Paper 2 Revision Flashcards
Absolute Poverty
When people are unable to afford sufficient necessities to maintain life
(anyone less than $1.90 a day)
Relative Poverty
Peoples income falls below an average income threshold. In Britain it is an income of less than 60% of median household income (27,300 in 2017)
The Poverty Trap
affects people on low incomes, when the tax and benefit system creates a disincentive to look for work or work for longer hours.By working longer hours individuals might lose income
Poverty Causes
Caused by unemployment, a lack of skills,health problems and income dependency
Causes of increased Relative Poverty in the UK
-De-industrialisation has increased the number of service sector jobs which tend to be lower paid.
-Growth in underemployment, zero-hour contracts, part time jobs, all of which mean lower wages for workers
-The decline of trade Unions
-State benefits have fallen in relative value whilst taxes become more regressive
Income
is a flow of earnings
Wealth
is a stock of assets
Gini Coefficient
A/(A+B)- it is measured between 1 and 0 and the bigger the coefficient ,the more unequal the country
Causes of Wealth Inequality within countries
1.Wages
2.Wealth Levels
3.Chance
4.Age
What is the Kuznets Hypothesis
States that as society develops and moves from agriculture to industry,inequality increases as the wages of industrial workers rises faster than farmers. Then wealth is redistributed through taxation and Gov spending and so inequality falls
Quantitative Easing
Central bank creates money electronically by adding money to their own balance sheet
-They use this to buy financial assets from financial institutions, ie pension funds, banks, and gov. bonds, especially in the UK
-The D for gov. bond rises, so P increases, so the yield goes down, reduces the incentive to hold government bonds
- financial institutions now have money, they can either use this to deliver more loans (very good, main obj. of QE), but maybe they will invest this money in riskier corporate bonds with a higher yield or shares (due to low willingness to lend)
- So the P or corporate bonds goes up and the yield goes down, so it’s cheaper and easier to raise finance and access finance, reduces the cost of borrowing money (obj. of QE) (it goes down as FIs can issue bonds at lower i/r = lower borrowing for companies and individuals who then access credit more cheaply
Globalisation
the increasing interdependence of the different economies worldwide through integration.
The financial markets
where buyers and sellers can buy a range of services or assets that are fundamentally monetary in nature
What are the roles of the financial market
1.To facilitate savings (such as storing money in savings account and holding stocks and
shares)
2.They lend to Businesses and individuals
3.facilitate the exchange of goods and services
4.provide forward markets
5.market for equities
Forward Market
This is where firms are able to buy and sell in the future at a set price, for example if a farmer wants to sell the crop they are growing at a guaranteed price in a month’s time. The forward market exists for commodities and in foreign exchange and helps to provide stability.
