economic-curves

Important Curves In Economic – Free PDF Download

 

LAFFER CURVE

  • Developed in 1974 by economist Arthur Laffer.
  • It show the relationship between tax rates and the amount of tax revenue collected by governments.
  • Tax revenues change when the tax rate is either increased or decreased.
  • Inverted-U shape.

PHILLIPS CURVE

  • Developed in 1958 by economist William Phillips.
  • It shows inverse relationship between unemployment rate and inflation.
  • High levels of employment can be achieved only at high levels of inflation.
  • Dilemma for policy makers. (Inflation hurts poor the most)
  • But it failed to justify the stagflation in the 1970s.

LORENZ CURVE AND GINI COEFFICIENT

  • Developed in 1906 by Max Lorenz.
  • It is a graphical representation of income inequality.
  • Farther the curve from baseline, higher will be the inequality.
  • Gini coefficient express the extent of inequality in a single figure. It can range from 0 (or 0%) to 1 (or 100%).

India – GINI index

  • GINI index in India was reported at 35.1 in 2011, according to the World Bank collection of development indicators.

KUZNETS CURVE

  • Developed in 1950s by economist Simon Kuznets.
  • It shows the relationship between Growth & Inequality.
  • Economic growth initially leads to greater inequality, followed later by the reduction of inequality.
  • Inverted-U shape.

1. Laffer Curve                               A) Unemployment rate and inflation
2. Phillips Curve                             B) Change in tax revenue
3. Lorenz Curve                              C) Growth & Inequality
4. Kuznets curve                            D) Income inequality

  • Match the correct IPC section.
  • 1 2 3 4
  • (a) A B C D
  • (b) B A D C
  • (c) B A C D
  • (d) D A B C

 

 

 

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