II. Complete the following table:

A. The giving of share options to top managers allows them
B. In order to provide additional incentives shareholders
C. High rewards are likely to motivate managers in the middle of the business hierarchy because

III. The mistakes in the sentences below have been underlined. Write the corrections in the spaces provided.

1. Many argue that such a pay awards have been excessive.

2. If the share value will go above this level, the manager makes difference.

3. Failure to offer high rewards may encourage the top executives within an industry moving elsewhere.

4. The justification for such a move is what giving rewards in the form of shares link the interests of managers, owners and investors.

1. _________________________________________________

2. _________________________________________________

3. _________________________________________________

4. _________________________________________________

Inequality and poverty

I. Read the text. Some parts of the text have been taken out. These extracts are listed below. Complete each gap with the appropriate extract. One sentence does not belong in any of the gaps.

a) The definition is based on judgments, made by each particular society, as to what is considered a reasonable and acceptable standard of living, according to the conventions of the day.

b) Poverty as a social phenomenon should be eliminated.

c) A truly socialist society would be a much more equal society.

d) Nevertheless economists do have a major role to play in the analysis of inequality.

e) This may mean that some people are poor, and most on the right argue in favour of government measures to alleviate poverty.

Inequality is one of the most contentious issues in the world of economics and politics.

The political right argues that a certain amount of inequality and poverty is the inevitable price paid for an efficient, growing economy. People need the incentives of high incomes to encourage them to work, train, invest and take risks. ___ (1) Nevertheless they worry that any significant redistribution from rich to poor may seriously reduce growth and efficiency by undermining incentives. People on the right also argue from a moral standpoint that the freedom to own property and to pass it on to children, and the freedom to keep the bulk of the income from that property, are fundamental rights.

The left, not surprisingly, disagrees. A fundamental tenet of socialism is that the distribution of income should be based on need, rather than on private property ownership and the workings of the market. ___ (2) Most socialists nevertheless do accept that there will have to be incentives for an economy to function, and that therefore there will have to be some minimum level of inequality.

Whether the current distribution of income is desirable or not is a normative question. Economists therefore cannot settle the debate between left and right over how much the government should redistribute incomes from rich to poor. ___ (3) They can do the following:

• Identify the extent of inequality and analyse how it has changed over time.

• Explain why a particular level of income distribution occurs and what causes inequality to grow or to lessen.

• Examine the relationship between equality and other economic objectives such as efficiency.

• Identify various government policies to deal with problems of inequality and poverty.

• Examine the effects of these policies, both on inequality itself and on other questions such as efficiency, inflation and unemployment.

In attempting to solve a social problem such as poverty, it is normal for the policy-making body to adopt the following four-stage approach:

• The problem is defined.

• The problem is measured.

• The problem’s causes are identified.

• Alternative policies are considered to cure the problem.

The importance of defining the problem of poverty correctly is that it determines the subsequent stages: the number of poor, possible causes of poverty and ways of tackling the problem.

There are two ways of looking at poverty.

Absolute poverty (or subsistence poverty).

As its name suggests, this definition involves identifying a poverty line measured in terms of those basic items considered essential to life: items such as adequate clothing, food and shelter.

By defining poverty in absolute terms, it is assumed that all individuals have similar minimum requirements, and that those whose means fall below the required minimum are poor.

Attempts have been made to include minimum social/cultural needs in such definitions: for example, adequate leisure and recreation, education and security.

Relative poverty

___ (4) Hence an individual who is unable to attain this reasonable and acceptable standard is considered poor. For example, if fridges, TVs and videos are considered part of “civilised existence”, then without them you are considered poor! The standard of living considered to be acceptable by society will differ over time, and from one society to another.