5.2 - Poverty

Question 1

Absolute poverty

Answer 1

The inability to afford basic necessities needed to live (food, water, education, health care and shelter)
* This is measured by the number of people living below a certain income threshold (called a poverty line).

Question 2

Relative poverty

Answer 2

The condition of having fewer resources than others in the same society
* It is measured by the extent to which a person’s or household’s financial resources fall below the average income level in the economy.

Question 3

Poverty

Answer 3

a situation where a person lacks the financial resources to sustain a basic standard of living

Question 4

Causes of poverty (name 4)

Answer 4

• Unemployment
• Low education levels
• Size of a family
• Age
• Poor government support for basic services
• Poor health
• Overpopulation
• Gender
• Minority group/ethnicity/migrants facing discrimination

Question 5

Policies to alliviate poverty

Answer 5

• Promoting economic growth
• Improving education
• More generous state benefits
• Progressive taxation
• Establishment/increase of national minimum wage

Question 6

How does promoting economic growth alliviate poverty?

Answer 6

• Removing protectionism or engaging in expansionary demand & supply-side policies will promote growth
• Data shows that economic growth has a very positive impact on economic development
• In most cases growth precedes development
• Often in less developed countries, economic growth is linked to one industry & generates many negative externalities of production possibly resulting in decreased living standards

Question 7

How do more generous state benefits alliviate poverty?

Answer 7

• State benefits are usually given to the poorest & most vulnerable people in society
• State benefits include unemployment & disability payments, pension payments, heating discounts, public transport subsidies etc.

Question 8

How does improving education growth alliviate poverty?

Answer 8

Investing in this supply-side policy increases the potential output of the country (shifts the production possibility frontier outwards)

Question 9

How does progressive taxation alliviate poverty?

Answer 9

• A progressive tax system redistributes from those with higher income to those with lower income & reduces income inequality
• Redistribution often starts with the provision of free education & healthcare
• Sometimes the benefits of a good progressive tax system are eradicated by the penalties imposed through multiple regressive (indirect) taxes

Question 10

How does increasing the minimum wage alliviate poverty?

Answer 10

• Minimum wages are set above the free market rate
• Firms are not allowed to pay anyone less than the legal rate