Which of the following statements is/are CORRECT?
Show Hint
- The difference between Human Poverty Index and the Human Development Index is that the former measure focuses on deprivations.
- The Human Development Index is insensitive to inequalities in the distribution of human development in the population.
- Income-based poverty lines are sufficient to capture the well-being of a country’s citizens.
- Multi-dimensional Poverty Index considers differences in intra-household distribution of resources.
The Correct Option is A, B
Solution and Explanation
(A) is correct: The Human Poverty Index (HPI) is specifically designed to measure deprivations in three basic dimensions: longevity, knowledge, and standard of living. Unlike the Human Development Index (HDI), which is an aggregate measure of a country's development based on the same dimensions, HPI focuses on the population's deprivation in these key areas.
(B) is correct: The HDI is a composite index measuring human development through life expectancy, education, and standard of living. However, it does not adjust for inequality within a country. The Inequality-adjusted Human Development Index (IHDI) accounts for inequality in the distribution of these dimensions, but the basic HDI does not.
(C) is incorrect: Income-based poverty lines are not enough to measure well-being comprehensively. They fail to capture essential dimensions such as education and healthcare, which are key aspects of a person's well-being. Hence, using only income to measure poverty provides a limited view of the population’s welfare.
(D) is incorrect: The Multidimensional Poverty Index (MPI) does not specifically account for intra-household distribution of resources. The MPI measures poverty through dimensions like education, health, and standard of living, but it does not directly assess how resources are distributed within households.
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Consider the two scenarios for a small open economy based on the Mundell-Fleming IS-LM model with floating exchange rate and perfect capital mobility.
Where \( Y \) is aggregate income, \( C \) is aggregate consumption, \( I \) is investment, \( r^* \) is the world interest rate, \( G \) is government expenditure, \( T \) is taxes, \( NX \) is net exports, \( e \) is exchange rate, \( M \) is money supply, and \( P^* \) is general price level. Given the relationships:
\( I \) has a negative relationship with \( r^* \),
\( NX \) depends negatively on both \( e \) and \( Y \),
\( P^* \) is fixed.
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