Inequality & Poverty Flashcards
What is income inequality?
Unequal distribution of income (flow) among individuals or households.
What is wealth inequality?
Unequal distribution of assets (stock), like property, stocks, and savings.
What is absolute poverty?
When individuals can’t afford basic necessities like food, shelter, and healthcare (e.g., <$1.90/day by World Bank).
What is relative poverty?
When a household earns less than 50% of the median income in a society.
What do the values of the Gini Coefficient indicate?
0 (perfect equality) to 1 (perfect inequality).
What is the Multidimensional Poverty Index (MPI)?
A composite measure of poverty that includes health, education, and living standards across 10 indicators.
What are key causes of poverty?
Low wages, unemployment, poor health, lack of education, and the poverty cycle.
What are the effects of inequality on economic growth?
Can incentivise hard work, increasing aggregate supply.
However, can discentivize entrepreneurship, as small firms will be unable to compete with larger multinational firms.
More transfer payments on the poor.
What is progressive taxation?
higher incomes are taxed at higher rates
What is a regressive tax?
Not based on income. Takes up higher percentage of poor income.
What are proportional taxes?
Everyone pays the same tax rate.
What are 3 policies to reduce poverty and inequality?
Progressive taxes
Transfer payments
Policies to reduce discrimination
