Averaging income over time _______ measured inequality. (a) increases (b) has no eect on (c) decreases*

To address this question about how averaging income over time relates to measured inequality, let's analyze the concepts involved:

Understanding Averaging Income

1. Definition of Averaging: Averaging income refers to the process of taking an arithmetic mean of individual incomes over a specific period.
2. Inequality Measurement: Inequality is commonly quantified using measures such as the Gini coefficient or standard deviation of income. High inequality means a greater disparity between the highest and lowest incomes.

Analyzing the Options

1. Option (a) increases - This suggests that averaging would somehow amplify perceived inequality. Typically, this is not true because averaging smooths out fluctuations in income.

2. Option (b) has no effect on - This implies that averaging would leave inequality unchanged. However, averaging tends to reduce extremes, thus affecting the overall measurement of inequality.

3. Option (c) decreases - Averaging over time generally reduces the variability in income data, thus leading to a lower measured inequality. When incomes fluctuate significantly, the measured inequality is higher, but averaging tends to level those fluctuations.

Conclusion

Given this analysis, the most logical conclusion based on the implications of averaging income is:

Final Answer

(c) decreases

By averaging income over time, we typically smooth out extreme values, which leads to a decrease in the measured inequality.