4.2 Poverty and inequality

Question 1

What is absolute poverty

Answer 1

• When people are unable to afford basic human needs

Question 2

What is relative poverty

Answer 2

• Where someone’s income is below 60% of the median household income

Question 3

What are some causes of an increase in relative poverty, name 3

Answer 3

1 - Educational attainment
2 - Inadequate infrastructure
3 - Cost of living/inflation

Question 4

What are some causes of increases in absolute poverty, name 3

Answer 4

1 - Environmental factors
2 - Conflict and instability
3 - Lack of access to basic services e.g healthcare can lead to long term health issuesn

Question 5

What is the difference between income and wealth

Answer 5

• Wealth is a measure of stock (what you own) whereas income is a flow measure

Question 6

What is ‘wealth inequality’

Answer 6

• Unequal distribution of assets, wealth can accumulated over time and is often inherited

Question 7

What is ‘income inequality’

Answer 7

• Unequal distribution of earnings from salaries ,wages, dividends or gov transfers

Question 8

What does the lorenz curve show

Answer 8

• Income inequality, the further the curve away from perfect equality, the worse income inequality.

Question 9

What does the Gini coefficient tell us.

Answer 9

• 0 to 1
• 0 is perfect equality
• The close the coeff is to 1, the greater the inequality

Question 10

What are some causes of income and wealth inequality within countries

Answer 10

• Differences in educational levels
• Technological change, those who are more skilled are in favour of automation
• Discrimination: Gender, racial, or ethnic bias in hiring and wages.
• Widening pay gaps between high paid and low paid jobs, eg bonus culture in financial sector

Question 11

What are some causes of income and wealth inequality globally

Answer 11

• Global trade patterns :
• Debt and aid dependencies
• Access to technology

Question 12

What are the positive impacts of increased economic activity and development on inequality

Answer 12

• Economic growth can reduce absolute poverty via job creation
• Improved education, healthcare and infrastructure as a result of higher gov spending can reduce inequality

Question 13

What is the significance of capitalism on inequality

Answer 13

• Incentivise to work and innovate/risk take
• Effective resource allocation, higher incomes signal higher skills