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OSC Economics > Definitions COPY > Flashcards

Definitions COPY Flashcards

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1
Q

Demand

A

The amount of a good or service that consumers are willing and able to buy at different prices

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2
Q

Market

A

The interaction between buyers and sellers in order to exchange goods or services

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3
Q

Inferior Good

A

An inferior good is a good whose demand decreases when consumer income rises and vice versa. It has a negative YED value

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4
Q

Substitute good

A

A good that offers similar benefits to the consumer as another good. It has a positive XED value

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5
Q

Complementary goods

A

Goods that are consumed with each other. They have a negative XED value

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6
Q

Supply

A

The amount of a good or service that producers are willing and able to supply at different price

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7
Q

Joint supply

A

Goods that are supplied together from the production of one product.

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8
Q

Competitive supply

A

Two goods competing for the same resources for production

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9
Q

Indirect taxes

A

Taxes on spending of goods and services by consumers, collected by the supplier on behalf of the government.

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10
Q

Subsidies

A

Money given to firms by the government to (choose one)

  • Reduce production costs
  • Reduce prices
  • Increasing supply
  • Increase consumption,
  • Increase investment and employment
  • Protect domestic industries from imports
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11
Q

Opportunity Cost

A

The best alternative foregone when an economic decision is made

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12
Q

Consumer surplus

A

The difference between what consumers are willing and able to pay and the market price.

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13
Q

Producer surplus

A

The price received by a producer in excess of the price that the producer would be willing and able to offer for sale.

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14
Q

Allocative efficiency

A

Where resources are allocated in such a way that neither too much nor too little is produced from society’s point of view.

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15
Q

Price elasticity of demand

A

The responsiveness of quantity demanded to a change in price

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16
Q

Primary commodities

A

A raw or unprocessed material that is harvested or extracted

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17
Q

Cross price elasticity of demand

A

The responsiveness of the demand of one good to a change in the price of another good

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18
Q

Income Elasticity of Demand

A

A measure of the responsiveness of demand to a change in income.

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19
Q

Normal goods

A

Goods that will increase in demand as income rises and vice versa. They have a YED greater than 0.

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20
Q

Luxury good

A

A luxury good is a good for which demand increases more than proportionally as income rises. They are not necessary for living, but are deemed as highly desired within a culture or society

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21
Q

Price elasticity of supply

A

The responsiveness of quantity supplied to a change in price

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22
Q

Specific taxes

A

An indirect tax which is a fixed amount of tax per unit sold.

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23
Q

ad valorem taxes

A

An indirect tax which is a percentage of the selling price

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24
Q

Price Ceiling

A

A maximum price set by the government which is below the market equilibrium price.

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25
Q

Price Floor

A

A minimum price set by the government which is above the market equilibrium price.

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26
Q

Underground (Informal) Markets

A

Markets where there is economic activity that is unrecorded (illegal/not taxed) by the government.

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27
Q

Negative externalities of consumption

A

Harmful effects on third parties that arise when a good or service is consumed.

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28
Q

Positive externalities of consumption

A

Positive effects on third parties that arise when a good or service is consumed.

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29
Q

Negative externalities of production

A

Harmful effects on third parties that arise when a good or service is produced.

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30
Q

Positive externalities of production

A

Positive effects on third parties that arise when a good or service is produced..

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31
Q

Merit Goods

A

Goods and services considered to be beneficial society that would be underprovided by the market and under-consumed

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32
Q

Demerit goods

A

Goods or services considered to be harmful to people which are over-provided by the market and therefore over-consumed

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33
Q

Public good

A

Non-rivalrous and non-excludable goods that are available for all to consume, regardless of who pays and who does not.

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34
Q

Common access resources

A

Goods that are rivalrous but non-excludable

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35
Q

Sustainability

A

Development that meets the needs of the present generation without compromising the needs of future generations

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36
Q

GDP (Gross Domestic Product)

A

Gross Domestic Product (GDP) is the dollar value of all final goods and services produced within a country’s borders

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37
Q

GNI (Gross National Income)

A

Gross Domestic Product plus net income from abroad

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38
Q

Recession

A

The low point on the business cycle. It is two consecutive quarters of negative economic growth of GDP.

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39
Q

Recession

A

It is two consecutive quarters of negative economic growth

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40
Q

Saving

A

Income that is not spent, but stored in financial institutions

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41
Q

Investment

A

The spending by firms (or the government) on capital

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42
Q

Consumption

A

The spending from households (consumers) on goods and services.

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43
Q

Government Spending

A

All government expenditure on goods and services.

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44
Q

Green GDP

A

A modified measure of GDP that takes into account the costs of environmental damage

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45
Q

Net Exports

A

The value of exports minus the value of imports

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46
Q

Consumer confidence

A

A measure of the optimism of consumers about their future income and future economic conditions

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47
Q

Interest rates

A

The cost of borrowing money

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48
Q

Direct taxes

A

Taxes paid to the government on the income of households and firms

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49
Q

Business Confidence

A

A measure of the expectations of businesses about the future economic conditions that affects the level of investment

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50
Q

Aggregate demand

A

The total demand for all goods and services produced in an economy, compromising of C+ I+G+(X-M)

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51
Q

Aggregate supply

A

The total quantity of goods and services produced in an economy (real GDP) over a particular time period at different price levels

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52
Q

Potential output

A

Total gross domestic product (GDP) that could be produced when the economy is at full employment

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53
Q

Recessionary Gap

A

When the economy is at an equilibrium below potential output

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54
Q

Inflationary Gap

A

When the economy is at an equilibrium above potential output.

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55
Q

Unemployment

A

People of working age who are actively seeking work but are without work

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56
Q

Underemployment

A

When a worker is either in a job below their skill level or are employed part-time but willing and able to work full-time

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57
Q

Structural unemployment

A

Unemployment caused by a decline in demand for a particular type of labour

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58
Q

Frictional Unemployment

A

Short-term unemployment that can occur when a person enters or re-enters the workforce

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59
Q

Cyclical Unemployment

A

Unemployment due to a lack of aggregate demand for goods and services

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60
Q

Seasonal Unemployment

A

A level of unemployment that is expected to occur at specific times of the year.

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61
Q

Natural Rate of Unemployment

A

Unemployment that still occurs when an economy operates at its potential. Includes frictional, seasonal and structural unemployment.

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62
Q

Inflation

A

A sustained increase in the price level.

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63
Q

Disinflation

A

Where the price level increases at a decreasing rate

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64
Q

Deflation

A

A sustained decrease in the price level.

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65
Q

Consumer price index

A

The measure of a weighted average price index of a basket of consumer goods and services that a typical household consumes.

66
Q

Producer Price Index

A

The measure of a weighted average price index of inputs and intermediate goods that are bought by producers

67
Q

Economic growth

A

Increase in real GDP

OR

Increase in potential real GDP.

68
Q

Human Capital

A

The skills, abilities and knowledge acquired by the labour force

69
Q

Physical capital

A

The capital goods which exist within an economy.

70
Q

Natural capital

A

The natural resources that exist within an economy

71
Q

Absolute Poverty

A

A condition where people live below a certain level of income necessary to meet basic needs.

72
Q

Relative Poverty

A

The inability of an individual or family to maintain a socially acceptable standard of living.

73
Q

Transfer payments

A

Payments made by the government to individuals and businesses for which no good or service is exchanged.

74
Q

Progressive Taxes

A

A tax that imposes a lower tax rate on low-income earners and a higher tax rate on high-income earners

75
Q

Regressive Taxes

A

Taxes where as income increases, the tax rate decreases. Lower income groups feel a bigger impact as they pay a larger proportion of their income on the tax.

76
Q

Fiscal policy

A

Government policy that amends government spending and/or taxes to achieve economic objectives

77
Q

Budget deficit

A

When government expenditure is greater than government revenue.

78
Q

Budget surplus

A

It is when government expenditure is less than government revenue

79
Q

Automatic stabilisers

A

Government tax and expenditure policies that automatically vary with the level of economic activity and national income, and that act to reduce short-term fluctuation in income

80
Q

Crowding out

A

Increased government spending exceeds government revenue and so needs to borrow money, forcing interest rates up, thereby reducing investment and consumption

81
Q

Monetary Policy

A

Actions carried out by the central bank to change the money supply and therefore change interest rates

82
Q

Two responsibilities of a central bank

A
  • Control of interest rates
  • Control of money supply
  • Banker to the banks
  • Control of exchange rate policy
  • Regulator of commercial banks
  • Maintenance of price stability
83
Q

Market-based supply-side policies

A

Policies whereby the government reduces its role in the economy to allow market forces to increase productivity and therefore increase potential output and achieve long-term economic growth.

84
Q

Interventionist Supply-side Policy

A

Policies whereby the government intervenes to increase the quality and quantity of resources in the economy to increase potential output and achieve long-term economic growth

85
Q

Infrastructure

A

The large scale physical and organisational structures, usually provided by the government, that are essential for economic activities

86
Q

trade liberalisation

A

The removal or reduction of restrictions or barriers on the free exchange of goods between nations.

87
Q

Labour Market Reforms

A

Reform intended to make labour markets more competitive and flexible, to make wages respond to the forces of supply and demand, to lower labour costs and increase employment by lowering the natural rate of unemployment

88
Q

Economies of Scale

A

Exist when the average costs for a firm decrease as the firm increases its output.

89
Q

Free Trade

A

International trade that takes place without any trade barriers

90
Q

List two administrative trade barriers

A
  • Safety standards
  • Health standards
  • Environmental standards
  • Customs procedures
  • Bureaucratic procedures
  • Product standards
  • Packaging requirements
91
Q

List two functions of the WTO

A
  • Set and enforce rules for international trade
  • Resolve trade disputes
  • Provide a forum for negotiating trade liberalisation
  • Help developing countries benefit from trade
92
Q

Tariff

A

A tax on imports

93
Q

Quotas

A

Limits on the number or value of a good that can enter a country

94
Q

Dumping

A

The practice of selling a good in international markets at a price that is below the cost of producing it (usually by providing export subsidies);

95
Q

Infant Industries

A

A new industry that does not benefit from economies of scale and needs protection to compete with imports

96
Q

Trade war

A

A situation in which countries attempt to damage each other’s trade by the imposition of quotas and/or tariffs.

97
Q

Exchange rate

A

The price of a currency in terms of another currency .

98
Q

Appreciation

A

A rise in the value of a currency in terms of another currency in a floating exchange rate system

99
Q

Depreciation

A

A decrease in the value of a currency in terms of another currency in a floating exchange rate system

100
Q

Revaluation

A

An increase in the value of one currency in terms of another currency as a result of government or central bank intervention.

101
Q

Devaluation

A

Decrease in the value of a currency in terms of another currency as a result of government or central bank intervention.

102
Q

Fixed exchange rate

A

Where the government or central bank ties the value of the official exchange rate to the value of another currency

103
Q

Managed Float

A

Periodic intervention by a central bank in order to influence exchange rate.

104
Q

Current Account

A

A measure of the flow of funds from the trade of goods and services, net income flows and net transfers

105
Q

Current account deficit

A

When the outflow of funds from the trade in goods and services, income flows and transfers are greater than inflows

106
Q

Current Account Surplus

A

When the inflow of funds from the trade in goods and services, income flows and transfers are greater than the outflows

107
Q

Financial Account

A

Measures the net change in the foreign ownership of domestic financial assets

108
Q

Capital account

A

Measures inflows minus outflows of funds for capital transfers and transactions in non-produced, non-financial assets.

109
Q

List 3 components of the current account

A
  • Balance of trade in goods
  • Balance of trade in services
  • Net flows of income
  • Net current Transfers
110
Q

Foreign Currency Reserves

A

Reserves of foreign currencies held by central banks or governents.

111
Q

Marshall-Lerner condition (HL)

A

HL - States that for a currency devaluation/depreciation to improve a CAD, the sum of PED for exports and the PED for imports must be greater than one

112
Q

Bilateral Trade Agreements

A

A trade agreement between two countries which aims to lower trade barriers or to increase trade

113
Q

Free trade area

A

A group of countries who all come under the same Free Trade Agreement to allow for lower trade barriers

114
Q

Customs union

A

A form of economic integration where member countries agree to liberalise trade and adopt a common tariff for non-members

115
Q

Common Market

A

Economic integration; countries that have formed a customs union proceed further to eliminate any barriers to trade between them. They have common external policy and agree to freely move factors of production within the common market.

116
Q

Monetary union

A

A form of economic integration where a common market also share a common currency, central bank and interest rates.

117
Q

Preferential Trade Agreement

A

A trade pact between countries that reduces tariffs for certain products to the countries who sign the agreement.

118
Q

Trade Creation (HL)

A

Trade Creation occurs when trade is diverted from a less efficient domestic producer towards a more efficient producer. Countries can then enjoy cheaper imports.

119
Q

Trade Diversion (HL)

A

HL - When trade protections cause imports to shift from low-cost countries to higher cost countries as a result of economic integration.

120
Q

Terms of trade (HL)

A

HL - the value of a country’s average export prices relative to their average import prices.

121
Q

Improvement in terms of trade (HL)

A

HL - When average export prices increase relative to average import prices

122
Q

Deterioration in Terms of trade (HL)

A

HL - when average export prices decrease relative to average import prices

123
Q

Law of diminishing marginal returns (HL)

A

HL - States that an increasing number of variable inputs are added to at least one fixed input, marginal product first increases and then eventually decreases

124
Q

Productivity (HL)

A

Measure of output per unit of input/time/labour

125
Q

Explicit costs (HL)

A

HL - Direct payments that are made for costs of production

126
Q

Economic costs (HL)

A

Implicit cost and explicit cost of a firm when producing a certain quantity of goods and services

127
Q

Implicit costs (HL)

A

HL - The value of opportunity costs

128
Q

Marginal cost (HL)

A

HL - The cost of producing one extra unit of output

129
Q

Variable Costs (HL)

A

HL - costs that vary with the level of output.

130
Q

Average cost (HL)

A

HL - average cost per unit of output. Total cost divided by quantity

131
Q

Total revenue (HL)

A

HL - The total money received by a firm from the sale of a particular quantity of output.

132
Q

Normal profit (HL)

A

HL - One of the below

  • Revenue that covers all cost, including opportunity cost
  • Total revenue = implicit and explicit costs
  • Economic profit = 0
  • Amount of profit needed to keep a firm in business in the long run
133
Q

Abnormal profit (HL)

A

HL - When a firm earns a level of revenue that is greater than the total costs of production, including opportunity costs (or where a firm earns a level of revenue that is greater than that required to ensure that a firm will continue to supply its existing good or service).

134
Q

Satisficing (HL)

A

HL

A firm tries to make enough profit in order to satisfy different stakeholders and to pursue other objectives

OR

A firm tries to make enough profit because decision makers do not have the necessary information in order to maximize profits.

135
Q

Monopoly (HL)

A

HL - It is a market structure where a single firm dominates the market.

136
Q

Monopolistic competition (HL)

A

HL - a market structure with:

  • A large number of firms
  • Similar but differentiated products
  • Barriers to entry and exit the market are low
  • Each firm possesses some market power.
137
Q

Perfect competition (HL)

A

HL - A market structure where

  • there are many buyers and sellers:
  • a homogenous product
  • free entry and exit
  • perfect Knowledge
  • perfect Mobility
  • Producers are price takers
138
Q

Oligopoly (HL)

A

HL - A market structure where:

  • a small number of firms dominate the industry
  • there is interdependence of firms
  • high barriers to entry
  • homogeneous or differentiated products
  • price rigidity
  • non-price competition.
139
Q

Collusive oligopoly (HL)

A

A situation where a small number of firms work together to avoid competition through agreements to fix prices

140
Q

Open/Formal collusion (HL)

A

HL - A situation where a small number of firms act together to avoid competition through agreements to fix prices

141
Q

Tacit/Informal collusion (HL)

A

HL - a situation where firms follow a leading firm to set the same price

142
Q

Cartel (HL)

A

HL - A group of producers in an industry that join together to regulate supply or fix prices

143
Q

Productive efficiency (HL)

A

HL - Exists when production takes place at minimum ATC or when ATC=MC

144
Q

Price discrimination (HL)

A

HL - Price discrimination occurs when different customer groups are charged different prices and the difference is not justified by cost differences

145
Q

Economic development

A

A broad concept involving any two of:

  • Improvement in standards of living
  • Reduction in poverty
  • Improved health and education
  • Reduction in unemployment
  • Greater equality in income distribution
  • Environmental protection
  • Increased freedom and economic choice
146
Q

Two characteristics of an economically less developed country

A

Any twp of the following:

  • Low levels of GDP per capita
  • High levels of poverty
  • Relatively large agricultural sector
  • Large informal sectors
  • High birth rates
  • Poor infrastructure
  • Underdeveloped capital markets
  • Heavily indebted
  • Unable to access international markets
  • Over-specialized on a narrow range of production
  • Small tax base
  • Dependency on primary sector exports
147
Q

Poverty trap or poverty cycle

A

Low incomes lead to low saving which leads to low investment which leads to low growth which leads to low income

148
Q

Two millenium development goals

A
  • Eradicate extreme poverty and hunger
  • Achieve universal primary education
  • Promote gender equality and empowerment of women
  • Reduce child mortality
  • Improve maternal health
  • Combat HIV/AIDS, malaria and other diseases
  • Ensure environmental sustainability
  • Develop a global partnership for development
149
Q

Sustainable development

A

It is the development that meets the need for the present without compromising the ability of future generations to meet their own needs

150
Q

Components of the HDI

A
  • Real gross national income per capita
  • Mean years of schooling
  • Expected years of schooling
  • Life expectancy
151
Q

Micro credit

A

Micro-credit refers to credit (loans) in small amounts to people who do not ordinarily have access to credit in order to set up/grow a business

152
Q

Diversification

A

It is a strategy to increase the variety of goods and services produced in order to avoid over-specialisation

153
Q

Corruption

A

Abuse and dishonest use of power

154
Q

Foreign Direct Investment

A

Long-term investment in a foreign country by a multinational corporation

155
Q

Multinational Corporations (MNCs)

A

A company that has productive units in more than one country

156
Q

Official Development Assistance (ODA)

A

Aid or financial assistance given from a Government for the purposes of development and/or welfare

157
Q

Main functions of the IMF

A
  • Ensure the stability of the international monetary system
  • Promote international monetary system.
  • Lend money to help members in balance of payments difficulties
158
Q

World Bank

A

An international organisation whose aims include providing aid and advice to developing countries and reducing poverty levels.

159
Q

Tied aid

A

When a country donates money or resources to another on the condition that the funds are used to buy imports from the donor country or linked to a specific project.

160
Q

Multilateral aid

A

Money given by countries to international (multilateral) institutions which are distributed to countries.

161
Q

Concessional long-term loans

A

A loan stretched over 25 to 40 years with lower than market interest rates. The loan may be include a grace period or be repayable in local currency.

162
Q

Market-oriented policies

A

A policy in which economic decisions are made by the private sector (firms and consumers) where government intervention is limited

OSC Economics (2 decks)

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