The correct answer is option 1, i.e. the difference between the poverty line and actual income level of all those living below that line • The poverty gap calculates the intensity of poverty. It reflects the extent to which people on average fall under the poverty line. • The theory of poverty gap was created by the World Bank and is largely used to estimate the incidence of poverty in different nations worldwide. • The higher poverty gap reflects a lower level of deprivation and a higher incidence of poverty for those who are below the poverty line. In effect, the government has to provide more income to take them above the poverty line. • +-----------+-----------------+ | Country | Poverty Gap (%) | +-----------+-----------------+ | India | 4.8 | | Indonesia | 2.7 | | Brazil | 2.1 | | Pakistan | 1.9 | | China | 1.3 | | Malaysia | 0.5 | | Nigeria | 27.5 | +-----------+-----------------+