The Gini coefficient measures what?

• A. It measures rainfall variability.
• B. It measures exchange rate stability.
• C. It measures household wealth distribution only in urban areas.
• D. It measures inequality; 0 means perfect equality, 1 indicates maximal inequality.

Answer: (D)

At its core, the Gini coefficient measures how unequally a resource—usually income or wealth—is distributed across a population. The value ranges from 0 to 1: 0 means perfect equality, where everyone has the same amount; 1 means maximal inequality, where one person holds all the wealth and the rest have little or nothing. Values in between show varying levels of concentration. It’s not about rainfall variability or exchange rate stability, and it isn’t limited to urban areas; it describes the entire population. The concept comes from the Lorenz curve, which plots the cumulative share of income against the cumulative share of people, and the Gini is the relative area between that curve and the line of perfect equality. This makes it a useful summary metric for comparing distributions across countries or over time.