2. Recall that the poverty threshold is not adjusted to reflect changes in the standard of living. As a result, is the poverty threshold a relative or an absolute measure of poverty? That is, does it define poverty according to how poor someone is relative to others or according to some fixed measure that doesn’t change over time? Explain.
The poverty threshold is an absolute measure of poverty. It defines individuals as poor if their incomes fall below a level that is considered adequate to purchase the necessities of life, irrespective of how well other people are doing. And that measure is fixed: in 2014, for instance, it took $11,670 for an individual living alone to purchase the necessities of life, regardless of how well-off other Americans were. In particular, the poverty threshold is not adjusted for an increase in living standards: even if other Americans are becoming increasingly well-off over time, in real terms (that is, how many goods an individual at the poverty threshold can buy) the poverty threshold remains the same.