Absolute Poverty

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Blaze Lim
Ms. Urbien
AP Economics
1/1/13
Poverty: Is there a solution?
Poverty is defined as a shortage of basic needs. These shortages can be of food and health or simply just money. Poverty does not only affect the economy as a whole, but every individual in it. Poverty has been a problem for more than a century, yet there has not been a government official whom has mentioned poverty. However, solving poverty throughout the whole world is a big job that even our government fails to address.

There are several types of poverty that are prevalent throughout the world, relative and absolute poverty. Both types of poverty are similar due to the fact that each type has a line and when an individual is under the line, that individual is known to be in that type of poverty. Relative poverty is measured within each individual nation and each nation measures their poverty line differently. Most countries, however, have a relative poverty line of 10%. This means that if a person makes less than 90% of the population, that person is in poverty. Relative poverty cannot compare between individual nations because some individuals in relative poverty in an industrial nation make more than most individuals in a developing countries, such as nations in Africa. Absolute poverty is measured equally throughout the world. The line for absolute poverty is decided by the World Bank. Today, the poverty line is set at $2 a day. The extreme poverty line is set at $1 a day. These values represent the amount that can be purchased in the US and are adjusted for other nations.

Absolute poverty is a problem because causes several things, which bring down the economy all together through a series of chain reactions. As a general thing, poverty lowers GDP because those people that are in a state of poverty work in jobs that produce less than other jobs. This brings our real GDP below the amount that our potential GDP would produce. Since GDP is lowered, the money in the hands of consumers will decrease, which will lower the demand for goods and services. As the demand for goods services decline, the amount of those jobs will decrease, which further lowers the GDP. This will restart the cycle from the beginning. This cycle becomes a collective problem, which will eventually create different effects as a result. Since many people are forced to work in lower paying jobs, minors that are still in school may have to leave school early to find a job. As the availability for jobs like doctors and teachers decline, diseases become increasingly more rampant. As consumer income and the supply for services decrease, people often feel powerless and resort to desperate measures. Society soon becomes dependent and believes that they have to live depending on others and will never learn to fend for themselves. This is shown in how Africa is very dependent on America. If US poverty is allowed to continue, poverty may become a near-permanent problem to the US that will put the US into a situation like Africa.

There are several factors that cause poverty. A main reason that poverty exists is the variance in wealth among individuals. With our economic system, the wealthy will continue to get wealthier, while the poor will get poorer in comparison. Due to the increase in the wealth of the wealthy, the cost of living will increase, creating an even more difficult time for those that are poor and force them into poverty. However, variance in wealth also applies to individual nations. As developing countries fail to support themselves, developed countries are forced to help the developing country, which decreases the amount of money in the developed country. Another cause of poverty is the lack of education. A lack of education will often lower the GDP of a nation. This is shown by comparing developed and educated nations to the developing nations. For example, education is required in the US, where many things are produced, compared to the education in Africa,...
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