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According to this theory, the interest rate adjusts to balance the supply and
demand for money.
An increase in the price level raises money demand and increases the
interest rate.
An increase in the money supply will ultimately lead to the aggregatedemand curve shifting to the right.
A decrease in the money supply will ultimately lead to the aggregatedemand curve shifting to the left.
An increase in government purchases or a cut in taxes shifts the aggregatedemand curve to the right.
The multiplier effect tends to amplify the effects of fiscal policy on aggregate
demand.
Lecture 26
Changes in Taxes
Monetary and fiscal policy affect the economy with a substantial lag.
They suggest the economy should be left to deal with the short-run
fluctuations on its own.
Automatic Stabilizers
Poverty - I
Instructor: Prof.Dr.Qaisar Abbas
Course code: ECO 400
Lecture Outline
1. Introduction
2. How growth affects Poverty
3. Types of Poverty
4. Poverty indices
5. Methods of estimating poverty line
Introduction
Poverty has many dimension. The poor have not only low incomes but also
lack access to basic needs such as education, health, clean drinking water
and proper sanitation.
The lack of access to basic needs undermines the capabilities of poor, limits
their opportunities to secure employment and therefore, results in their social
exclusion and exposes them to exogenous shocks.
The proportion of people living in extreme poverty on global level fell from
28% in 1990 to 21% in 2001 (on the basis of $1 a day).
In absolute numbers the reduction during the period was 130 million with
most of it coming from China.
Quality of growth implies inclusive growth. Growth coming from sectors which
employ more unskilled/low skill workforce. For example, contribution to growth
coming from agriculture, particularly livestock and dairy sector, SMEs, Housing
and Construction, Information Technology would be more poverty reducing
growth or pro-poor growth or inclusive growth.
Defining Poverty
Poverty is generally defined as lack of command over resources to satisfy
basic needs, mainly food, shelter and clothing. This approach is basically an
income approach as it measures the degree of lowness of income or
consumption in the society.
This is an uni-dimensional approach to poverty, which views poverty as
income or consumption deprivation.
Poverty is not uni-dimensional, rather it is multi-dimensional phenomenon.
Poverty should be viewed as the deprivation of basic capabilities such as illhealth, lack of education, vulnerabilities, powerlessness and social
deprivation.
Advantages and disadvantages of using uni-dimensional vs multidimensional.
Uni-dimensional approach is simple to use
Multidimensional approach is broader but complex.
Poverty Indices
Headcount Ratio: It is defined as the proportion of people living below the
poverty line. This measure is easy to calculate. However, it takes no account
of the depth of poverty. The Headcount ratio is nevertheless the most widely
used poverty estimate.
Poverty Gap: Poverty gap measures the depth of poverty. It also measures
the total income necessary to raise everyone who is below the poverty line up
to that line. A lower value would indicate that most of the poor are bunched
around the poverty line.
Summary
Summary
A relative poverty line is set at around 50% of the average per capita income
of the country.
The subjective poverty line refers to that level of income at which people
feels that their income is just equal to the minimum income required to meet
end need.