Poverty and Real/Nominal Values

Absolute Poverty

Occurs when income is not sufficient to sustain basic needs.

→ Depends between countries

Relative Poverty

Where household income is below 60% of median country income.

People who experience most poverty

• Older people: Will not be working as most are retired

• Unemployed: Will be relying on transfer payments (benefits)

• Low wages: Low skilled job = low income

Nominal Values

Measures unadjusted monetary amounts.

→ E.g. Price tag, Salary

Real value

Adjusted values for inflation, showing true purchasing power

Nominal income Vs. Rate of inflation

Ideally, nominal income (the unadjusted money you earn) should be higher than rate of inflation.

→ If nominal income has increased by 2%, but rate of inflation is 5%, there is a -3% loss