Country A has a poverty line of 560 in their currency (i.e., z=560). Calculate the Foster-Greer-Thorbecke (FGT) indices (i.e., P0, P1, P2) by completing the table attached to this question. Household IDABCDEFGHITotalFormulaFGT IndexHouseholdincome yi25032033045047053080088090012006130Po=?Po=?Poverty gap(z-yi)???????????P₁=?P₁=?Squaredpoverty gap(z-yi)²???????????P₂=?P₂=?Cumulativeincome2505709001350182023503150403049306130Cumulative %of households10%20%30%40%50%60%70%80%90%100%

Answered: Household ID A B C D E F G H I J Total…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Country A has a poverty line of 560 in their currency (i.e., z=560). Calculate the Foster-Greer-Thorbecke (FGT) indices (i.e., P0, P1, P2) by completing the table attached to this question.

Household ID
A
BCDEF
G
H
I
Total
Formula
FGT Index
Household
income yi
250
320
330
450
470
530
800
880
900
1200
6130
Po=?
Po=?
Poverty gap
(z-yi)
?
?
?
?
?
?
?
?
?
?
?
P₁=?
P₁=?
Squared
poverty gap
(z-yi)²
?
?
?
?
?
?
?
?
?
?
?
P₂=?
P₂=?
Cumulative
income
250
570
900
1350
1820
2350
3150
4030
4930
6130
Cumulative %
of households
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%

Expert Solution

Step 1: Define poverty line

The poverty line signifies the boundary developed by economists to identify poor people, who do not have access to basic amenities against people who are marginally poor. The government plays a significant role in improving the condition of the economy through subsidies and goods rationing.