Chapter 20 � Income Inequality and Poverty

Chapter 20 � Income Inequality and Poverty - Chapter...

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Chapter 20 – Income Inequality and Poverty I. Poverty line – an absolute level of income set by the government for each family size below which a family is deemed to be in poverty II. Poverty rate- the percentage of the population whose family income falls below the poverty line III. a. Omitted from measures of inequality and poverty, biasing them upward IV. The life cycle – the regular pattern of income variation over a person’s life a. People can borrow and save to offset life-cycle changes in income b. Life-cycle income variation causes inequality in income, but not inequality in living standards V. Transitory vs. Permanent Income a. People can borrow and save to smooth out transitory income fluctuations b. A better measure of inequality in living standards would be based not on current income, but on permanent income, a person’s normal income. VI.
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Chapter 20 � Income Inequality and Poverty - Chapter...

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