a. In the presence of an underground economy likely to result in a Gini coefficient that overstates or understates poverty?
b. Consider a simple economy where 90 percent of citizens report an annual income of $10,000 while the remaining 10 percent report an annual income of $110,000. What is the Gini coefficient associated with this economy?
c. Suppose the poorest 90 percent of citizens actually have an income of $15,000 because each receives $5,000 of unreported income from the underground economy. What is the Gini coefficient now?