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6 (a) With reference to the information provided, explain the distinction between absolute poverty and relative poverty - Edexcel - A-Level Economics A - Question 6 - 2018 - Paper 2
Question 6
6 (a) With reference to the information provided, explain the distinction between absolute poverty and relative poverty. (b) With reference to the information provi... show full transcript
Worked Solution & Example Answer:6 (a) With reference to the information provided, explain the distinction between absolute poverty and relative poverty - Edexcel - A-Level Economics A - Question 6 - 2018 - Paper 2
Step 1
With reference to the information provided, explain the distinction between absolute poverty and relative poverty.
Answer
Absolute poverty refers to the condition where individuals are unable to meet the minimum requirements for basic life necessities, such as food, shelter, and clothing. This is often defined using a specific monetary threshold, like $1.90 a day in 2011 PPP. In contrast, relative poverty takes into account the economic status of other members of society, signifying that individuals may be classified as poor when their income is significantly less than the average, potentially limiting their access to the same opportunities and resources as others.
Step 2
With reference to the information provided and your own knowledge, examine two factors that might explain the differing rates of decline in absolute poverty in East Asia and Sub-Saharan Africa.
Answer
One factor is the level of economic growth and development, where East Asian countries have engaged in significant trade liberalization and investments in education, leading to job creation and a decrease in poverty rates. In contrast, Sub-Saharan Africa has faced challenges such as political instability and underdeveloped infrastructure, which hinder economic progress and perpetuate poverty.
Another factor is government policy approaches; East Asia has often implemented proactive fiscal and monetary policies that support economic development. Meanwhile, some Sub-Saharan African nations have struggled with ineffective governance and policies that fail to adequately address poverty reduction, contributing to slower declines in absolute poverty.
Step 3
With reference to Extract A, discuss two macroeconomic policies, apart from protectionism, that a government could use to reduce the negative effects of globalisation.
Answer
One macroeconomic policy could involve implementing fiscal policy measures to boost public investment in social services and infrastructure. This strategy would help to mitigate the negative impacts of globalisation by promoting inclusive growth and improving the quality of life.
Another policy could be the adoption of regulatory frameworks that ensure adequate labor rights and protections. By regulating labor conditions, governments can prevent exploitation while still allowing businesses to benefit from global markets.
Step 4
Assess the view that some level of inequality is desirable to maintain an appropriate incentive to invest in the economy (Extract B, lines 19 and 20).
Answer
While some argue that inequality can drive investment by creating a competitive environment, it is essential to consider the broader implications. Excessive inequality may lead to social unrest and a decrease in overall economic growth. For investment to thrive, a more equitable distribution of resources can create a larger consumer base and promote sustained economic growth, which suggests that a balance is necessary rather than endorsing significant inequality as a norm.
Step 5
Discuss the role of the financial sector in the growth and development of developing countries.
Answer
The financial sector plays a crucial role in mobilizing savings, providing credit, and facilitating investments. A robust financial system can improve access to capital for businesses and entrepreneurs, ultimately driving economic growth. Additionally, it fosters international trade by providing necessary services and financial instruments that enable businesses to engage in global markets. Furthermore, the financial sector can aid in risk management, ensuring that entrepreneurs can navigate economic uncertainties more effectively, thereby promoting sustainable development.