4.2 poverty and inequality

Question 1

Absolute Poverty

Answer 1

Inability to afford the basic goods and services which are regarded as necessary for survival

Question 2

Gini Coefficient

Answer 2

A number that is calculated from the Lorenz curve and allows countries to be ranked according to inequality levels

Question 3

Lorenz curve

Answer 3

A graph used to show the distribution of wealth in a country (cumulative income against cumulative population)

Question 4

International Poverty line

Answer 4

A measure that defines absolute poverty, based on a person living on less than $1.90 a day (set in 2015) also known as extreme poverty

Question 5

Progressive Tax

Answer 5

Tax rates that increase as income increases

Question 6

Proportional Tax

Answer 6

Taxes are at a constant rate regardless of total income

Question 7

Regressive Tax

Answer 7

Tax rates that decrease as income increases

Question 8

Relative Poverty

Answer 8

When a person has relatively less in relation to others in the economy in which they live

Question 9

Headcount Ratio

Answer 9

A measure of the percentage of a country’s population living below the poverty line

Question 10

What are the main causes of relative poverty in the UK?

Answer 10

• Inequality of wages (low skilled workers in low pain jobs)
• Unemployment and long-term economic inactivity (no wage income, reliance on benefits)
• High renting costs
• Debt and Debt repayments

Question 11

Persistent poverty

Answer 11

A household which is below the poverty threshold line for 2 out of the past 3 years

Question 12

Wealth

Answer 12

A stock concept - assets with a market value or marketable wealth (that can be sold such as stocks and shares)
- Savings (deposits with bank)
- Consumer Durables (property, real estate)
- Pensions (life insurance schemes)

Question 13

Income

Answer 13

A flow concept- most income comes from paid work (wages) but also from the stock of wealth e.g interest from savings deposits