data response

Question 1

With reference to the information provided, explain the distinction between
absolute poverty and relative poverty

Answer 1

Knowledge/Understanding: Up to 2 marks for e.g.
• Absolute poverty: Lacking basic necessities to
survive (1)
• Relative poverty: Relatively poor compared to
rest of your country (1)
Application: Up to 2 marks for e.g. (1+1 OR 2)
• Absolute poverty: World Bank definition:
$1.90 a day (1) PPP values (1)
• Relative poverty: 60%/50% (1) below median
household income in your country (1)
• Reference to Figure 1 or Extract A/B (1+1)
Analysis: Up to 1 mark for e.g.
• Absolute poverty can decline at the same time as
relative poverty is increasing (1)
• There may be relative poverty in a country but
not necessarily absolute poverty (1)

Question 2

With reference to the information provided and your own knowledge, examine
two factors that might explain the differing rates of decline in absolute poverty in
East Asia and Sub-Saharan Africa.

Answer 2

Level of education
• Level of healthcare
• Level of infrastructure
• Level of trade
• Capital flows
• Civil war
• Drought
• Poor governance

Relative lack of education means a less skilled
and therefore less productive workforce (1)
• Relative lack of healthcare means people spend
more time absent from work with illnesses and
therefore reduces productivity (1)
• Relative lack of infrastructure makes it more
difficult and therefore expensive to move goods
around the country to markets (1)

Improvements will only occur in the long term
significance of each

Question 3

With reference to Extract A, discuss two macroeconomic policies, apart from
protectionism, that a government could use to reduce the negative effects of
globalisation.

Answer 3

• Fiscal policy: increase people’s disposable
incomes, increase employment and so reduce
downsides of low wages and unemployment
due to foreign competition. A more
redistributive tax/welfare system to reduce
inequality/poverty caused by globalisation.
• Expansionary monetary policy: cut in interest
rates, rise in availability of credit, allows
businesses to borrow for investment to help
combat increased foreign competition.
• Supply side policies, e.g. improved education,
healthcare, infrastructure, etc.: Improvements
in these will boost productivity and this boost
GDP as well as meaning firms would be more
likely to be able to pay higher wages. Higher
productivity would enable firms to better
compete with foreign competition in the form
of lower prices.

• Impact of expansionary fiscal policy on budget
  deficit
  • If business confidence is low, expansionary
  monetary policy may not lead to increased
  borrowing for investment
  • Supply side policies may not be effective in the
  short run or have public sector cost implications
  • Effectiveness of policies, e.g. lack of consumer
  confidence

Question 4

Assess the view that ‘some level of inequality is desirable to maintain an
appropriate incentive structure in the economy’ (Extract B, lines 19 and 20).

Answer 4

Incentive to work hard in order to receive higher
reward will help increase economic growth which
can result in reduced absolute poverty
• More innovation due to the profit motive for firms
and inventors leads to more competitive industry
and faster economic growth
• Lower taxes or less redistribution may encourage
entrepreneurs to relocate to the country
• Reference to rising living standards in a largely
market based economy, e.g. UK, US

Inequality reduces consumer confidence so less
consumption, increase in saving. Aggregate
demand may fall as a result.
• Excessive inequality can lead to more crime,
poorer healthcare, etc.
• Low pay can act as a disincentive to seek
employment and economic growth suffers as a
result.