Definitions Flashcards
(405 cards)
1
Q
Abnormal Profit
A
When average revenue is greater than the average cost.
2
Q
Absolute Advantage
A
The ability of a country to produce a good with fewer resources than another country.
3
Q
Absolute Poverty
A
People living below the minimum income necessary to satisfy basic physical needs (set at $1.90 PPP).
4
Q
Abuse of Market Power
A
When a firm acts with the intention to eliminate competitors or to prevent entry of new firm in a market.
5
Q
Actual Growth
A
When real GDP increases through time and is a result of higher quantity or quality of resources (illustrated by a movement in the PPC model).
6
Q
Administrative Barriers
A
Trade barriers in the form of regulations that aim to limit imports into a country.
7
Q
Adverse Selection
A
A type of market failure involving asymmetric information.
8
Q
Aggregate Demand
A
Planned spending on domestic goods and services at different average price levels, per period of time.
9
Q
Aggregate Supply
A
The planned level of output domestic firms are willing and able to offer at different average price levels.
10
Q
Allocative Efficiency
A
Achieved when P = MC or MSB = MSC therefore scarce resources are allocated in the best possible way.
11
Q
Allocative Inefficiency
A
When MSB > MSC or MSB < MSC so that there is a misallocation of scarce resources.
12
Q
Anchoring
A
Situations in which people rely on a piece of unrelated information when making a decision.
13
Q
Anti-dumping
A
Tariffs that aim at raising the artificially low price of a dumped imported good to the level of the higher domestic price.
14
Q
Anti-monopoly Regulation
A
Laws and regulations intended to restrict anti-competitive behavior of firms that are abusing market power.
15
Q
Appreciation
A
When the price of a currency increases in a floating exchange rate system.
16
Q
Appropriate Technology
A
Technology that relies on the relatively abundant factor an economy is endowed with.
17
Q
Asymmetric Information
A
A type of market failure where one party in an economic transaction has access to more or better information than the other party.
18
Q
Automatic stabilizers
A
Institutionally built-in features that tend to decrease the short-term fluctuations of the business cycle without needing government intervention.
19
Q
Average Costs
A
Total costs per unit of output produced.
20
Q
Average Revenue
A
Revenue earned per unit sold thus equal to the price of the good.
21
Q
Average Tax Rate
A
The ratio of the tax paid by an individual over their income expressed as a percentage.
22
Q
Balance of Payments
A
A record of the value of all transactions of a country with the rest of the world over a period of time.
23
Q
Balance of Trade in Goods
A
The value of exports of goods of a country minus the value of imports of goods over a given period of time.
24
Q
Balance of Trade in Services
A
The value of exports of services of a country minus the value of imports of services over a given period of time.
25
Barriers to Entry
Anything that deters entry of new firms into a market such as licenses or patents.
26
Behavioral Economics
A subdiscipline of economics which focuses on cognitive psychology to better understand the behavior of economic decision-makers.
27
Biases
Systematic deviations from rational choice decision-making.
28
Bilateral Trade Agreements
An agreement between two countries to phase-out or eliminate trade related barriers.
29
Bounded Rationality
The idea that consumers and producers are rational only within limits.
30
Bounded Self-Control
The idea that individuals may not be able to act in their interests (e.g. procrastination).
31
Bounded Selfishness
The idea that individuals do not always maximise self-interest but also have concern for the well-being of others.
32
Budget Deficit
When government expenditures exceed government revenues usually over a period of a year.
33
Business Confidence
A measure of the degree of optimism that businesses have about the economic future.
34
Business Cycle
The short-term fluctuations of real GDP around its long-term trend.
35
Business Tax
Tax levied on the income of a business or corporation.
36
Capital
Physical capital refers to means of production whilst human capital refers to the skills embodied in the labor force of a country.
37
Capital Account
A subaccount of the balance of payments that includes credit and debit entries for non- produced and non-financial assets, capital transfers between residents and non-residents.
38
Capital Flight
When money and other assets flow out of a country to seek a “safe haven” in another country.
39
Capital Gains Tax
A tax on the profits realized from the sale of financial assets.
40
Capital Transfers
Part of the balance of payments, they are financial or non-financial assets for items including debt forgiveness, investment, non-life insurance claims.
41
Carbon Taxes
Pigouvian taxes levied on the carbon content of fuel.
42
Central Bank
Institution in charge of conducting monetary and exchange rate policy, and providing banking services to the government and commercial banks.
43
Ceteris Paribus
Latin expression meaning “other things being equal”.
44
Choice Architecture
The design of environments based on the idea that the range and layout of choices affects the decisions made by consumers.
45
Circular Economy
An economic system that aims to redefine growth, focusing on society-wide benefits.
46
Circular Flow of Income
A simplified model that shows the flows of income and expenditures in an economy.
47
Collective Self-Governence
The monitoring and regulating the use of a common pool resource between its users (e.g. fishery).
48
Collusive Oligopoly
A market where firms agree to fix price and/or to engage in other anti-competitive behaviour.
49
Common Market
When a group of countries agree not only to free trade of goods and services but also to free movement of capital and labour.
50
Common Pool Resources
Natural resources that are non-excludable and rivalrous.
51
Comparative Advantage
When a country can produce a good at a lower opportunity cost compared to another country.
52
Competitive Market
A market with many firms acting independently where no firm has the ability to control the price.
53
Competitive Market Equilibrium
Occurs when in a free competitive market, quantity demanded is equal to quantity supplied.
54
Competitive Supply
When goods that a firm is producing use the same resources in their production process.
55
Complements
Goods that are jointly consumed.
56
Composite Indicator
An indicator that is comprised as an average of more than one economic variable (e.g. HDI).
57
Concentration Ratios
The proportion of industry sales accounted for by the largest firms indicating the degree of market power.
58
Consumer Confidence
A measure of the degree of optimism that households have about their income and economic prospects.
59
Consumer Price Index (CPI)
The average of the prices of the goods and services consumed.
60
Consumer Surplus
The difference between how much a consumer is willing to pay and how much they actually pay.
61
Consumption
Spending by households on goods and services over a period of time.
62
Contractionary Fiscal Policy
Refers to a decrease in government expenditures and/or an increase in taxes that aim at decreasing aggregate demand and thus reducing inflationary pressures.
63
Contractionary Monetary Policy
A policy employed by the central bank involving an increase in interest rates and aimed at decreasing aggregate demand and thus inflationary pressures.
64
Corporate Indebtedness
The sum of what a corporation owes to holders of its debt.
65
Corporate Social Responsibility
A corporate goal adopted by many firms that aims to create and maintain an ethical and environmentally responsible image.
66
Cost-Push Inflation
Inflation that is a result of increased production costs and illustrated by a leftward shift of the SRAS curve.
67
Credit Items
Refers to transactions within the balance of payments of a country that lead to an inflow of currency.
68
Credit Rating
A grade assigned by certain agencies on the borrowing risks a prospective issuer of debt presents to lenders.
69
Crowding Out
When the increased borrowing needs of the government to finance the increased expenditures could lead to increased interest rates. Thus, reducing components of AD.
70
Current Account
A subaccount of the balance of payments that records the value of net exports, income and current transfers of a country over a period of time.
71
Current Account Deficit
Exists when debits or outflows are greater than credits or inflows.
72
Current Account Deficit
Exists when credits or inflows are greater than debits or inflows.
73
Current Transfers
An entry in the current account that records payments between residents and non-residents of a country without something of economic value being received in return.
74
Customs Union
An agreement between countries to phase out or eliminate tariffs and other trade barriers and establish a common external barrier toward non-members.
75
Cyclical Unemployment
Unemployment that is a result of a decrease in aggregate demand (occurs in a recession).
76
Debit Items
The transactions within the balance of payments of a country that lead to an outflow of currency.
77
Debt Relief (Cancellation)
A reduction of the debt burden of developing countries.
78
Debt Servicing
The repayment of principal and interest on the debt of a person, firm or country.
79
Default Choice
When a choice is made by default: selected when one does not do anything.
80
Deflation
A sustained decrease in the average price level of a country.
81
Deflationary Gap
Arises when the equilibrium level of real output is less than potential output as a result of a decrease in AD.
82
Demand
The relationship between price and quantity of a good or service that consumers are willing and able to buy over a time period, ceteris paribus.
83
Demand Management
Policies that aim at manipulating aggregate demand through changes in interest rates or changes in government expenditures and taxation.
84
Demand-pull Inflation
Inflation that is caused by increases in aggregate demand.
85
Demand-side Policies
Refers to economic policies that aim at affecting aggregate demand.
86
Demerit Goods
Goods or services that harm consumers and society, and tend to be over-consumed.
87
Depreciation
A decrease in the value of a currency in terms of another currency in a floating or managed exchange rate system.
88
Deregulation
A decrease in the value of a currency in a fixed exchange rate system.
89
Development Aid
Aid aimed at assisting developing countries in their development efforts.
90
Direct Taxes
Taxes on income, profits or wealth paid directly to the government.
91
Discount Rate
The interest rate that a central bank charges commercial banks for short-term loans.
92
Disinflation
When the average price level continues to rise at a slow rate so that the rate of inflation is positive but lower.
93
Dumping
When a firm sells abroad at a price below average cost or below the domestic price.
94
Economically Least Developed Countries (EDLCs)
Low-income countries facing severe structural constraints to sustainable development with low levels of human assets and highly vulnerable to economic and environmental shocks.
95
Economic Development
A multidimensional concept involving a sustained increase in living standards.
96
Economic Growth
Refers to increases in real GDP over time.
97
Economic Integration
Economic interdependence between countries involving agreements between to phase-out or eliminate trade and other barriers between them.
98
Economies of Scale
Falling average costs that a firm experiences when it increases its scale of operations.
99
Efficiency
Making the best use of scarce resources, where MSC = MSB or where social surplus is maximum.
100
Elasticity of Demand for Exports
A measure of the responsiveness of the volume of exports to a change in their price.
101
Elasticity of Demand for Imports
A measure of the responsiveness of the volume of imports to a change in their price.
102
Engel Curve
A curve showing the relationship between consumers’ income and quantity demanded of a good. It indicates whether a good is normal or inferior.
103
Entrepreneurship
The ability to organize the factors of production and willingness to take risks.
104
Equilibrium
A state of balance that is self-perpetuating in the absence of any outside disturbance.
105
Equity
The concept or idea of fairness.
106
Excess Demand
When quantity demanded at some price is greater than quantity supplied.
107
Excess Supply
when quantity supplied at some price is greater than quantity demanded.
108
Exchange Rate
The value of one currency expressed in term of another currency.
109
Excludable
Goods which producers can charge at a price which excludes whoever is not willing or able to pay for it from enjoying it.
110
Expansionary Fiscal Policy
An increase in government expenditures and/or a decrease in taxes that aim at increasing aggregate demand.
111
Expansionary Monetary Policy
Monetary policy aiming at increasing aggregate demand through a decrease in interest rates.
112
Expenditure Approach
One approach of measuring GDP that adds all the expenditures made on final domestic goods and services
over a period of time.
113
Expenditure Reducing
Contractionary demand side policies aiming at decreasing national income to narrow the current account deficit.
114
Expenditure Switching
Policies aimed at switching expenditures away from imports towards domestically produced goods and services.
115
Exports
Goods and services produced in one country and purchased by consumers in another country.
116
Export Promotion
Growth policies aiming at expansion of export revenues.
117
Export Revenue
The revenues collected by exporting firms.
118
Export Subsidy
Payments made by the government to exporting firms.
119
External Balance
A situation where the value of a country’s exports is balanced by the value of its imports over a period of time.
120
Externalities
External costs or benefits to third parties when a good or service is produced or consumed.
121
Factors of Production
Resources used in the production of goods and services including land, labour, capital and entrepreneurship.
122
Financial Account
Records inflows and outflows of portfolio and FDI funds over a period of time.
123
Firm
An entity (such as a business) that uses factors of production in order to produce and sell goods and services and earn profits.
124
Fiscal Policy
A demand-side policy using changes in government expenditure or direct taxation to influence aggregate demand.
125
Fixed Exchange Rate
An exchange rate system where the exchange rate is pegged to the value of another currency and maintained there with central bank intervention.
126
Floating Exchange Rate
An exchange rate system where the exchange rate is determined by the market demand and supply of the currency in the foreign exchange market without any intervention.
127
Foreign Aid
Refers to flows of grants or loans from developed to developing countries that are non-commercial and terms are concessional.
128
Foreign Direct Investment (FDI)
When a firm establishes a productive facility in a foreign country or acquires controlling interest (at least 10% of the ordinary shares) in an existing foreign firm.
129
Foreign Sector
In an open economy the term refers to exports and imports.
130
Framing
Shows how the way choices are presented that may affect the choice made.
131
Free Goods
Goods that are not considered scarce and hence do not have opportunity cost.
132
Free Market Economy
An economy where production is privately owned and where market forces determine the answers to the economic questions.
133
Free Rider Problem
When individuals consume a good or service without paying for it because they cannot be excluded from enjoying it.
134
Free Trade
International trade that is not subject any kind of trade barriers.
135
Free Trade Area
An agreement between two or more countries to phase-out or eliminate trade barriers between them.
136
Frictional Unemployment
Unemployment of individuals who are in- between jobs.
137
Full Employment
Exists when the economy is producing at its potential level
| of real output and thus there is only natural unemployment.
138
Game Theory
A branch of mathematics that studies the strategic interaction of economic decision-makers.
139
Gender Equality Index (GII)
An indicator that measures gender inequalities in the dimensions of human development, reproductive health, empowerment and economic status.
140
Gini Coefficient
A measure of the degree of income inequality of a country ranging from zero (perfect equality) to 1 (perfect inequality).
141
Government Debt
The total amount the government owes to creditors.
142
Government Spending
All spending by the government including current and capital expenditures and transfer payments.
143
Gross Domestic Product (GDP)
The value of all final goods and services produced within an economy over a period of time (year or quarter).
144
Gross National Income (GNI)
The income earned by all national factors of production independently of where they are located over a period of time.
145
Happiness Index
An index used to measure economic well-being of a population using quality of life dimensions.
146
Happy Planet Index
An index that shows how efficiently residents of different countries are using environmental resources.
147
Homogeneous Products
Goods that are considered identical across firms in the eyes of consumers.
148
Household Indebtedness
The money that households owe.
149
Households
Groups of individuals in the economy who share the same living accomodation, pool their income and jointly decide the set of goods to consume.
150
Human Capital
The education, training, skills, experience and health embodied in the labor force of a country.
151
Human Development Index (HDI)
An index that reflects the three basic goals of development including health, education and standards of living.
152
Humanitarian Aid
Aid given to alleviate short-term suffering resulting from a natural catastrophe or war.
153
Imperfect Competition
A market structure where firms have a degree of market power as they face a negatively sloped demand curve.
154
Imperfect Information
When the information about a market or a transaction is incomplete.
155
Import Expenditure
The value of imports of goods and services.
156
Imports
The value of goods and services purchased domestically that are produced abroad.
157
Import Substitution
A growth strategy where domestic production is substituted for imports in an attempt to industrialize.
158
Incentive-related Policies
Policies that aim at improving economic incentives of individuals and firms.
159
Income
A flow of earnings from using factors of production to produce goods and services.
160
Income Approach
One of the methods used to measure GDP; adds up all incomes generated in the production process for a given time period.
161
Income Effect
Based on the law of demand, explains that if the price of a good increases then the real income of consumers decreases and they will tend to buy less of the good.
162
Income Elasticity of Demand (YED)
The responsiveness of demand for a good or service to a change in income.
163
Indirect Taxes
Taxes on expenditure to buy goods and services.
164
Industrial Policies
A type of interventionist supply-side policies whereby the government chooses to support specific industries.
165
Inequality adjusted Human Development Index (HDI)
An indicator consisting of an average of a country’s achievements in health, education and income adjusted for the degree of inequality characterizing each.
166
Infant Industry
A new industry that should be protected from foreign competition until it is large enough to achieve economies of scale.
167
Inferior Goods
Lower quality goods for which higher quality substitutes exists.
168
Inflation
A sustained increase in the average level of prices.
169
Inflationary Gap
The case where equilibrium real output exceeds potential output as a result of an increase in AD.
170
Inflation Rate
The percentage change between two periods of the average price level, usually measured through the CPI.
171
Informal Economy
The part of an economy where activity is not officially recorded, regulated or taxed.
172
Infrastructure
Physical capital typically financed by governments that is essential for economic activity to take place.
173
Injections
Spending on domestic output that does not originate from households.
174
Interest Rate
The cost of borrowing money or the reward for saving money over a period of time as a percentage.
175
International Monetary Fund (IMF)
An international financial institution whose objectives include to improve global monetary cooperation and secure financial stability.
176
International Trade
Trade that involves the exports and imports of goods or services between countries.
177
Interventionist Supply-side Policies
A set of policies that aim to increase an economy’s productive capacity that relies on government intervention.
178
Investment
Spending by firms on capital goods.
179
J-curve
Following devaluation or a sharp depreciation,
a trade deficit will typically widen before it
starts improving thus tracing the letter “J” if plotted against time.
180
Joint Supply
Goods jointly produced hence producing one automatically leads to the production of the other.
181
Keynesian Aggregate Supply Curve
An aggregate supply curve that shows the level of real output produced in an economy in relation to the price level.
182
Keynesian Multiplier
The idea that an increase in any injection will lead to a greater increase in real GDP.
183
Keynesian Revolution
An economic school of thought based upon the works of Keynes, advocating an interventionist role for the government in managing economic activity.
184
Labor
One of the four factors of production that refers to the physical and mental contribution of workers to the production process.
185
Labor Market Flexibility
The labour market is considered flexible if it can adjust to changes in labour demand and supply conditions.
186
Labor Union
An organization of workers whose goals include improving working conditions and achieving higher compensation.
187
Laissez Faire
The view that if market forces are left without government intervention the outcome will be efficient.
188
Land
One of the four factors of production that refers to the natural resources within an economy.
189
Land Rights
Legal rights over land holdings.
190
Law of Demand
As the price of a good falls, the quantity demanded will increase over a certain period of time, ceteris paribus.
191
Law of Diminishing Marginal Returns
The idea that as a variable factor (labor) is added to a fixed factor (capital) it will increase until reaching a point beyond which it is inefficient and total product falls.
192
Law of Diminishing Marginal Utility
The idea that as an individual consumes additional units of a good, the additional satisfaction enjoyed decreases.
193
Law of Supply
As the price of a good rises, the quantity supplied will rise over a certain period of time, ceteris paribus.
194
Leakages
Income not spent on domestic goods and services.
195
Long-run Aggregate Supply (SRAS)
Aggregate supply that is dependent upon the resources and technology in the economy and independent of price level.
196
Long-run Phillips Curve
A curve showing the monetarist view that there is no trade-off between inflation and unemployment in the long run and that there exists a natural rate of unemployment at the level of potential output.
197
Long-run in Microeconomics
The period of time when all factors of production are variable.
198
Long-run in Macroeconomics
The period of time when the prices of all factors of production change to match changes in the price level.
199
Long-term Growth
Growth over long periods of time.
200
Long-term Growth Trend
Refers to average growth over long periods of time shown in the business cycle diagram as the line that runs through short-term fluctuations.
201
Lorenz Curve
A curve showing what percentage of the population owns what percentage of the
total income or wealth in the economy.
202
Loss
Occurs when total costs of a firm are greater than total revenues.
203
Luxury Goods
Goods that are not considered essential by consumers therefore they have a price and income elastic demand.
204
Macroeconomics
The study of aggregate economic activity that investigates how the economy as a whole works.
205
Managed Exchange Rate
An exchange rate that floats in the foreign exchange markets but is subject to intervention in order to prevent undesirable movements.
206
Mandated Choices
Choices made by consumers who are required to state whether or not they wish to take part in an action.
207
Manufactured Products
Products or goods that have been produced by workers with capital goods.
208
Marginal Benefit
The extra or additional benefit enjoyed by consumers that arises from consuming one more unit of output.
209
Marginal Cost
The extra or additional costs of producing one more unit of output.
210
Marginal Propensity to Consume (MPC)
The proportion of additional income that is spent by households on goods and services.
211
Marginal Propensity to Import (MPM)
The proportion of additional income that is spent by households on imported goods and services.
212
Marginal Propensity to Save (MPS)
The proportion of additional income that is saved by households.
213
Marginal Propensity to Tax (MPT)
The proportion of additional income that is paid in taxes.
214
Marginal Revenue
The additional revenue that arises for a firm when it sells one more unit of output.
215
Marginal Social Benefit (MSB)
The additional benefit to society of consuming an additional unit of output.
216
Marginal Social Cost (MSC)
The additional cost to society of producing an additional unit of output.
217
Marginal Tax Rate
The proportion of additional income that is paid in taxes as a percentage.
218
Marginal Utility
The extra or additional utility derived from consuming one more unit of a good or service.
219
Market
Any arrangement where buyers and sellers interact to carry out an economic transaction.
220
Market-based Supply-side Policies
A set of policies based on the competitive market, used to promote long-term economic growth.
221
Market Concentration
The extent to which the total sales in a market are accounted for by the largest firms.
222
Market Demand
The sum of the individual demand curves for a product of all the consumers in a market.
223
Market Equilibrium
Occurs at the price where the quantity of a product demanded is equal to the quantity supplied.
224
Market Failure
The failure of markets to achieve allocative efficiency.
225
Market/price Mechanism
The system in which the forces of demand and supply determine the prices of products.
226
Market-oriented Approaches
Approaches based on the actions of private decision-makers operating in markets with a minimum amount of government intervention.
227
Market Power
The ability of a firm/s to raise and maintain price above the level of perfect competition (P > MC).
228
Market Share
The percentage of total sales in a market accounted for by one firm.
229
Market Supply
The sum of the individual supply curves for a product of all the producers in a market.
230
Marshall-Lerner Condition
A condition stating that a depreciation or devaluation of a currency will lead to an improvement in the current account balance if the sum of export PED plus the import PED is greater than one.
231
Maximum Price
A price set below the market equilibrium price of a good or service (price ceiling).
232
Merit Goods
Goods or services considered to be beneficial for people that are under-provided by the market.
233
Microeconomics
The study of the behaviour of individual economic decision-makers, the determination of market prices and quantities of goods, services, and factors of production.
234
Microfinance
The provision of small loans to poor entrepreneurs who lack access to traditional banking services.
235
Minimum Income Standards
A measure of poverty based on the beliefs of people regarding what is essential in order to achieve an acceptable standard of living.
236
Minimum Lending Rate
The interest rate that is charged by a central bank when it lends to commercial banks.
237
Minimum Price
A price set above the market equilibrium price of a good or service (price floor).
238
Minimum Reserve Requirement
A requirement by the central bank that sets the minimum amount of reserves that commercial banks must maintain to back their loans.
239
Minimum Wage
A type of price floor where the wage rate is set above the market equilibrium.
240
Mixed Economy
An economy that has elements of a planned and free market economy.
241
Monetarist/new Classical Counter Revolution
An economic school of thought arguing that the price mechanism along with well-functioning competitive markets are sufficient to lead the economy to full employment.
242
Monetary Policy
A demand-side policy using changes in the money supply or interest rates to achieve economic objectives.
243
Monetary Union
Where two or more countries share the same currency and have a common central bank.
244
Money Creation
The process of creating new money by commercial banks through loans.
245
Money Supply
The total amount of money available at a particular time.
246
Monopolistic Competition
A market structure where there are many sellers, producing differentiated products, with no barriers to entry.
247
Monopoly
A market structure where there is only one firm in the industry and there are high barriers to entry.
248
Moral Hazard
A type of market failure where a party takes risks but does not face their full costs by changing behaviour after a transaction has taken place.
249
Multidimensional Poverty Index (MPI)
An international measure of poverty.
250
Multilateral Development Assistance
Assistance provided by multilateral organizations when they lend to developing countries to help them reach development objectives.
251
Multilateral Trade Agreement
An agreement between many countries to lower tariffs or other protectionist measures, carried out through the WTO.
252
National Income
The income earned by the factors of production of an economy.
253
National Income Accounting
The services that measure the economy’s national income and output as well as other economic activity.
254
National Income Statistics
The statistical data used to measure a nation’s income and output.
255
Natural Monopoly
A monopoly that can produce enough output to cover the entire industry while still achieving economies of scale.
256
Natural Rate of Unemployment
The rate of unemployment that occurs when the economy is producing at its potential output.
257
Necessity
The degree to which a good is necessary or essential.
258
Negative Externality of Consumption
Negative effects suffered by a third party whose interests are not considered when a good or service is consumed.
259
Negative Externality of Production
Negative effects suffered by a third party whose interests are not considered when a good or service is produced.
260
Net Exports
Export revenues minus import expenditure.
261
Nominal Gross Domestic Product
The total money value of all final goods and services produced in an economy in a given time period at current values.
262
Nominal Gross National Income
The total income earned by all the residents of a country (regardless of where they are located) in a given time period at current prices.
263
Nominal Interest Rates
Interest rates that have not been adjusted for inflation.
264
Non-collusive Oligopoly
When firms in an oligopoly do not resort to agreements hence there is competition.
265
Non-excludable
A good which is impossible to prevent a person from using it.
266
Non-governmental Organization (NGO)
Organizations that are not part of the government that promote economic development/ humanitarian ideals/ sustainable development.
267
Non-price Competition
Competition between firms that is based on factors other than price.
268
Non-produced Non-financial Assets
A measure of the net international sales and purchases of non-produced assets (e.g. land) and intangible assets (e.g. copyright).
269
Non-rivalrous
Goods which consumption by one individual does not reduce the ability of others to consume them.
270
Normal Good
A good where the demand for it increases as income increases.
271
Normal Profit
The minimum return that must be received by a firm in order to stay in business.
272
Normative Economics
Areas of the subject that are open to personal opinion and belief.
273
Nudge Theory
Prompts or hints used to influence the choices made by consumers.
274
OECD Better Life Index
An index to compare well-being across countries based on dimensions including living conditions and quality of life.
275
Official Borrowing
International borrowing by a government.
276
Official Development Assistance (ODA)
Aid that is provided to a country by another government or multilateral agency.
277
Oligopoly
A market structure where there are a few large firms that dominate the market, with high barriers to entry.
278
Open Market Operations
A tool of monetary policy involving the exchange of government bonds by the central bank in order to increase or decrease the money supply.
279
Opportunity Cost
The next best alternative foregone when an economic decision is made.
280
Output Approach
One of the methods to measure GDP; adds up the value of final goods and services produced in a given time period.
281
Overvalued Currency
A currency whose value or exchange rate is greater than its equilibrium exchange rate.
282
Payoff Matrix
A table showing all possible outcomes of decisions taken by decision-makers in game theory.
283
Perfect Competition
A market structure where there is a very large number of small firms, producing identical products, with no barriers to entry or exit, and perfect information.
284
Perfect Information
Where all stakeholders in an economic transaction have access to the same information.
285
Perfectly Elastic Demand
Occurs with a horizontal demand curve showing that any amount can be bought at a particular price.
286
Perfectly Elastic Supply
Occurs with a horizontal supply curve showing that any amount can be supplied at a particular price.
287
Perfectly Inelastic Demand
Where a change in the price of a good or service leads to no change in the quantity demanded.
288
Perfectly Inelastic Supply
Where a change in the price of a good or service leads to no change in the quantity supplied.
289
Personal Income Taxes
Taxes paid by individuals or households on their incomes.
290
Philips Curve
A curve showing the relationship between the rate of unemployment and the rate of inflation.
291
Pigouvian Taxes
An indirect tax that is imposed to eliminate the external costs of production or consumption.
292
Planned Economy
An economy where the means of production are owned by the state.
293
Portfolio Investment
The purchase of financial assets such as shares and bonds in order to gain interest or dividends.
294
Positive Economics
Deals with areas of the subject that are capable of being falsified (testable).
295
Positive Externalities of Consumption
The beneficial effects that are enjoyed by third parties whose interests are not accounted for when a good or service is consumed.
296
Positive Externalities of Production
The beneficial effects that are enjoyed by third parties whose interests are not accounted for when a good or service is produced.
297
Potential Output
Output produced by an economy when it is at full employment equilibrium or long-run equilibrium (new classical).
298
Poverty
Arises when the lack of possessions or money prevent an individual from achieving a satisfactory standard of living.
299
Poverty Line
A level of income determined that is enough to ensure a family can satisfy minimum needs.
300
Poverty Trap/cycle
Any circular chain of events starting and ending in poverty.
301
Preferential Trade Agreement
Where a country agrees to give preferential access for certain products to its trading partners.
302
Price Ceiling
A price imposed by an authority and set below the equilibrium price.
303
Price Competition
Competition between firms that is based on price.
304
Price Controls
Prices imposed by an authority, set above or below the equilibrium market price.
305
Price Deflator
A price index that removes the impact of changes in the price level.
306
Price Elastic Demand (PED)
A measure of the responsiveness of the quantity demanded of a good or service to a change in its price.
307
Price Elasticity of Supply (PES)
A measure of the responsiveness of the quantity supplied of a good or service to a change in its price.
308
Price Expectations
The forecasts or views that consumers or firms hold about future price movements.
309
Price Floor
A price imposed by an authority and set above the market price.
310
Price Maker
A firm that is able to influence the price at which it sells its product.
311
Price Mechanism
The system where the forces of demand and supply determine the prices of products
312
Price Taker
A firm that is unable to influence the price at which it sells its product.
313
Price War
Occurs when firms successively cut their prices in an effort to match the price cuts of other firms.
314
Primary Commodities
Raw materials that are produced in the primary sector.
315
Primary Sector
Anything derived from the factor of production land.
316
Privatization
The sale of public assets to the private sector.
317
Producer Surplus
The benefit enjoyed by producers by receiving a price that is higher than the price they were willing to receive.
318
Product Differentiation
The process by which firms try to make their products different from the products of
other firms in an effort to increase their sales.
319
Production Possibilities Curve (PPC)
A curve showing the maximum combinations of goods or services that can be produced by an economy in a given time period given all resources are employed.
320
Productive Capacity
The greatest capability of an economy to produce.
321
Progressive Taxation
Taxation where the fraction of tax paid increases as income increases.
322
Property Rights
The authority to own property and determine how that property is used.
323
Proportional Tax
A system of taxation where tax is levied at a constant rate as income rises.
324
Public Goods
Goods or services that have the characteristics of non-rivalry and non-excludability.
325
Purchasing Power Parity (PPP)
A method used to make the buying power of different currencies equal to the buying power of US $1.
326
Quantitative Easing
An expansionary monetary policy where a central bank buys government bonds or other financial assets.
327
Quantity Demanded
The quantity of a good or service demanded at a particular price over a given time period, ceteris paribus.
328
Quantity Supplied
The quantity of a good or service supplied at a particular price over a given time period, ceteris paribus.
329
Quota
An import barrier that set limits on the quantity or value of imports that may be imported into a country.
330
Rational Consumer Choice
Occurs when consumers make choices based on assumptions.
331
Rational Producer Behavior
Occurs when firms try to maximize profit.
332
Rationing
A method used to divide or apportion goods and services or resources among the various interested parties.
333
Real GDP
The total value of all final goods and services produced in an economy in a given time period adjusted for inflation.
334
Real GDP per Capita
Real GDP divided by the population of the country.
335
Real GNI per Capita
Real GNI divided by the population of the country.
336
Real Interest Rates
Interest rates that have been adjusted for inflation.
337
Recession
Occurs when real GDP falls for at least two consecutive quarters.
338
Refutation
A method used where any proposition must be subjected to an empirical test in order to see if it can be disproven or refuted.
339
Regional Trade Agreement
An agreement between a group of countries usually within a geographical region to lower or eliminate trade barriers.
340
Regressive Taxation
Taxation where the fraction of tax paid decreases as income increases.
341
Relative Poverty
A comparative measure of poverty according to which income levels do not allow people to reach a standard of living typical for the society in which they live.
342
Remittances
The transfer of money by foreign workers to individuals in their home country.
343
Reserve Assets
Foreign currencies and precious metals held by central banks as a result of international trade.
344
Resource Allocation
Apportioning resources to particular uses for production.
345
Restricted Choices
This is when the choice of a consumer is restricted.
346
Revaluation
An increase in the value of a currency in a fixed exchange rate system.
347
Revenues
Payments received by firms when they sell their output.
348
Rivalrous
Goods which the consumption by one person reduces the amount available for others.
349
Rules of Thumb
Mental shortcuts for decision-making used to make a decision to a complex choice.
350
Satisficing
The objective to achieve a satisfactory outcome with more objectives rather than focusing on one at the expense of others.
351
Say's Law
The supply of goods creates its own demand.
352
Scarcity
The limited availability of economic resources relative to society’s unlimited needs and wants of goods and services.
353
Screening
The use of a process by the participant with less information to gain more information regarding a transaction.
354
Seasonal Unemployment
Unemployment that arises when people are out of work because their usual job is out of season.
355
Shortage
Arises when the quantity demanded of a good or services is more than the quantity supplied at some particular price.
356
Short-run Aggregate Supply (SRAS)
The total quantity of real GDP offered at different possible price levels in the short run.
357
Short-run in Macroeconomics
The period of time when the prices of factors of production are considered fixed.
358
Short-run in Microeconomics
The period of time when at least one factor of production is fixed.
359
Short-run Phillips Curve
Shows the relationship between the rate of unemployment and the rate of inflation suggesting a tradeoff between inflation and unemployment.
360
Short-term Fluctuations of Economic Activity
Periods of growth of real GDP followed by periods of contraction part of the business cycle.
361
Signalling
The participant with more information sending a signal revealing relevant information about a transaction to the participant with less information.
362
Social Surplus
The combination of consumer and producer surplus.
363
Social Enterprise
A company whose main objective is to have a social impact rather than to make a profit.
364
Socially Optimum Output
This occurs where there is allocative efficiency or MSB = MSC.
365
Social Sciences
Academic studies of human societies and how people interact with each other.
366
Specialization
When a firm or country focuses on the production of one or a few goods or services.
367
Speculation
Process where something is bought or sold with a view to making a short term profit.
368
Stakeholder
An individual or group of individuals who have an interest in an economic activity.
369
Structural Unemployment
A kind of long-term unemployment that
| arises from changes (technology, demand patterns, geographical location, labor market rigidities, etc.) in an economy.
370
Subsidies
An amount of money paid by the government to a firm, per unit of output, to encourage production and lower the price to consumers.
371
Export Subsidy
An amount of money paid by the government to a firm, per unit of output, to encourage production and provide the firm an advantage over foreign competition.
372
Substitutes
Goods that can be used in place of each other, as they satisfy a similar need.
373
Substitution Effect
When the price of a product falls compared to other product prices, consumers purchase more of that product as it is now cheaper.
374
Supply
Quantities of a good that firms are willing and able to supply at different possible prices, over a given time period, ceteris paribus.
375
Supply-side Policies
Government policies designed to shift the long- run aggregate supply curve to the right in order to achieve economic growth.
376
Sustainability
Refers to the preserving the environment so that it can continue to satisfy needs and wants into the future.
377
Sustainable Debt
A level of government debt such that the borrowing government can make its payments of interest and debt repayment whilst also being able to meet objectives.
378
Sustainable Development
The degree to which the current generation is able to meet its needs whilst still conserving resources for future generations.
379
Tariff
A tax placed on imports to protect domestic industries from foreign competition and raise revenue for the government.
380
Total Costs
All the costs of a firm incurred for the use of resources to produce something.
381
Total Revenue
The amount of revenue received by a firm from the sale of a quantity of output.
382
Tradable Permits
Permits to pollute issued by a governing body that sets a maximum amount of pollution allowable (can be traded).
383
Trade Creation
When higher cost imports are replaced by lower cost imports due to the formation of a trading bloc or agreement.
384
Trade Diversion
In international trade it occurs when lower cost imports are replaced by higher cost imports due to the formation of a trading bloc or agreement.
385
Trade Liberalization
The process of reducing barriers to international trade.
386
Trade Protection
Government intervention which limits imports and/or encourage exports by setting up trade barriers that protect from foreign competition.
387
Trading Bloc
Countries that have agreed to reduce protectionist measures between them.
388
Tragedy of Commons
A situation with common pool resources, where individual users acting in self-interest go against the common good of all users by depleting that resource.
389
Transfer Payments
Payments made by the government to vulnerable groups in a society.
390
Undervalued Currency
A currency whose value or exchange rate is lower than its equilibrium exchange rate.
391
Unemployment
When a person (above age and available to work) is actively looking for work but is without a job.
392
Unemployment Benefits
Payments made by the government to those who are unemployed.
393
Unemployment Rate
The number of unemployed workers expressed as a percentage of the total workforce.
394
Unfair Competition (in international Trade)
Practices of countries trying to gain an unfair advantage through methods as undervalued exchange rates.
395
Unitary Elastic Demand
When a change in the price of a good or service leads to an equal change in quantity demanded.
396
Unitary Elastic Supply
When a change in the price of a good or service leads to an equal change in quantity supplied.
397
Universal Basic Income
A regular cash payment given to all persons in an economy independent of any other source of income they may have.
398
Sustainable Development Goals (SDGs)
17 goals set by the UN tackling poverty, inequalities and climate change.
399
Utility
A measure of the satisfaction derived from consuming a good or service.
400
Wage
Payment received by labour, which is a certain amount per unit of time.
401
Wealth
The total value of assets owned by an entity minus what is owed to financial institutions.
402
Weighted Price Index
A measure of average prices over a period of time that gives a weight to each item according to its relative importance in the consumers’ budgets, used to measure changes in the price level.
403
Welfare Loss
A loss of a part of social surplus that occurs when there is market failure.
404
World Bank
An international organization that provides loans and advice to less developed countries to promote development and reducing poverty.
405
World Trade Organization (WTO)
An international body that sets the rules for global trading and resolves disputes between its member countries.
