth rate.
• C. The Gini coefficient measures unemployment rate.
• D. The Gini coefficient measures inflation rate.

Answer: (A)

The Gini coefficient measures how evenly income or wealth is distributed across a population. It uses a 0 to 1 scale: 0 means perfect equality (everyone has the same income), and higher values indicate greater inequality. A value close to 1 would mean a very unequal distribution, where a large portion of income is held by a small share of people. The idea comes from the Lorenz curve, where the further the curve is from the line of perfect equality, the larger the area that reflects inequality, and the Gini coefficient is the normalized measure of that area. Sometimes it’s expressed as a percentage (0 to 100). The other options describe different economic indicators—GDP growth, unemployment, and inflation—not the distribution of income, so they don’t capture what the Gini coefficient measures.