Match List I with List II and select the correct answer using the code given below the lists :
| List I (Curve) |
List II (Indication) |
|---|---|
| A. Lorenz curve | 1. Inflation and employment |
| B. Phillips curve | 2. Tax rates and tax revenue |
| C. Engel curve | 3. Inequality in distribution of income or wealth |
| D. Laffer curve | 4. Income and proportion of expenditure on food |
Code :
A) 3 4 1 2
B) 2 1 4 3
C) 3 1 4 2
D) 2 4 1 3
3 4 1 2
2 1 4 3
3 1 4 2
2 4 1 3
Answer is Wrong!
Answer is Right!
This question was previously asked in
UPSC CDS-2 – 2021
A. Lorenz curve is used to represent inequality in the distribution of income or wealth. (3)
B. Phillips curve shows the inverse relationship between the rate of inflation and the rate of unemployment in an economy. (1)
C. Engel curve describes how household expenditure on a particular good or service varies with household income. For necessary goods like food, the proportion of expenditure decreases as income rises. (4)
D. Laffer curve is a theoretical representation of the relationship between tax rates and the amount of tax revenue collected by governments. (2)
Thus, the correct matching is A-3, B-1, C-4, D-2.
– Phillips curve: Represents a short-run trade-off, which may not hold in the long run.
– Engel curve: Derived from Engel’s Law regarding food expenditure proportion.
– Laffer curve: Suggests that beyond a certain point, increasing tax rates may decrease tax revenue due to reduced economic activity.
– The Phillips curve was described by A. W. Phillips based on observations in the UK economy.
– Engel’s Law was formulated by Ernst Engel in the 19th century.
– The Laffer curve was popularized by economist Arthur Laffer in the 1970s.