T4.2: Poverty & Inequality

Question 1

What is absolute poverty?

Answer 1

Those people who do not have adequate nutritional intake per day, or do not have adequate shelter or clothing in order to survive.

The World Bank reports the number of people in countries below $1.90 a day adjusted to purchasing power parity (PPP).

Question 2

What is deprivation?

Answer 2

Deprivation takes into account whether people have access to things essential for a basic standard of living, including clean drinking water, clean fuel for cooking, education, toilet facilities, basic transport, and communication.

Question 3

What are earnings?

Answer 3

Earnings are made up of wages plus overtime pay, bonuses, and commissions.

Question 4

What is economic rent?

Answer 4

Any amount earned by a factor of production, such as labor, above the minimum amount they require to work in a current occupation.

Question 5

What is the economically inactive population?

Answer 5

Those who are of working age but are neither in work nor actively seeking paid work.

Question 6

What is the effective marginal tax rate?

Answer 6

The tax rate on each extra £1 of income, taking into account the impact of direct taxes and potential welfare loss from transitioning to a paid job.

Question 7

What is the efficiency wage theory?

Answer 7

A theory that suggests it may benefit firms to pay workers a wage higher than their marginal revenue product, improving worker morale and attracting high-quality applicants.

Question 8

What is extreme poverty?

Answer 8

The scale of extreme poverty is measured as the percentage of a country’s population living on less than $1.90 a day adjusted for purchasing power parity.

Question 9

What is the poverty line?

Answer 9

An income level that is considered minimally sufficient to sustain a family in terms of food, housing, clothing, medical needs, and so on.

Question 10

What is the poverty trap?

Answer 10

A situation in which there is little incentive for workers in low-paid jobs to earn extra income due to higher direct taxes and/or losing welfare benefit payments.

Question 11

What is relative poverty?

Answer 11

The relative position of some economic unit compared to another, where a person can be relatively poor but not absolutely poor.

Question 12

What is the unemployment trap?

Answer 12

A situation in which there is little financial incentive for someone who is unemployed to start working due to the loss of welfare benefits and the need to pay taxes.

Question 13

What is wealth?

Answer 13

The value of assets owned by a household, including property, shares, savings, and marketable wealth.

Question 14

What is wealth inequality?

Answer 14

The degree to which wealth is distributed unequally across a population, measurable using the Gini coefficient.

Question 15

What is capitalism?

Answer 15

An economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state.

Question 16

What are compensating (wage) differentials?

Answer 16

Higher pay earned for relatively low-skilled jobs if working conditions are unsociable, unpleasant, or dangerous.

Question 17

What is demographic change?

Answer 17

Any change in the population, such as average age, dependency ratios, life expectancy, family structures, and birth rates.

Question 18

What is the dependency ratio?

Answer 18

The ratio of dependents (people younger than 16 or older than 65) to the working-age population.

Question 19

What is discrimination?

Answer 19

The different treatment of people based on factors such as age, gender, race, sexual orientation, or ethnicity.

Question 20

What is the Gini coefficient?

Answer 20

A measure of the extent to which the distribution of income deviates from a perfectly equal distribution, ranging from 0 (perfect equality) to 1 (complete inequality).

Question 21

What is an incentive scheme?

Answer 21

A motivational scheme for employees designed to encourage increased productivity, such as share schemes, bonuses, and commissions.

Question 22

What is income distribution?

Answer 22

How income is divided among all citizens in a country, commonly measured by the Gini coefficient.

Question 23

What is a living wage?

Answer 23

A wage that provides enough money for a working person to live decently and provide for their family.

Question 24

What is the Lorenz curve?

Answer 24

A graphical representation showing the degree of income inequality in a given economy; the further the curve from the line of absolute equality, the greater the inequality.

Question 25

What is the maximum wage?

Answer 25

A wage that is set below the equilibrium wage rate, leading to excess demand for labor.

Question 26

What is the minimum wage?

Answer 26

A wage that is set above the equilibrium wage rate, resulting in excess supply of labor or unemployment.

Question 27

What is the National Living Wage?

Answer 27

The formal name for the minimum wage in the UK since 2016.

Question 28

What are nominal wages?

Answer 28

The actual hourly rate of pay that is not adjusted for inflation.

Question 29

What is social cohesion?

Answer 29

The degree to which a society is united, connected, and tolerant of cultural diversity.

Question 30

What is social exclusion?

Answer 30

When people are denied access to goods and opportunities considered normal in society.

Question 31

What is Universal Credit?

Answer 31

A single monthly benefit designed to replace multiple benefits for people on low income or out of work.

Question 32

What are wage differentials?

Answer 32

The difference in wages between workers, which can refer to differences between differently skilled workers in the same industry.

Question 33

What are zero hours contracts?

Answer 33

Contracts that do not guarantee a minimum number of working hours each week, often affecting young, part-time, or full-time students.