Poverty & Inequalities- MM

Question 1

What is 1) income & 2) wealth?

Answer 1

1) A flow- continuous movement in & out earned by supplying FOP
2) A stock- static. Can be inherited or built up over time

Question 2

How are income & wealth distributed in every country?

Answer 2

Unevenly e.g. richest 5% own 50% of the country

Question 3

How do countries try to achieve a fair distribution of income?

Answer 3

Progressive taxation systems (high earners pay a higher %)

Question 4

What are the two types of poverty?

Answer 4

1) Absolute poverty
2) Relative poverty

Question 5

What is absolute poverty?

Answer 5

When households have to survive on US $2 a day or less

Question 6

What is relative poverty?

Answer 6

When households earn 60% (or less) of the median income

Question 7

What is the 1) median income & 2) where is relative poverty in the UK?

Answer 7

1) £36,000
2) £20,000

Question 7

What do people in absolute poverty struggle to have?

Answer 7

Basic needs

Question 7

What do people in relative poverty struggle to have?

Answer 7

Anything other than basic needs

Question 8

How is income inequality measured?

Answer 8

GINI co-efficient

Question 8

What is another way of showing equality?

Answer 8

Lorenz curve

Question 9

What does a Lorenz curve show and how?

Answer 9

45 degree line =full equality (50% of pop. has 50% of income)
Further to the right the ‘bow’ goes, the more unequal the country is

Question 10

What is the 1) x-axis & 2) y-axis on a Lorenz curve?

Answer 10

1) % households by income distribution
2) Cumulative share of income %

Question 11

What are 3 things the causes/consequences of poverty/inequality depends on?

Answer 11

1) Type of poverty
2) Size of inequalities
3) Economic position

Question 12

Which type of poverty is inequality closely related to & why?

Answer 12

Relative poverty- high income inequality creates more households in relative poverty

Question 13

What are 3 consequences of absolute poverty?

Answer 13

1) Social problems- crime, poor health etc
2) Country not producing too potential (PPF diagram) as poverty means less education
3) Brain-drain- brightest & fittest members of country emigrate

Question 14

What are 4 causes of income inequality?

Answer 14

1) Labour market trends- flexible=greater income inequalities
2) Taxation policies- more progressive taxation= less inequality
proportional/regressive taxes= more inequality
3) Government intervention-strong welfare schemes=less inequality
4) Wealth inequalities- wealthier hosues can invest to ↑ income

Question 15

What are 3 causes of wealth inequality?

Answer 15

1) Income inequality (duh can’t afford anything)
2) Gvnmt failure- corruption
3) Cultural factors- e.g. UK, land & poverty ownership in relatively few hands

Question 16

What are 3 consequences of inequality/ relative poverty (closely linked)?

Answer 16

1) Social problems- crime, structural unemployment
2) Economic problems- low morale, less incentive to work= low productivity=
3) low economic growth

Question 17

What are the 4 types of income?

Answer 17

1) Rent
2) Wages
3) Interest
4) Profit

Question 18

What is the impact of economic growth on poverty and what does it depend on?

Answer 18

Reduce poverty- higher AD
May increase relative poverty-growth may disproportionally benefit highest earners
Depends on type of poverty & gvnmt actions etc

Question 18

What is the impact of economic growth on inequality and what does it depend on?

Answer 18

Reduce inequality if higher AD creates jobs= higher income
May increase it depending on who benefits (shareholders)
Depends on taxation policies (progressive vs regressive) and economic position (Yfe= inflation)

Question 19

What is the impact of economic development on poverty and what does it depend on?

Answer 19

Reduce poverty- higher GNI per capita- better education & healthcare etc
May not reduce- depends on inequality
Depends on government & what’s driving development & if it is sustainable

Question 20

What is the impact of economic development on inequality & what does it depend on?

Answer 20

Reduce inequalities by lifting households out of extreme poverty= smaller gap
More opportunities (school & healthcare)
May not reduce as could go to elite only
Depend on taxation policies, what’s driving it & if it’s sustainable

Question 21

What is the impact of high inflation on poverty & what does it depend on?

Answer 21

Makes poverty worse- lower RDI= households slipping into poverty
Depend on how long it lasts & gvnmt
Could reduce relative poverty as high inf. is bad for savers, so high end may be worse off

Question 22

What is the impact of high inflation on 1) income inequality & 2) wealth inequality & what does it depend on?

Answer 22

Increase inequalities:
1) income ineq.=higher paid can inflation-proof their wages
2) Wealth ineq.- people qith assets see the value rise- increasing gap
Depends on gvnmt- if benefits rise in line with inflation, not too bad

Question 23

What is the impact of employment on poverty?

Answer 23

Higher employment reduces poverty unless jobs are low skill/pay= relative poverty increase (depends on type pf jobs)

Question 24

What is the impact of employment on inequality & what does it depend on?

Answer 24

May reduce inequalities if new jobs are well paid & taxes are progressive
Depends on type pf jobs & economic position

Question 25

What are 5 main causes of extreme poverty?

Answer 25

1) Little access to clean water & nutritious food
2) Conflict
3) Poor education
4) Lack of infrastructure
5) No access to livelihoods or jobs

Question 26

What are deciles?

Answer 26

Values that divide a list of numbers into tenths (e.g. quartiles are divided into 4)

Question 27

What is the GINI co-efficient?

Answer 27

Used to measure INCOME inequality

Question 28

What is the scale of a GINI co-efficient?

Answer 28

0-1, closer to 0=more equal
closer to 1= more unequal

Question 29

What is the 1) most and 2) least equal country according to their GINI co-efficients?

Answer 29

1) Slavia=0.25
2) South Africa=0.69