Lesson 4.2.1

4.2.1 Absolute and relative poverty Quiz: Pearson Edexcel Economics A, Unit 4

20 questions

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Lesson 4.2.1, Absolute and relative poverty: 20 multiple choice questions for the Pearson Edexcel Economics A (9EC0), Unit 4: Theme 4: A global perspective, written with Revision Ninja.

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The 20 questions

  1. Which best distinguishes absolute poverty from relative poverty?

    • Absolute poverty is income below a fixed threshold needed for basic needs; relative poverty is income below a set share of typical income
    • Absolute poverty only applies to rural areas, whereas relative poverty applies only to urban households in every country
    • Absolute and relative poverty are the same concept, measured in different currencies in different countries
    • Absolute poverty is income below the national average; relative poverty is income below a fixed subsistence threshold

  2. Which measure is commonly used to define relative poverty in the UK?

    • Households with no access to electricity, clean water or sanitation facilities in the home
    • Households with income below a fixed amount of £1 a day, measured at market exchange rates each year
    • Households whose members are unemployed for more than one year, regardless of their income
    • Households with income below 60 per cent of median household income after housing costs

  3. What is the relative poverty threshold if median household income is £30,000 and the line is 60 per cent of median?

    • £18,000, since 0.6 x 30,000 = 18,000
    • £30,000, since the threshold is set at the median and so is equal to the typical household income
    • £15,000, since half of the median income is the common threshold for relative poverty in most countries
    • £12,000, since 40 per cent of the median is taken as the relative poverty threshold in every country

  4. Which is a measure of absolute poverty?

    • The ratio of the richest 10 per cent of households' income to the poorest 10 per cent in the same country
    • The share of the population living below a fixed income threshold such as an international dollar-a-day line
    • The percentage of households with income below 60 per cent of the current median household income each year
    • The share of total income received by the top 1 per cent of earners in a given economy and year

  5. What is a likely cause of a fall in absolute poverty?

    • A fall in government spending on social protection, which lowers the cost of living for poor households
    • A rise in unemployment that reduces the number of households with any income at all in the economy
    • A rise in the inflation rate that lowers the real value of incomes for all households in the economy
    • Sustained economic growth that raises real incomes of the poorest above the fixed subsistence threshold

  6. What is a likely cause of a rise in relative poverty in an economy whose average income is growing?

    • A fall in the number of households below a fixed absolute poverty line, because the line moves in line with the median
    • Income growth concentrated among higher earners, so the incomes of low earners fall further behind the median
    • A fall in median income while the incomes of the poorest households grow faster than the median each year
    • Income growth shared equally by all households, which keeps the distribution of income exactly the same as before

  7. Median income rises by 10 per cent, while the incomes of the poorest households rise by only 2 per cent. What is the likely effect on the relative poverty rate?

    • It is unchanged, because relative poverty depends only on absolute income thresholds set by the government
    • It rises, because the relative threshold moves up faster than the incomes of the poorest households
    • It falls to zero, because a rise in median income automatically removes everyone from relative poverty in a year
    • It falls, because the relative threshold is fixed in real terms and the poorest households are richer in real terms

  8. Which situation best illustrates absolute poverty falling while relative poverty rises?

    • Real incomes of all households fall, but the median income falls even faster than the incomes of the poorest
    • Real incomes of the poorest rise above the subsistence line, but the median rises faster and widens the gap in the distribution
    • Inflation rises for all households, but the poorest households are shielded from it by wage indexation schemes
    • Real incomes are unchanged for all households, but the number of people on benefits falls sharply in the year

  9. Which factor is most likely to reduce the number of people in absolute poverty over the long term?

    • A fall in access to clean water and healthcare, which reduces the number of people who can work productively
    • A rise in population growth without any increase in output, which spreads incomes across more households
    • A rise in the price of basic food, which reduces the spending of the poorest on goods and services they need
    • Investment in education and infrastructure that raises productivity and incomes across the economy

  10. A household's income rises from £6,000 to £7,500 a year, while the absolute poverty line is £7,000. What has happened?

    • The household remains in absolute poverty, because the poverty line rises in line with any change in household income
    • The household has moved above the absolute poverty line, having been below it before the rise
    • The household has moved below the absolute poverty line, because its income has risen faster than the line
    • The household is now at the median income of the economy, which removes it from relative poverty as well

  11. Why might absolute poverty measures differ between countries?

    • Thresholds are always set in the same currency at market exchange rates, so comparisons are always exact and direct
    • Absolute poverty is not measurable, which is why all countries use the same relative threshold for their comparisons
    • Absolute poverty is measured by the same method everywhere, so differences only reflect differences in population size
    • Thresholds are set in different ways, and comparisons across countries often use purchasing power parity to adjust for living costs

  12. Which is an advantage of using a relative poverty measure?

    • It is unaffected by changes in the distribution of income, because it uses a fixed threshold in real terms
    • It captures social exclusion and the ability to take part in society relative to others, which absolute measures can miss
    • It requires no data on household incomes, since it is calculated from the number of people living in each region
    • It always shows that poverty has fallen when average income rises, which is the most reliable sign of progress

  13. Which is a limitation of an absolute poverty line?

    • It counts only people with no income at all, so it never identifies anyone as being in poverty
    • It shows that absolute poverty rises whenever any household's income increases by more than a small amount
    • It is always measured in the local currency, so it cannot be compared between countries under any circumstances
    • A single fixed line can understate hardship in richer countries, where people can be poor relative to peers

  14. Which is the most accurate evaluation of using a 60 per cent of median line to measure poverty in a country where incomes are very unequal?

    • The line may rise while the poorest gain little, so it can show relative poverty rising even when living standards improve
    • The line always falls when inequality rises, so it shows that poverty declines whenever the rich become richer
    • The line is unaffected by changes in income distribution, because it is calculated using the average income of all households
    • The line shows exactly how many people need food aid, which makes it a complete measure of hunger in the population

  15. Which statement about measuring poverty across countries is most accurate?

    • Absolute poverty cannot be measured in developing countries at all, so only relative measures are used there
    • Relative and absolute measures always agree on the number of people in poverty in every country and every year
    • Relative and absolute measures give different pictures, so the choice of measure can change conclusions about trends
    • Relative measures are only used by the World Bank and absolute measures only by national governments

  16. The number of people below an absolute poverty line falls, but the share of income held by the bottom 20 per cent falls too. What does this suggest?

    • Absolute poverty must have risen, because the share of income held by the poorest must always move in the same direction
    • Inequality must have fallen, since a fall in the share of income of the bottom 20 per cent always reduces inequality
    • Relative poverty must have fallen, because the bottom 20 per cent is always the group that defines the relative line
    • Absolute poverty can fall while income inequality rises, so the two measures can move in different directions

  17. Which factor could cause relative poverty to rise even when absolute poverty falls?

    • A fall in median income that lowers the threshold by an equal amount for all households in the economy
    • A fall in the number of households in full-time education, which reduces the income of the median household
    • Faster income growth at the top of the distribution than at the middle and bottom, widening the gap to the median
    • A rise in the number of households on the minimum wage, which automatically raises the relative poverty threshold

  18. Which policy measure is most directly aimed at reducing relative poverty?

    • A rise in indirect taxes on basic goods, which raises the revenue available for general government spending
    • A flat tax rate that applies the same percentage to every household's income, regardless of its level
    • Progressive taxation and transfer payments that redistribute income towards households at the bottom of the distribution
    • A reduction in public spending on education and health, which lowers the taxes needed to fund those services

  19. Which is a cause of a rise in absolute poverty?

    • A recession that lowers real incomes and raises unemployment among the poorest households
    • A fall in the price of basic food that raises the real purchasing power of the poorest households
    • Economic growth that raises real incomes of the poorest households above the subsistence line each year
    • Public spending on education that raises the skills and earnings of low-income workers over time

  20. An absolute poverty line is $2.15 a day in real terms. A household's income was $1.80 a day and has risen to $2.40 a day. What is its status now?

    • Still in absolute poverty, since $2.40 is less than the $2.15 line once the rise is expressed in cents
    • Still in absolute poverty, since poverty lines always rise faster than household incomes in every country
    • Not in absolute poverty, since $2.40 a day is above the fixed line of $2.15
    • Not in relative poverty, since absolute poverty is always measured against the median income of the country

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