How does poverty affect a country's economy?

Poverty affects a country's economy in ways such as weakening the economy, which occurs when people spend less money, and harming the education of children in poverty, which further hurts the economy by making it difficult for those children to eventually find good jobs.

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There is a strong connection between a country's level of poverty and the strength of its overall economy. When poverty levels in a particular nation are high, consumers usually spend less money. This can hurt the manufacturing and commercial economies, which in turn leads to more poverty as fewer people are hired, pay stagnates, and the GDP of a country falls.

When poverty rates decline, however, there usually is a boost in the economy. As consumers spend more, more jobs are needed, which helps pull more people out of poverty. As you can see, this circle works in both directions. Therefore, it is not always clear what the causal factor is. Determining if it is the levels of poverty and wealth or the direction of the overall economy that drives the relationship is a large part of the study of macro-economics.

It is also good to remember that high poverty levels seldom affect everyone in a country. There almost always remains a small subset of the population that holds on to a degree of...

(The entire section contains 4 answers and 871 words.)

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Last Updated by eNotes Editorial on November 13, 2019
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