4.2 Poverty and Inequality Flashcards
What are the two types of poverty?
Relative poverty and absolute poverty
What is absolute poverty?
any amount of number below the minimum amount of resources a person needs to survive and have access to all basic needs. The world bank defines it as anyone earning less than US$1.90 a day (worth of products) is experiencing absolute poverty.
What is relative poverty?
When household income is lower in comparison to the people around them. In the UK it is when income is 50% lower than the median income, globally ranging from 40-70%
What are the problems concerning relative poverty as a measure?
- Can’t make international comparisons
- Subjective
- Changes over time
What are the three main ways the government can solve inequality?
- Supply side policies
- Fiscal policies
- Monetary policies
What are examples of supply side policies that can be used to solve inequality?
- Labour market flexibility
- Privatization and deregulation
- Skills + training programs
- Health
- Infrastructure
What are the fiscal policies that can be used to solve inequality?
Taxes and spending (spending broken down into Aid, Trade and FDI
What are the monetary policies that can be used to solve inequality?
QE
Borrowing
Interest rates
Although this probably wouldn’t work in developing economies where people don’t tend to borrow.
What two things can be used to represent income inequality in an economy?
The Lorenz curve
The Gini coefficient
What does it mean if the Lorenz curve is steeper/more exponential?
Steeper, more exponential curve means greater income inequality
How do you work out the Gini coefficient?
Area of A / Area of A + B
What is income?
Income is a flow of funds that can be used to attain wealth.
What is wealth?
wealth is a stock of assets and a total value
Why is inequality worsening?
Inequality has gotten worse now it is relatively easy to reach a global markets
Also because a small number of people control the factors of production CELL
What does Kuznets inequality curve suggest?
Suggests that in the earlystage of a economies growth there is relatively little income inequality, as the economy grows it worsens. At a certain point of industrialisation, income inequality begins to decrease and a society becomes more equal
What are some examples of causes of inequality within countries?
Globalisation
Education and training skills
Wage rates
Trade union presence
Degree of employment protection
Social benefits
Progressiveness of tax systems
What are the causes of income and wealth inequality between countries?
Natural resource access
Geography
History (colonialism)
Degree of political stability
macroeconomic policies
degree of trade liberalisation
FDI
degree of technological change
How could it be argued that capitalism contributes to inequality?
Capitalism allows inequality to occur as the owners of the FOP will hold more wealth and income than the workers who gain their income from the owners of the FOP
