Chapter 29 Flashcards
What is income
The flow of earnings (from wages salaries and other sources) over a period of time
What is wealth
The stock of accumulated assets (e.g. property and land)
Is the distribution of wealth and income equally dsitributed
Income and wealth are not equally distributed (shared out amongst the population)
Why do some families always have a wealth
Due to money passing down through the generations such as property and cash
What is absolute poverty
When a household can not afford basic necessities for survival. The world bank measures it on those living on less than $1.25 per day
What is relative poverty
When someone’s income is below 60% of the median adjusted income in an economy.
What is inequality (economics)
An unequal distribution of income and /or wealth in an economy
What is and what can the lorenz curve show
Can be used to measure the distribution of income or wealth, shows the spread of income in countries
What is the gini coefficient
can be used to measure inequality
Decile
When the population is divided into tenths (10%)
Quartile
When the population is divided into quarters (25%)
What is equality
refers to the equal distribution of wealth and income in society, so that everyone has the same income (wealth)
What is the headcount ratio
a measure of the percentage of a country’s population living below a poverty line.
What is the international poverty line
an agreed measure that defines the absolute poverty line based on international prices, set at PPP$1.90 in October 2015.
What is persistent poverty
where a household is currently in relative income poverty and has also been in this state in at least 2 of the preceding 3 years.
What are causes of income and wealth inequality within and between countries
- Inequality in wages
- Welfare payments and taxes
- Unemployment
- Changes to the UK tax system
- Inequality between countries
Why achieving a more even distribution of income is important to macroeconomic objectives
High levels of poverty through the unequal distribution of income may result in lower levels of health within the population.
Encourage a cohesive society
Causes of inequality on wages or employment
Education
Part-time jobs (underemployed)
Structural unemployment (inequality between those in tech and steel sectors and pay)
Unemployment
Levels of education (degree, gcses etc)
Gender and racial inequality
other inequalities such as disabilities
How do welfare payments cause inequality/poverty
State pensions and welfare payments tend to increase less than wages even though they are index linked to inflation. This over time increases inequality and the number of people in relative poverty
How does taxes cause inequality/poverty
Somes taxes can be regressive where those on lower incomes bear the burden more
How does disease and malnutrition and other health problems cause inequality/poverty
People with health problems often have to take time off work which means they loss income and this increases inequality and pushes them towards poverty
How does corruption and political oppression causes inequality/poverty
This is because leaders can embezzle wealth and not give back to the population
How does natural disasters cause inequality/poverty
destroy peoples wealth and jobs
Why is there is inequality between countries
- In some countries, social groups are excluded or marginalised based on gender, ethnicity etc which reduces the ability to earn
- Some countries are held back by wars, droughts, famines and natural disasters which push and keep a population In poverty,
- Exploitation of the poor through colonial rule, this held them back and stopped them from developing as quickly.
Impact of economic change and development on inequality
Kuznets hypothesis is that as society moves more from agriculture to industry, it develops, and inequality in society increases as the wages of industrial workers rise faster than those of farmers. He argued that inequality i poor countries is just a transitional phase and inequality reduces once nations become economically developed
Impact of inequality
Monopolies can exploit the power on consumers with higher powers
Inequality motivates workers tp work harder to get what other people have.
Die to inheritance wealth is passed down through generations wealth is often concentrated in few families. though government can increase inheritance tax to redistribute this wealth. Can demotivate people too.
Impact of poverty
Health: Lower life expectancy, malnutrition - they are more vulnerable to infection and disease
Society: poor housing, increased crime and mental health issues. possible social unrest
Poor sanitation: can afford basic levels of sanitation and no clean water which can kill people as they are more likely to get ill and diseases
Education: Less likely to education as they can’t afford to live and educate, they need to earn money to survive
Economy: Harder to get jobs and hinders an economy’s productive potential
