Answer to Question #215305 in Economics for Meher

Question

You have just been given $2.00 of foreign aid. How much of this aid would you give to each person below the poverty line if your goal is to reduce the following measures as much as possible? (Assume for this problem that a person with an income of $3.49 is considered poor, but a person with $3.50 is not.) [6] 

(i) Headcount: 

$0.50 to person 3 and 1.50 to person 2. 

(ii) FGT0: 

$0.50 to person 3 and 1.50 to person 2. 

(iii)FGT2: 

$1.50 to person 1 and 0.50 to person 2.

Answer 1

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