Exam code: 0455 & 0987
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Define absolute poverty.
Absolute poverty is when a person cannot afford basic necessities like food, clean water, shelter, and clothing, and is usually defined as living on less than $2.15 per day.
Define relative poverty.
Relative poverty is a situation where a household's income is significantly lower than the median household income in the economy.
What is the main form of poverty that occurs in developed countries?
Relative poverty is the main form of poverty found in developed countries.
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Define absolute poverty.
Absolute poverty is when a person cannot afford basic necessities like food, clean water, shelter, and clothing, and is usually defined as living on less than $2.15 per day.
Define relative poverty.
Relative poverty is a situation where a household's income is significantly lower than the median household income in the economy.
What is the main form of poverty that occurs in developed countries?
Relative poverty is the main form of poverty found in developed countries.
True or False?
Absolute poverty is defined as earning less than 60% of the median household income.
False.
Absolute poverty is when a person cannot afford basic necessities, not based on a percentage of median income.
In the UK, households earning less than of the median income are considered to be in relative poverty.
In the UK, households earning less than 60% of the median income are considered to be in relative poverty.
Define working poor.
The working poor are people who are employed but earn very low incomes that are not enough to cover basic needs.
List two causes of poverty related to employment.
Two employment-related causes of poverty are unemployment and low wages.
Serious or disability can stop people from working and push families into poverty.
Serious illness or disability can stop people from working and push families into poverty.
How can environmental factors lead to poverty?
Environmental factors like natural disasters, climate change, and poor infrastructure can destroy homes, reduce income, and limit access to services, increasing poverty.
Define poverty trap.
The poverty trap is a cycle where causes of poverty reinforce each other, making it difficult for people to escape poverty.
True or False?
Low wages are both a cause and a result of poverty in the poverty trap.
True.
Low wages lead to poverty and, because of the poverty trap, poverty also results in continued low wages.
Low levels of and healthcare lead to poor human capital and lower productivity.
Low levels of education and healthcare lead to poor human capital and lower productivity.
How do large numbers of dependents in a population affect poverty levels?
Populations with many dependents (such as children and the elderly) per working household tend to experience higher levels of poverty.
Define poverty cycle.
The poverty cycle is a self-reinforcing mechanism where low income leads to low savings and investment, resulting in low productivity, low human capital, and continued low income.
How can policies break the poverty cycle and improve standards of living?
Policies that address factors such as low income, poor education, and limited access to healthcare can break the poverty cycle by increasing productivity and income, thereby improving standards of living.
Define progressive taxation.
A progressive tax system is one where the tax rate increases as income increases, redistributing wealth and helping reduce income inequality.
What is the impact of promoting economic growth on poverty?
Promoting economic growth can increase wages, improve access to education and healthcare, and raise productivity, helping to break the poverty cycle.
Define national minimum wage.
A national minimum wage is the lowest legal wage that employers can pay their workers, set by the government to help reduce poverty.
True or False?
Improving education is a supply-side policy that increases a country's potential output.
True.
Investing in education increases human capital and productivity, shifting the production possibility frontier outwards.
Which groups benefit most from more generous state benefits?
The poorest and most vulnerable people in society benefit most from more generous state benefits, as these payments help meet basic needs and improve living standards.
How does improved healthcare provision contribute to breaking the poverty cycle?
Improved healthcare makes workers healthier, reduces sick days, increases productivity, and supports more consistent economic output, thus helping to break the poverty cycle.