Definitions

Question 1

Gross Domestic Product (GDP)

Answer 1

the value of all final goods and services produced within an economy over time

Question 2

Foreign Direct Investment (FDI)

Answer 2

long-term investment in another country by a multinational corporation representing at least 10% ownership

Question 3

Unemployment rate

Answer 3

the proportion of the labour force which does not hold a job

Question 4

Allocative efficiency

Answer 4

Achieved when just the right amount of goods and services are produced from society’s point of view so that scarce resources are allocated in the best possible way.

Question 5

Market failure

Answer 5

failure of market to produce at the point where allocative efficiency is achieved, social community surplus is not maximised

Question 6

Economic growth

Answer 6

increase in REAL GDP

Question 7

Current account

Answer 7

statement of the flow of funds from trade in goods and services, plus other income flows

Question 8

Demand

Answer 8

The relationship between possible prices of a good or service and the quantities that individuals are willing and able to buy over some time period, ceteris paribus

Question 9

Price elasticity of demand (PED)

Answer 9

A measure of the responsiveness of the quantity demanded of a good or service to a change in its price

Question 10

Income elasticity of demand (YED)

Answer 10

The responsiveness of demand for a good or service to a change in income.

Question 11

Supply

Answer 11

Quantities of a good that producers are willing and able to supply at different possible prices, over a given time period, ceteris paribus.

Question 12

Price elasticity of supply (PES)

Answer 12

A measure of the responsiveness of the quantity supplied of a good or service to a change in its price.

Question 13

International trade

Answer 13

exchange of goods/services between countries (net exports)

Question 14

Tariff

Answer 14

tax charged on import goods

Question 15

Quotas

Answer 15

physical limit on number of imported goods

Question 16

embargoes

Answer 16

ban on imports

Question 17

Economic integration

Answer 17

process where countries coordinate and link their economic policies

Question 18

Externality

Answer 18

When production of a good has an effect upon a third party

Question 19

Merit good

Answer 19

A good that is beneficial for the consumer but is underprovided (healthcare)

Question 20

Demerit good

Answer 20

A good that is harmful to the consumer, but the consumer chooses to ignore that fact (smoking, alcohol)