Poverty and Inequality

Question 1

Absolute Poverty

Answer 1

When incomes fall below the minimum to meet basic living needs (poverty line).

It is defined as the percentage of the population of a country living on less than $1.90 per day.

Question 2

Relative Poverty

Answer 2

When income is below a threshold in a certain country, which is subjective and not comparable between nations.

In the EU, people who earn less than 60% of the median wage are ‘at risk of poverty’.

Question 3

Factors Affecting Poverty

Answer 3

-Levels of economic growth
-Education and training
-Social welfare
-Taxes
-Wages rates

In developing countries:
-Aid
-Property rights
-Fair trade schemes
-Debt relief

Question 4

Wealth vs Income Inequality

Answer 4

Wealth inequality refers to inequality based on assets such as houses and stock.

Income inequality refers to inequality based on income from wages, rent and profit.

Question 5

Gini Coefficient

Answer 5

A
G = _____
A+B

Question 6

Causes of Income and Wealth Inequality Between Nations

Answer 6

-Natural Resources
-Geographical location
-Government
-Natural disasters
-Population growth

Question 7

Impact of Economic Development on Inequality

Answer 7

As an economy grows, owners of resources will become wealthier in comparison to workers, widening the inequality gap.

Inequality can strain economic growth because:
-The poor don’t have the resources to start businesses
-Those on low incomes have a low marginal propensity to save, limiting funds available for investment.