Economics

• Absolute Poverty


  A condition where people's income is too low to enable them to meet their basic needs
• Relative Poverty


  A condition where people are poor in comparison to others in the country
• Causes of Poverty


  • Being unemployed
  • Being in low-paid work (Low wages)
  • Falling ill
  • Growing old
• Government Policies to Alleviate Poverty

  • Promoting economic growth
  • Improving the quantity and quality of education
  • Providing more generous state benefits
  • Introducing or raising a national minimum wage
  • Encouraging more multinational companies to set up in the country
• The government's choice of above measures can be restricted by the tax revenue it has raised to fund them
• Other Ways to Improve Living Standards

  • Improving healthcare
  • Increasing and improving the housing stock
  • Improving the working conditions
  • Reducing pollution
• Government Policies to Redistribute Income & Wealth

  • Progressive taxation
  • The provision of unemployment and other cash benefits
  • The provision of free state education and healthcare
  • Using other macroeconomic policies (e.g. minimum wage legislation, regional policy, measures to reduce unemployment)
• Governments may be concerned that redistributing income and wealth does not reduce incentives to entrepreneurs and workers
• Money


  An item which is generally acceptable as a means of payment
• Forms of money


  • Coins
  • Notes (Bank notes)
  • Bank accounts
• Coins


  • Often used to make small purchases and are given in change
• Notes


  • Used to buy more expensive items
• Bank accounts


  • Responsible for the largest proportion (In terms of value) of payments made
• Functions of money


  • Acting as a medium of exchange
  • Acting as a store of value
  • Acting as a unit of account (Measure of value)
  • Acting as a standard of deferred payments
• Medium of exchange


  Money allows people to buy and sell products
• Store of value


  Money can be saved and does not deteriorate with time
• Unit of account


  Money can be used to place a value on an item
• Standard of deferred payments


  Money allows people to borrow and lend
• Characteristics of money


  • General acceptability
  • Limited in supply
  • Durable
  • Portable
  • Divisible
  • Homogeneous
  • Recognisable
• An item does not need to have intrinsic value to act as money
• Commercial banks


  Banks which aim to make a profit by providing a range of banking services to households and firms
• Main functions of commercial banks

  • Accepting deposits
  • Lending
  • Enabling customers to receive and make payments
• Financial intermediation


  Commercial banks accept deposits from those with more money and lend it to those who want to spend more money than they have at hand
• Other functions of commercial banks

  • Dealing in foreign currency
  • Holding important documents and small valuables
  • Selling insurance
  • Providing advices for a number of financial matters
  • Providing mortgage loans
  • Offering a wide variety of savings accounts with a range of conditions and interest rates
• Central bank


  A government-owned bank which provides banking services to the government and commercial banks and operates monetary policy
• Functions of a central bank

  • Acts as a banker to the government
  • Acts as a banker to the commercial banks
  • Acts as a lender of last resort
  • Manages the national debt
  • Issues bank notes
  • Implements the government's monetary policy
  • Controls the banking system
  • Represents the government at meetings with other central banks and international organisations
  • Holds the country's reserves of foreign currency and gold
• Birth rate


  The number of births in a year per 1000 population in a year
• Death rate


  The number of deaths in a year per 1000 population in a year
• Net migration

  The difference between immigration and emigration
• Net immigration

  When more people coming to live in the country than people leaving the country to live elsewhere
• Net emigration

  When more people leaving the country to live elsewhere than people coming to live in the country
• Natural increase

  When the birth rate exceeds the death rate
• Natural increase calculation

  • If the birth rate is 15.6 per 1000 and the death rate was 4.6 per 1000, the natural rate of increase is 11 per 1000 or 1.1 %
• Reasons for high birth

  • Young average population in which women marry young
  • High number of women in the population
  • High women's fertility rate
  • High infant mortality rate
  • Women not well-educated
  • Most women do not work
  • Cheap to bring up children
  • Less paid jobs open to women
  • Lack of state pension, sickness, elderly and disability benefits
  • Lack or disapproval of family planning
  • Government provides cash incentives to have children
• Reasons for death rate

  • Healthy diets and regular exercise
  • Good housing facilities
  • Access to high quality medical care
  • Favourable lifestyles (no smoking/excess alcohol)
  • Good working conditions
  • Country at peace (non-involvement in military action)
• Gender distribution of population

  Indicates the number of males compared to the number of females
• Age distribution of population

  The division of the population into different age groups
• Population pyramid


  A diagram showing the age and gender structure of a country's population

  
• Characteristics of population pyramid in less developed country

  • High birth rate
  • High death rate
  • Larger proportion of young people
  • Small percentage reaching older age

  
• Characteristics of population pyramid in more developed country

  • Low birth rate
  • Low death rate
  • More people surviving to old age