Part I: TRUE/FALSE.This part is worth 20 points. For each STATEMENT, write out the word TRUE or FALSE and provide a short explanation of your answer.

STATEMENT

TRUE

or FALSE? (2 points each)

EXPLANATION (2 points each)

1.A policy that leads to an increase in the Headcount Index and the Poverty Gap Index will also necessarily lead to an increase in

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2.A policy that leads to an increase in the Total Poverty Gap will also necessarily lead to an increase in the Poverty Gap Index.

3.Kelly owns a bike shop in Davis. The salary of the accountant she hires to do taxes for the bike shop IS counted in California GDP, but the sales from used bikes in her store are NOT counted in California GDP.

4.If we increase the incomes of everyone in an economy by 50%, the Gini coefficient of income inequality will also increase by 50%.

5.A regressive transfer between two individuals will always cause the Gini Coefficient to increase.