Economists believe that looking at the distribution of income by quintiles at one moment overstates the true inequality of income because:

A) it ignores the effect of taxes.
B) it ignores the effect of transfer payments.
C) families near the bottom of the distribution in any given year may be having an unusually bad year,while those at the top may be having an unusually good one.
D) families near the bottom of the distribution in any given year are often having an unusually good year,while those at the top are often having an unusually bad one.

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Vanessa Zhang · Accepted Answer

Final Answer : C, Explanation :  Looking at the distribution of income by quintiles at one moment may not accurately reflect the true inequality of income because the families near the bottom of the distribution in any given year may be having an unusually bad year, while those at the top may be having an unusually good one. This could be due to various factors such as economic cycles and individual circumstances. Therefore, a snapshot of income distribution at one moment may exaggerate or understate the true inequality of income.

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