Living Standards, Poverty and Population: practice questions

Question 1

In the country of Halvorne, a household earns enough income to buy adequate food, clean water and basic clothing, so all of the household's basic physical needs are met. However, this household's income is only one-fifth of the average household income in Halvorne.

Which type of poverty best describes this household's situation?

Accepted Answer

C

Question 2

Thirty years ago, 60% of Sundara's population was of working age (16–64), 30% was aged under 16, and 10% was aged 65 or over. Today, because of a falling birth rate and rising life expectancy, only 52% of Sundara's population is of working age, 22% is aged under 16, and 26% is aged 65 or over.

Which of the following best describes the effect of this change on Sundara's dependency ratio (the number of dependants per person of working age)?

Accepted Answer

B

Question 3

The table below shows economic data for two countries, Miravale and Oskerland. Miravale Oskerland Real GDP $300 billion $150 billion Population 10 million 6 million Average life expectancy at birth 63 years 80 years Average years of schooling 7 years 13 years Human Development I…

Accepted Answer

((a)) Real GDP per head =real GDP/population. Miravale: 300 billion/10 million = 30,000, i.e. $30,000 per head. Oskerland: 150 billion/6 million = 25,000, i.e. $25,000 per head. Miravale has the higher real GDP per head.  ((b)) The HDI combines three dimensions of development into a single index, income per head, health (measured by life expectancy at birth), and education (measured by indicators such as expected or average years of schooling).  ((c)) Real GDP per head alone only measures average income; it says nothing about how healthy people are or how educated they are, and it does not show how evenly that income is shared within a country. Here, Miravale has the higher GDP per head ($30,000 versus $25,000), which on its…

Question 4

In the country of Brenmark, a large textile factory in the town of Selbridge closed after cheaper imported clothing reduced demand for domestically-made textiles. This made 3,000 workers redundant. Some of these workers remain unemployed and rely on state benefits, while others…

Accepted Answer

((a)) Absolute poverty means being unable to afford the minimum necessities needed to survive, such as adequate food, clean water, shelter and clothing, regardless of how much anyone else earns. Relative poverty means having an income significantly lower than the income of others in t…  ((b)) One cause is unemployment: the redundant workers who have not found new jobs have lost their income from work entirely and now depend on state benefits, which are typically lower than a wage. A second cause is low wages: the workers who did find new jobs in cleaning and retail a…  ((c)) A National Minimum Wage could reduce poverty by directly raising the wages of Selbridge's low-paid cleaning and retail workers, giving them more income to cover living costs. However, it would not help the redundant workers who remain unemployed, since it only applies to those i…

Question 5

The table below shows population data for two countries, Doskovia and Verantia, for the same year. Doskovia Verantia Birth rate (per 1000 of population) 32 10 Death rate (per 1000 of population) 9 9 Net migration rate (per 1000 of population) −2 (net emigration) +3 (net immigrat…

Accepted Answer

((a)) Rate of natural increase = birth rate - death rate. Doskovia: 32-9=23 per 1000. Verantia: 10-9=1 per 1000. Doskovia has the higher rate of natural increase.  ((b)) Overall population growth rate = rate of natural increase + net migration rate. Doskovia: 23+(-2)=21 per 1000. Verantia: 1+3=4 per 1000. Doskovia's overall population growth rate (21 per 1000) is much higher than Verantia's (4 per 1000).  ((c)) First, Doskovia's much faster population growth means any given increase in total GDP has to be shared among a rapidly growing number of people, so real GDP per head is likely to rise more slowly (or could even fall) than in slower-growing Verantia, widening the gap in average l…

Question 6

In the country of Larenta, real GDP was $40 billion in 2020, when the population was 8 million. By 2025, real GDP had grown to $54 billion and the population had grown to 9 million. Over the same period, Larenta's Human Development Index (HDI) fell slightly, from 0.71 in 2020 to…

Accepted Answer

B

Question 7

An international development agency is comparing living standards in two countries. Palmara has real GDP per head of $18,000 a year, driven mainly by oil exports, an average life expectancy of 61 years, and average years of schooling of 6 years. Quenby has real GDP per head of $…

Accepted Answer

((a)) Using real GDP per head alone, Palmara appears to have the higher living standards, since its real GDP per head ($18,000) is higher than Quenby's ($11,000). Real GDP per head is a widely used indicator because it is relatively straightforward to calculate from national income da…  ((b)) First, Quenby's much higher life expectancy (78 years versus 61 years) suggests better health outcomes despite its lower income. A dimension the HDI captures but real GDP per head alone does not. Second, Quenby's higher average years of schooling (12 years versus 6 years) sugges…  ((c)) Real GDP per head is easier to measure consistently, since it is based on standard national income accounts, whereas the HDI depends on estimates such as expected years of schooling that can vary in quality between countries. However, measurement precision is not the same as giv…

Question 8

In the country of Feslund, economists define the relative poverty line as any household income below 60% of the national median household income. This year, median household income in Feslund is $30,000. The Rosek family's household income this year is $16,000.

Using Feslund's relative poverty line, is the Rosek family living in relative poverty?

Accepted Answer

B

Question 9

Mr. Danto is 68 years old and lives in the country of Ashworth. He worked as a factory labourer for over 40 years, but a chronic illness forced him to retire five years ago, earlier than he had planned. He now relies entirely on a state pension of $140 a month. Ashworth's govern…

Accepted Answer

((a)) Mr. Danto is living in absolute poverty, because his monthly income of $140 is below Ashworth's poverty line of $220. His income falls short of the poverty line by 220-140=80, i.e. $80 a month.  ((b)) One cause is old age (now aged 68, Mr. Danto is no longer working and depends entirely on a state pension, which at $140 a month is well below what he earned as a working labourer. A second cause is illness) a chronic illness forced him to retire five years earlier than planned,…  ((c)) One policy is raising the state pension, which would directly increase Mr. Danto's income and could lift him above the $220 poverty line (however, a higher pension for all elderly citizens would raise government spending considerably, which would need to be funded through higher…

Question 10

Over the past decade, a prolonged drought has sharply reduced farm incomes in Voleth, a rural farming region of the country of Tarkassa. Over the same period, factories and service businesses in Tarkassa's capital city, Bremshaw, have expanded and now offer wages well above what…

Accepted Answer

((a)) A "push" factor is the prolonged drought in Voleth, which sharply reduced farm incomes and gave residents a reason to leave. A "pull" factor is the higher wages available in factories and service businesses in Bremshaw, which attracted workers to move there.  ((b)) First, Voleth's population is likely to fall in size, since large numbers of people have left for Bremshaw. Second, because it is mainly young working-age adults who have migrated, the residents remaining in Voleth are likely to be disproportionately older people and children, r…  ((c)) On the positive side, the inflow of young working-age migrants gives Bremshaw's factories and service businesses a larger available workforce, which can support faster output growth and generate more tax revenue for the city. On the negative side, a rapidly growing urban populat…

Living Standards, Poverty and Population: Economics 0455 (Cambridge O Level / IGCSE)

Syllabus coverage

Question 1

Question 2

Question 3

Question 4

Question 5

Question 6

Question 7

Question 8

Question 9

Question 10

	Miravale	Oskerland
Real GDP	$300 billion	$150 billion
Population	10 million	6 million
Average life expectancy at birth	63 years	80 years
Average years of schooling	7 years	13 years
Human Development Index (HDI)	0.62	0.83

	Doskovia	Verantia
Birth rate (per 1000 of population)	32	10
Death rate (per 1000 of population)	9	9
Net migration rate (per 1000 of population)	−2 (net emigration)	+3 (net immigration)