In Pakistan the term the poverty trap is used to describe the fact that ?
Correct answer: C. if poor people earn more their benefits fall, making them no better off.
- A. poor people are excluded from most leisure and social activities
- B. the Pakistan benefit system makes being poor vary degrading
- C. if poor people earn more their benefits fall, making them no better off.
- D. in the Pakistan poor people are heavily taxed
Explanation
A poverty trap occurs when earning additional income causes means-tested benefits to be withdrawn, leaving the person little or no better off. The effective loss of benefits acts like a very high marginal tax rate.
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Government revenue and expenditure are analysed through taxation, public borrowing, budgets, subsidies, transfers and public debt. The topic explains how fiscal policy affects resource allocation, income distribution, economic stability and growth, while distinguishing direct from indirect taxes, progressive from regressive taxation, and public goods from goods supplied by private markets.
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