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Vicious cycle of Poverty

In economics, the cycle of poverty is the "set of factors or events by which poverty, once started, is likelyto continue unless there is outside intervention."

[1]

The cycle of poverty has been defined as a phenomenon where poor families become trapped in povertyfor at least three generations. These families have either limited or no resources. There are manydisadvantages that collectively work in a circular process making it virtually impossible for individuals tobreak the cycle.

[2]This occurs when poor people do not have the resources necessary to get out of

poverty, such as financial capital, education, or connections. In other words, poverty-stricken individualsexperience disadvantages as a result of their poverty, which in turn increases their poverty. This wouldmean that the poor remain poor throughout their lives.

[1]This cycle has also been referred to as a

"pattern" of behaviors and situations which cannot easily be changed.

Balance of Payment

The balance of payments provides us with important information about whether or not a country is payingits way in the international economy.

What is the Balance of Payments?

The balance of payments (BOP) records all of the many financial transactions that are made between

consumers, businesses and the government in the UK with people across the rest of the World. The BOPfigures tell us about how much is being spent by British consumers and firms on imported goods andservices, and how successful UK firms have been in exporting to other countries and markets. It is animportant measure of the relative performance of the UK in the global economy. At AS level we focus onlyon one part of the balance of payments accounts. This section is known as the current account. We willgo through the make-up of this account in a later section.

Foreign Exchange Rate:

The value of two currencies relative to each other. For example, on a given day, one may trade one U.S.

dollar for a certain number of British pounds. A currency's exchange rates may be floating (that is, they

may change from day to day) or they may be pegged to another currency. A floating exchange rate is

dependent on the supply and demand of the involved currencies, as well as the amount of the currency

held in foreign reserves. On the other hand, a government may peg its currency to a certain amount in

another currency or currency basket. For example, the Qatari riyal has been worth 0.274725 dollars since

1980.

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An advantage to a floating exchange rate is the fact that it tends to be more economically efficient.

However, floating exchange rates tend to be more volatile, depending on the particular currency. Pegged

exchange rates are generally more stable, but, since they are set by government fiat, they may take

political rather than economic conditions into account. For example, some countries peg their exchange

rates artificially low with respect to a major trading partner to make their exports to that partner artificially

cheap.

International monetary systems

International monetary systems are sets of internationally agreed rules, conventions and supporting

institutions that facilitate international trade, cross border investment and generally the reallocation of

capital between nation states. They provide means of payment acceptable between buyers and sellers of

different nationality, including deferred payment. To operate successfully, they need to inspire confidence,

to provide sufficient liquidity for fluctuating levels of trade and to provide means by which global

imbalances can be corrected