Glossary Flashcards
(134 cards)
1
Q
Ad valorem taxes
A
An indirect tax where a given percentage is added to the price of a good or service
2
Q
Administrative barriers (in the context of trade)
A
Any administrative requirement that might prevent or reduce the amount of imports
3
Q
Aggregate demand
A
Total spending in the economy, made up of consumption, investment, government spending and net export spending.
4
Q
Aggregate supply
A
The total amount of domestic goods and services supplied by business and the government, including both consumer goods and capital goods.
5
Q
Allocative efficiency
A
Occurs where the marginal social cost of producing a good is equal to the marginal social benefit of the good to society. In different words, it occurs where the marginal cost of producing a good (including any external costs) is equal to the price that is charged to consumers (P=MC)
6
Q
Anti-dumping
A
Legislation to protect an economy against the importing of a good at a price below its unit out of production
7
Q
Appreciation
A
An increase in the value of a country’s currency in a floating exchange rate system
8
Q
Appropriate technology
A
Where technology caters to the particular economic, social and environmental characteristics of to users
9
Q
Automatic stabilisers
A
Features of government fiscal policy, e.g. Unemployment benefits and direct tax revenues, that automatically counter-balance fluctuations in economic activity. For example, government spending on unemployment benefits automatically rise and direct tax revenues automatically fall when economy activity is slow
10
Q
Balance of payments
A
The accounting record of all transactions (debits and credits) between the households, firms and government of one country, and the rest of the world
11
Q
Balance budget
A
A situation that exists when planned government spending is equal to planned government expenditure
12
Q
Barrier to trade
A
Anything which prevents free trade between two countries e.g. Tariffs, quotas
13
Q
Barriers to entry
A
Obstacles that prevent a new firm from entering a market, such as economics of scales, product differentiation and legal protection
14
Q
Break-even price
A
The price where average revenue is equal to average total cost. Below his price, the firm will shut down in the long run
15
Q
Budget deficit
A
A situation that exists when planned government spending exceeds planned government revenue. A government may ‘run a budget deficit’ in order to increase aggregate demand in the economy.
16
Q
Absolute advantage
A
Where a country is able to produce more output than other countries using the same input of factors of productions
17
Q
Budget surplus
A
A situation that exists when planned government revenue exceeds planned government spending.
18
Q
Business cycle
A
A diagram showing the periodic or cyclical fluctuations in economic activity. The business cycle shows that economies typically move through a pattern of economic growth with the phases: recovery, boom, slowdown and recession.
19
Q
Capital
A
The factor of production that is made by humans and is used to produce goods and services. It occurs as a result of investment
20
Q
Cartel
A
A formal agreement among firms in a collusive oligopoly
21
Q
Central bank
A
The government’s bank. The institution that is responsible for an economy’s monetary policy
22
Q
Ceteris paribus
A
A Latin expression meaning ‘let all other things remain equal’ used by economists to develop economic theories or models
23
Q
Circular flow of income model
A
A simplified model of the economy that shows flow of money through the economy
24
Q
Classic AS model
A
A model showing that the long run aggregated supply curve is vertical at the full employment level of output
25
Collusive oligopoly
Where a few firms in an oligopoly act together to avoid competition by resorting to agreements to fix prices or output
26
Common access resources
Also known as common pool resources or common property resources, these resources which have properties similar to public goods in that it is very difficult or impossible to prevent people from using or consuming the resource. Therefore, they are vulnerable to overuse and/or degradation.
27
Common market
A customs union with common policies on product regulation, and free movement of goods, services, capital and labour
28
Comparative advantage
Where a country is able to produce a good at a lower opportunity cost of resources than another country
29
Complementary good
Goods used in combination with each other, e.g. digital cameras and memory cards. Complementary goods have negative cords-price elasticity.
30
Constant returns to scale
A given percentage increase in the quantity of all factors of production results in an equal percentage change in output and thus no change in long-run average cost.
31
Consumer Price Index
A measure of the average rate of inflation which calculates the change in the price of a representative basket of goods and services purchased by the 'average' consumer.
32
Consumer Surplus
The additional benefit or utility received by consumers by paying a price that is lower than they are willing to pay.
33
Consumption
Spending by households on consumer goods and services.
34
Core Inflation
A measure of inflation that factors out the changes in the prices of products that tend to experience volatile price swings e.g. food and energy prices. This gives policy makers a better indication of long-term changes in the price level.
35
Corporate Social Responsibility
An approach taken by firms where they attempt to produce responsibly or ethically towards the community and environment, demonstrating a positive impact on society.
36
Cost-push inflation
A persistent increase in the average price level that comes about as a result of increases in the costs of productions and a decrease in aggregate supply (AS).
37
credit
borrowed money
38
Cross Price Elasticity of Demand
A measure of the responsiveness of the quantity of one good demanded in response to a change in the price of a related good. XED = %D in Qs of good A /%D in price of good B
39
Crowding out
A situation where the government spends more (government expenditure) than it receives in revenue and needs to borrow money, forcing up interest rates and 'crowding out' private investment and private consumption.
40
Current Account (of the balance of payments)
A measure of the international flow of funds from trade in goods and services, plus net investment income flows (profit, interest and dividends) and net transfers of money (foreign aid, grants and remittances).
41
Current Account Deficit
Where revenue from the exports of funds from trade in goods and services and income flows are less than the expenditure on the import of goods and services and income flows in a given year.
42
Current Account Surplus
Where revenue from the exports of funds from trade in goods and services and income flows are greater than the expenditure on the import of goods and services and income flows in a given year.
43
Customs Union
An agreement made between countries, where the countries agree to work towards free tare among themselves and also agree to adopt common external barriers against any country attempting to import into the customs union.
44
Cyclical (Demand-deficient) Unemployment
Unemployment that exists when there is insufficient aggregate demand in the economy and wages do not fall to compensate for this. This is usually associated with a slowdown in economic growth or negative growth.
45
De-Merit Goods
Products that are considered to be harmful for people that would be over-provided or over-consumed in a purely free market economy. De-merit goods are generally considered to be products whose consumption creates negative externalities.
46
Debt Cancellation
The act of eliminating the debt owed by a developing country government in order to allow it to achieve development objectives.
47
Decreasing return to scale
A given percentage increase in the quantity of all factors of production results in a smaller percentage increase in output and this an increase in long-run average costs (diseconomies of scale).
48
Deflation
A persistent fall in the average level of prices
49
Deflationary (recessionary) gap
The gap that occurs when macroeconomic equilibrium occurs at a level that is less than the full employment level of output
50
Demand
The quantity of a product that consumers are willing to and able to buy at a given price in a given time period.
51
Demand Curve
A curve, or line showing the relationship between the price of a product and quantity demanded over a range of prices.
52
Demand-Pull Inflation
A persistent increase in the average price level that comes about as a result of increases in aggregate demand (AD).
53
Demand Schedule
A chart or table showing the quantity of a product demanded at each price. A demand schedule, or a demand function, is used to draw a demand curve.
54
Demand-Side Policies
Also known as 'Demand-Management Policies', these are policies to change the level of aggregate demand (AD) in the economy deliberately in order to achieve macroeconomic objectives.
55
Depreciation
A decrease in the value of a country's currency in a floating exchange rate system.
56
Deregulation
A type of supply-side policy where the government reduces the number of type of regulation governing the behaviour of firms.
57
Deterioration (worsening) in the terms of trade
Where the index of the average price of exports falls relative to the index of the average price of imports.
58
Devaluation
A decrease in the value of a country's currency in a fixed exchange rate system.
59
Development indicators
Statistics that may be used to assess the level of development of an economy. These may be single indicators, e.g. infant mortality rate, or composite indicators, e.g. Human Development Index.
60
Direct Taxation
Taxation imposed on people's income or wealth, and on firms' profits.
61
Diseconomies of scale
An increase in average costs on the long run
62
Disinflation
A fall in the rate of inflation.
63
Diversification
A strategy to reduce reliance on the export of a narrow range of exports by re-allocating resources to a wider range of industries.
64
Dumping
The selling of a good in another country at a price below its unit cost of production
65
Economic costs
The total opportunity costs of production to a firm, including the opportunity cost of entrepreneurship.
66
Economic Development
A multidimensional concept involving improvement in standards of living, reduction in poverty, improved health and education along with increased freedom and economic choice.
67
Economic Growth
An increase in the actual level of output of goods and services produced by an economy, i.e. an increase in real GDP over time.
68
Economic Profit (Abnormal or supernormal profit)
Economic profit (abnormal or supernormal profit) is earned when a firm's revenues are greater than its total opportunity costs (its economic costs).
69
Economies of Scale
A fall in average cost in the long run.
70
Excess Demand
Occurs where the price of a good is lower than the equilibrium price, such that the quantity demanded is greater than the quantity supplied.
71
Excess Supply
Occurs where the price of a good is lower than the equilibrium price, such that the quantity supplied is greater than the quantity demanded.
72
Exchange rate
The value of one currency expressed in terms of another currency.
73
Expenditure-reducing policies
Policies implemented by the government that attempt to reduce overall expenditure in the economy, in order to reduce expenditure on imports.
74
Expenditure-switching policies
Policies implemented by the government that temp to switch the expenditure of domestic consumers away from imports towards domestically produced goods and services.
75
Export Promotion
Strategies to encourage economic growth through increased international trade and the promotion of export industries.
76
Factor Endowment
The factors of production that a country has available to produce goods and services
77
Factors of Production
The land, labour, capital, and management (entrepreneurship) that are used in production.
78
Financial Account (of the balance of payments)
A measure of the net change in foreign ownership of domestic financial assets, including foreign direct investment, portfolio investment and changes in foreign reserves, formerly called the capital account.
79
Fiscal Policy
The set of government policies concerning its taxation and expenditure. Fiscal policy may be used to manage the level of aggregate demand (AD) and may be expansionary (to raise AD) or contractionary (to lower AD).
80
Fixed Cost
Costs that do not vary with the level of output
81
Fixed Exchange Rate
An exchange rate regime where the value of a currency is fixed, or pegged, to the value of another currency (or to the average value of a selection of currencies, or to the value of some other commodity e.g. gold.)
82
Floating Exchange Rate
An exchange rate regime where the value of a currency is allowed to be determined solely by the demand for, and supply of, the currency on the foreign exchange market.
83
Foreign debt
The total debt owed by the government of one country to foreign lenders.
84
Foreign Direct Investment
Long-term investment by a multinational company in a foreign country.
85
Free Trade Area
An agreement made between countries, where the countries agree to work towards free trade among themselves, but are able to trade with countries outside the free trade area in whatever way they wish.
86
Frictional Unemployment
Unemployment that occurs when people are entering the workforce after leaving education, or people who have left one job and are searching for a new job.
87
Full Employment level of Output
The level of output that is produced by the economy when there is only natural unemployment.
88
Game Theory
A method of analysing the way that 'players' in an interdependent relationship (such as oligopoly) make strategic decisions.
89
GDP per capita
The total money value of all final goods and services produced in an economy in one year per head of the population.
90
GDP
The total money value of all final goods and services produced in an economy in a given time period, usually a year.
91
Gini Effect
A coefficient (or index) that is derived from the Lorenz curve and is a numerical indicator of income equality. It is calculated by dividing the distance between the Lorenz curve and the line of absolute equality by the total area under the line of absolute equality (multiplied by 100 for the index). the higher the figure, the more unequal the income distribution.
92
GNP/GNI
The total money value of all final goods and services produced in an economy in one year, plus net property income from abroad (interest, rent, dividends, and profit).
93
Government Spending
Spending by governments on goods and services
94
Green GDP
A measure of the total output of an economy having taken into account the environmental consequences (externalities) involved in the production of that output.
95
Homogeneous Products
Completely identical products, as produced in perfect competition.
96
Import Substitution
Strategies to encourage the domestic production of goods in order to reduce imports and stimulate local producers.
97
Improvement in the terms of Trade (TOT)
Where the index of the average price of exports rises relative to the index of the average price of imports.
98
Incentive Function of Price
Prices give producers the incentive either to increase or decrease the quantity they supply. A rising price gives producers the incentive to increase the quantity supplied, as the higher price may allow them to earn higher revenues.
99
Incidence of Tax
The amount of an indirect tax paid by consumers of a good or producers of a good.
100
Income Elasticity of Demand
A measure of the responsiveness of demand for a good to a change in consumers' income YED = %D in D / %D in Y
101
Indirect Taxes
Taxes placed upon the expenditure on a good or service, e.g. value added tax, or goods and services tax.
102
Infant Industry argument
The argument that new industries should be protected from foreign competition until they are large enough to achieve economies of scale that will allow them to be competitive.
103
Inferior Good
A good whose demand falls as income rises. An inferior good has negative income elasticity.
104
Inflation
A persistent increase in the average level of prices.
105
Inflationary gap
The gap that occurs when macroeconomic equilibrium occurs at a level that is above the full employment level of output.
106
Infrastructure
The large-scale capital usually provided by government that is necessary for economic activity to take place.
107
Injections
The investment, government spending and export revenues that add spending to the circular flow of income.
108
Increasing Returns to Scale
A given percentage increase in the quantity of all factors of production results in a greater percentage increase in output and thus a fall in long-run average costs (economies of scale).
109
Interest Rate
The price of credit or borrowed money.
110
International Monetary Fund (IMF)
An organisation working to foster global monetary cooperation, secure financial stability, facilitate international trade and reduce poverty.
111
International Reserves
Foreign currencies held by governments (central banks) as a result of international trade. Reserves may be held so that the government may maintain a desired exchange rate for the country's currencies.
112
Investment
Spending by firms on capital goods; the addition of capital stock to an economy.
113
J-curve
Suggests that in the short-term, a fall in the value of the currency will leads to a worsening of the current account deficit, before things improve in the long-term.
114
Joint supply
Goods which are produced together, or where the production of one good involves the production of another product, e.g. meat and leather (a by-product).
115
Keynesian AS model
A model showing the interpretation of the keynesian view of aggregate supply in the economy. In this model, with three distinct phases of aggregate supply, macroeconomic equilibrium may occur at a level of output that is less than full employment, and suggests that the economy may remain at this level of output in the absence of active intervention on the demand side by the government.
116
Labour
The work done by humans that is used in the production of goods and services
117
Labour union or trade union
An organisation of workers whose goals include the improvement of working conditions and payments to workers. Unions works on behalf of workers though negations with management.
118
Land
All raw material that are used in the production of goods and services.
119
Law of Demand
As the price of of a product increases, the quantity demanded decreases, ceteris paribus.
120
Law of diminishing marginal returns
In the short-run, as increasing units of a variable factor are added to a fixed factor, the addition to total output (MP) will eventually fall.
121
Law of supply
As the price of a product increases, the quart supplied increases, ceteris paribus.
122
Leakages
The savings, taxes and import spending that remove spending form the circular flow of income.
123
Linear Demand Function
An equation in the form Qd=a-bp which shows the relationship between the price and the quantity of a product demanded.
124
Linear Supply Function
An equation in the form Qs=c+dp which shows the relationship between the price and the quantity of a product supplied.
125
Long-run
In terms of the theory of the firm, the period of time in which all factors are variable.
126
Long-run average cost curve (LRAC)
A graphical representation of long-run average costs. The LRAC is u-shaped due to economies and diseconomies of scale.
127
Lorenz curve
A curve showing what percentage of the population earns what percentage of the total income in the economy. It is calculated in cumulative terms. The further the curve is from the line of absolute equality (45 degree line), the more unequal is the distribution of income.
128
Macroeconomics
The study of how the economy as a whole works
129
Management or entrepreneurship
The factor of production that brings together the other three factors of production with the aim of making profit. Entrepreneurship tends to involve risk taking.
130
Manufactured goods
Goods that have been processed by workers.
131
Marginal Private Benefit
The extra benefit or utility to the consumers of consuming an addition unit of output.
132
Marginal Private Cost
The extra (private) cost to the producer of producing an additional unit of output.
133
Marginal Social Benefit
The extra benefit or utility to society of consuming san additional unit of output, including both the private benefit and the external benefits.
134
Marginal Social Cost
The extra cost to the society of producing an additional unit of output, including both the private cost and the external costs.
