Because incomes vary over the life cycle and are hit by temporary shocks, how do standard measures of income distribution relate to inequality in living standards?

1. A Option A: They understate the inequality of living standards
2. B Option B: They exaggerate the inequality of living standards
3. C Option C: They could exaggerate or understate the inequality of living standards depending on whether the transitory shocks are positive or negative
4. D Option D: They accurately represent the true inequality of living standards

Answer checked 11 October 2026 · How we write and check questions