Theme 4 - poverty and inequality Flashcards

1
Q

What does the world bank consider being in absolute poverty?

A

Someone living on $2.15 a day or less and is unable to afford basic necessities such as shelter, food and water

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2
Q

How does the world bank define relative poverty?

A

Lower than the average income of people around you.

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3
Q

In the UK, what is the percentage that puts people into relative poverty?

A

If someone earns less than 60% of the average income, they are considered to be in relative poverty

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4
Q

What are 3 main factors that influence poverty rates?

A
  • Infrastructure
  • AIDS
  • Education and training
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5
Q

How can infrastructure influence poverty levels?

A

Better infrastructure means goods can travel better which increases productivity so costs may fall and foreign workers can move out o poverty

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6
Q

How can education and training influence poverty levels?

A

Low standards of education means higher unemployment so lower income so higher poverty
Good education, high skilled labour so increased productivity and a fall in poverty

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7
Q

How can Aid influence poverty levels?

A

An increase in AID means more education so increase in knowledge and skills.
Better healthcare so increased health
Aid is not guaranteed to reduce poverty

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8
Q

What is income inequality?

A

The highest earner earns a larger income than the rest of the population - more than the average earner.

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9
Q

What does the Lorenz curve show?

A

Income inequality in a country compared to perfect income equality

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10
Q

Describe what a steeper curve shows and what a stretched curve shows on a lorenz curve

A

A steeper curve will be closer to perfect income equality and a wider gap would show more income inequality

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11
Q

What is the gini coefficient? How do you calculate it?

A

A mathematical way of understanding income inequality in a country.
The closer to 1, the more income unequal a country is.
GC = A / A+ B

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12
Q

What is wealth inequality?

A

This is when the stock of assets is shared unequally between the population

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13
Q

Some major factors influencing inequality include:

A
  • Minimum wage rates
  • Assortative mating
  • Social benefits and tax
  • The R>G hypothesis
  • Inheritance
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14
Q

How does a minimum wage rate influence inequality?

A

Low earners earn more and high earners - business owners - see higher costs so higher price and fall in profits leading to a fall in salary
An improvement in inequality

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15
Q

How dos assortative mating influence inequality?

A

Talented, successful and rich people marry and have children with talented, successful and rich people which means they can afford better education, better healthcare, resources etc
Worsens inequality

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16
Q

How do social benefits and tax influence inequality?

A

The UK uses progressive income tax - the more you earn the more you are taxes - which means low earners can earn more income
Higher tax revenue from higher tax earners which increases government spending
Govt spending on benefits and pensions

17
Q

What is the r>g hypothesis?

A

People with lots of assets can earn more assets which increases income to buy even more assets.
R = rate of return = 5.3%
G = growth rate = 3.8%
If r increases then people have more income to buy more assets and become wealthier so inequality increases

18
Q

How does inheritance influence inequality?

A

Increased wealth means more assets but some people may inherit nothing which cause wealth to remain unchanged.
Someone’s increased wealth means more assets bought
90% of wealth is inherited

19
Q

What are the advantages of a gini coefficient?

A
  • Can compare income distribution in a population or between countries
  • It is easily interpretated
20
Q

What are some evaluations of the gini coefficient?

A
  • Gini coefficient measures income not wealth as wealth is harder to measure
  • It doesn’t consider the underground and subsistence economy