Poverty: five questions to try now
Real past-paper questions, the answer key from the mark scheme, and the explanation that goes with it. No account needed to answer them.
Question 1
In countries with absolute poverty, low incomes can start a process that keeps incomes low. What are the stages of this process?
Answer: D.
The correct answer is D: low incomes → low saving → low investment → low productivity → low incomes.
This is the poverty cycle, and each link follows from the one before. Households on subsistence incomes must spend everything on necessities, so almost nothing is saved. With little domestic saving there is little finance available for investment in machinery, infrastructure or training. Without that investment, output per worker, productivity: stays low. Low productivity means low output and therefore low incomes, and the cycle closes. It is self-reinforcing, which is why poverty persists rather than gradually easing, and why breaking in at one point, through foreign investment, aid for capital projects, or microfinance, is the standard development strategy.
Why the other options are wrong:
This is the poverty cycle, and each link follows from the one before. Households on subsistence incomes must spend everything on necessities, so almost nothing is saved. With little domestic saving there is little finance available for investment in machinery, infrastructure or training. Without that investment, output per worker, productivity: stays low. Low productivity means low output and therefore low incomes, and the cycle closes. It is self-reinforcing, which is why poverty persists rather than gradually easing, and why breaking in at one point, through foreign investment, aid for capital projects, or microfinance, is the standard development strategy.
Why the other options are wrong:
- A runs through low consumption to low prices to low output. Low prices would raise real purchasing power, so this link works against the cycle rather than perpetuating it.
- B runs through low government spending and high taxation. High taxation does not follow from low incomes, poor countries typically struggle to raise tax revenue at all, precisely because incomes and formal-sector activity are low.
- C includes high profits and low dividends. High profits contradict the whole premise: if profits were high, funds for investment would be available.
Question 2
A government decides to leave direct taxes unchanged but to increase indirect taxes.
What is this policy intended to achieve?
Answer: C.
Every tax increase raises revenue, so the immediate and certain effect of putting up indirect taxes is a larger tax take and a smaller budget deficit. That is the aim the policy fits, and leaving direct taxes unchanged makes it clear the government is choosing where to raise the money rather than pursuing some other objective. B has the effect backwards, because indirect taxes are REGRESSIVE: a tax on spending takes a larger share of a low income than of a high one, since poorer households spend a greater proportion of what they earn. D also has it backwards, as indirect taxes are added to prices at the till, so raising them pushes the price level up rather than down. A names a variable the policy barely touches, since the exchange rate is driven by interest rates, trade flows and capital movements rather than by the rate of a domestic sales tax.
Question 3
Due to war, some people are living in absolute poverty. What is the main indicator of absolute poverty for these people?
Answer: D.
The correct answer is D: receiving insufficient food for basic nutrition.
Absolute poverty is measured against a fixed subsistence standard: whether people can obtain enough food, clean water, shelter, clothing and basic healthcare to survive. Insufficient food for basic nutrition is the most direct failure of that standard; it is the core survival need, and inadequate nutrition is the clearest single indicator that income or resources have fallen below subsistence.
Why the other options are wrong:
Absolute poverty is measured against a fixed subsistence standard: whether people can obtain enough food, clean water, shelter, clothing and basic healthcare to survive. Insufficient food for basic nutrition is the most direct failure of that standard; it is the core survival need, and inadequate nutrition is the clearest single indicator that income or resources have fallen below subsistence.
Why the other options are wrong:
- A, dependence on aid for medical treatment, is a consequence of poverty and a sign that healthcare is unaffordable. But it describes how a need is being met rather than whether the basic requirement is unmet.
- B, lack of transport to escape abroad, is a hardship of the war rather than a measure of poverty. Being unable to travel is not a subsistence need, and wealthy people trapped by conflict would face the same problem.
- C, living in tents in temporary camps, indicates displacement and inadequate shelter, which is genuinely close to a subsistence failure. But a tent does provide some shelter, and displacement is a consequence of war rather than a measure of income relative to survival needs.
Question 4
What is most likely to increase as a country becomes more developed?
Answer: A.
The correct answer is A: average household income.
Development means rising real output per head, and that output becomes income for the households that produced it. Higher average household income is therefore the most direct consequence of development, and it is the mechanism through which better nutrition, healthcare, education and housing become affordable.
Why the other options are wrong:
Development means rising real output per head, and that output becomes income for the households that produced it. Higher average household income is therefore the most direct consequence of development, and it is the mechanism through which better nutrition, healthcare, education and housing become affordable.
Why the other options are wrong:
- B, average family size, falls as a country develops. Child mortality declines so fewer births are needed, girls stay in education longer, contraception becomes available, and children become more expensive to raise.
- C, the infant mortality rate, falls sharply with clean water, vaccination and skilled birth attendance. It is one of the most responsive indicators of development.
- D, the proportion of income spent on food, falls as income rises. This is Engel's Law: food is a necessity with income elasticity of demand between 0 and 1, so spending on it rises more slowly than income and its share of the budget declines. The proportion of income spent on food is in fact a widely used indicator of poverty for exactly this reason.
Question 5
Which policy is most likely to reduce relative poverty?
Answer: D.
The correct answer is D: reduce the rate of sales tax.
Relative poverty means having an income well below the average for the society. Reducing it requires raising the real incomes of those at the bottom relative to everyone else. A sales tax is regressive: low-income households spend a larger share of their income on consumption, so a tax on spending takes a bigger proportional bite from them. Cutting the rate therefore raises the real incomes of the poorest by proportionately more than it helps the rich, compressing the distribution.
Why the other options would increase relative poverty:
Relative poverty means having an income well below the average for the society. Reducing it requires raising the real incomes of those at the bottom relative to everyone else. A sales tax is regressive: low-income households spend a larger share of their income on consumption, so a tax on spending takes a bigger proportional bite from them. Cutting the rate therefore raises the real incomes of the poorest by proportionately more than it helps the rich, compressing the distribution.
Why the other options would increase relative poverty:
- A, making income tax less progressive, means taking proportionately less from high earners. The distribution widens.
- B, reducing benefit payments, cuts the incomes of those at the very bottom directly, the most immediate way to worsen relative poverty.
- C, reducing the minimum wage, cuts the pay of the lowest-paid workers.
What this practice covers
These questions are drawn from past Cambridge IGCSE papers and filtered to poverty. You answer, you find out immediately whether you were right, and you get the reasoning for the correct option and for each distractor. Wrong answers go to a mistakes locker so you can come back to exactly those.
Practice is free. You need an account only so your progress and your mistakes are still there next time.
What examiners see students get wrong here
These are the errors that cost marks on poverty, taken from our own topic notes. Read them before you practise and you will recognise the traps in the questions.
- Confusing absolute with relative poverty.
- Saying economic growth eliminates relative poverty; it does not, because the benchmark moves.
- Assuming everyone in poverty is unemployed. Low pay causes in-work poverty.
- Listing policies without giving a drawback of any.
- Forgetting the poverty cycle, which explains why poverty persists across generations.
Revise it first
If any of the above is unfamiliar, work through the notes before practising: Poverty revision notes.