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Economics > Theme 4 > Flashcards

Theme 4 Flashcards

(77 cards)

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1
Q

What is absolute advantage

A

When a country can produce a good more cheaply in absolute terms than another country

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2
Q

Absolute poverty

A

When people are unable to afford sufficient necessities to maintain life
- those on less than 1.90 a day

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3
Q

Aid

A

When a country voluntarily transfers resources to another or gives loans on a concessionaire basis (reduced or more favourable terms than usual)

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4
Q

Appreciation

A

An increase in the value of currency using floating exchange rates

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5
Q

Asymmetric information

A

When one party has more knowledge than another.
Form of market failure in the financial sector

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6
Q

Automatic stabilisers

A

Mechanisms which reduce the impact of changes in the economy on national income

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7
Q

Balance of payments

A

A record of all financial dealings over a period of time between economic agents of one country and another

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8
Q

Buffer stock system

A

When a maximum and minimum price are imposed together in order to bring about price stability

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9
Q

Capital account

A

A part of balance of payments ; records all debt forgiveness,inheritance taxes, transfers of financial assets and sales of assets

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10
Q

Capital expenditure

A

Government spending on investment goods such as new roads,schools and hospitals, which will be consumed in over a year

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11
Q

Capital flight

A

When large amounts of money are taken out of a country, rather than being left there for people to borrow and invest

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12
Q

Central banks -what they do ?

A

A financial institution that is directly responsible for:
.control of money supply
. Monatery policy
.manage gold reserves
.issue gov debt

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13
Q

Common market

A

Members trade freely in all economic resources and impose a common external tariff

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14
Q

Comparative advantage

A

When a country is able to produce a good more cheaply relatively to other goods produced
-it has lower oppertunity cost

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15
Q

Current account

A

Part of the balance of payment
-records all payments for the purchase and sale of goods and services as well as income and transfers

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16
Q

Customs union

A

The removal of all tariff barriers between members and the introduction of a common external tariff

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17
Q

Current expenditure

A

General government final consumption + transfer payments + interest payments

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18
Q

Cyclical deficit

A

The part of the deficit that occurs because government spending fluctuates around trade cycles

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19
Q

Depreciation

A

A fall in the value of currency using floating exchange rates

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20
Q

Devaluation

A

When the currency is decreased against another under a fixed system

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21
Q

Developed country

A

Countries with high GDP per capita and high standards of living

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22
Q

Developing countries

A

Countries with low GDP per capita and low standard of living

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23
Q

Discretionary fiscal policies

A

Deliberate manipulation of government expenditure and taxes to infleunce the economy
Expansionary or deflationary fiscal policy

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24
Q

Economic development

A

Improvements in living standards

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25
Emerging economies
A country that is growing quickly and has so,e charectoristics of a developed country but is not fully there yet
26
Exchange rate
The purchasing power of a currency in terms of what it can buy in other currencies
27
Financial account
A part of the balance of payments Records FDI, portfolio investment and the transfer of good and currency reserves
28
Financial markets
When buyers and sellers can buy and trade a range of services or assets that are fundamentally monetary in nature
29
Fiscal deficit
When a government spends more than it receives in revenue each year
30
Fixed exchange rate
The value of the currency is set against the value of another and the exchange rate does not change
31
Foreign currency gap
When a country does not export enough to finance the purchase of goods from overseas
32
Foreign direct investment
Investment by one private sector company in one country into another private sector company in another country
33
Free trade
Trade with no barriers or restriction
34
Free trade agreements
When two or more countries agree to reduce/eliminate trade barriers on all goods from member countries
35
Free floating exchange rate
Value of currency is determined purely by market demand and supply of the currency
36
General government final consumption
Spending on goods and services which will be consumed within the next year
37
Gini co efficient
A measure of income inequality
38
How to messure gini coefficient
The ratio of the area between the 45 degree line and the Lorenz curve and the whole area under the 45 degree line
39
Globalisation
Growing interdependence of countries and rapid rate of change it brings about
40
Harrod do mar model
Savings provide the funds that are used for investment, and growth rates depend on the left-leaning of savings and productivity of investment therefore growth is developing countries is limited to lack of investment and saving
41
Human development index HDI
Measures an economy’s development based on income,health and education
42
Infrastructure
Facilities required for an economy to function such as roads.
43
International competitiveness
The ability of a country to compete effectively and become attractive in international markets
44
J-curve
The current account will worsen before it improves before a depreciation of the currency
45
Laffer curve
Shows that a rise in tax rates does not necessarily lead to a rise in tax revenues due to incentives of tax rates on work,
46
Lewis model
A model which suggests that countries will develop through industrialisation as labour is moved from the unproductive agricultural sector towards the more productive urban sector. This leads to increased wages increased savings and therefore increased investment
47
Lorenz curve
The cumulative percentage of population plotted against the cumulative percentage of income that those people have
48
Market bubbles
When the price of an asset rises massively and greatly exceeds the value of the asset itself
49
Market rigging
A group of individuals or institutions collide to fix prices or exchange information that will lead to gains for themselves at the expense of others in the market
50
Microfinance schemes
Schemes which aim to give poor people and households permanent acsees to a range of financial services which they previously would not have been able to access through lack of credit
51
Managed floating exchange rate
Value of currency is determined by demand and supply but central banks intervene to prevent large and potentially harmful changes
52
Marshall - Lerner condition
The sum of price elasticities of imports and exports must be more than one if currency depreciation is to have a positive impact on the economies trade balance
53
Monetary unions
Two or more countries with a single currency
54
National debt
The sum of government debt that they owe to creditors -built up over many years of deficits
55
Primary product dependency
When a country relies heavily on primary goods such as agricultural sectors
56
Progressive taxation
Where those on higher incomes pay a higher marginal rate of tax; those in higher income pay a higher percentage of their income on tax
57
Proportional taxation
The proportion of income paid on the tax remains the same whilst the income of the taxpayer changes - everyone pays the same rate in their income tax
58
Protectionism
When a government enacts policies to restrict free entry of imports into their country such as tariffs and quotas
59
Quotas
Limits placed on levels of imports allowed in a country
60
Regressive taxation
When the proportion of income paid on the tax falls whilst the income of the taxpayer increases Those on lower income lay a higher percentage of their income on the tax
61
Relative poverty
When income falls below an average income thresholds
62
Revaluation
When the currency is increased against the value of another under a fixed ecsnge rate system
63
Speculation
Trading financial assets in hope of significant returns
64
Structural deficit
The defect which occours when the cyclical defecit is 0
65
Tariffs
Taxes placed on imported goods in an attempt to prevent/ disincentive people from buying them
66
Terms of trade
A measure of how a countries average export prices compare to its average import prices - ratio between its export prices and its import prices
67
68
Theory of comparative advantage
Countries will find specialisation mutually advantageous if the opportunity costs of production are different
69
Trade creation
When a country moves from buying goods from high costs to a lower cost producer abroad if tariffs and quotas are removed
70
Trade diversion
When a country moves from buying goods from low cost producers to higher cost producers due to trade barriers or protectionism
71
Trade liberalisation
Reduction or removal of protectionist policies
72
Trading blocks
A group of countries that reduce or remove trade barriers between them
73
Transfer payments
Government spending for which there is no corresponding output in goods or services, where money is taken from one group and given to another e.g welfare payments to the poor
74
Transfer pricing
Where firms manipulate the price of their goods so that profit is increased in areas of low tax
75
Unit labour costs
The cost of employing workers for each unit of a good
76
77
What is a forward market
A forward market is a commitment to buying a commodity at a future price as a way of insurance due to hedging against the future price either going up or down to best suit your position

Economics (4 decks)

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