A2 Economics Definitions Flashcards
Absolute poverty
When an individual or household’s income is insufficient for them to afford basic shelter, food and clothing.
Absolute advantage
Where a country using a given resource input is able to produce more than other countries with the same input.
Accelerator theory
The theory that the level on investment is related to past changes in national income.
Participation rate
The proportion of the population of working age in a job or actively seeking work.
Actual growth
An increase in the productive potential of the economy matched by an increase in demand.
Adaptive expectations
Where decisions about the future are based on past information.
Adjustable peg
When the value of the fixed exchange rate can be changed as circumstances require.
Allocative efficiency
The optimum allocation of scarce resources that best accords with the consumers’ pattern of demand.
Allocative inefficiency
When resources are not used to produce the goods and services wanted by consumers.
Anglo-Saxon neo-liberalism
Economic reform aimed at boosting the dynamism of economies - in contrast to the “social model” which stresses social objectives.
Anticipated inflation
Where economic agents correctly predict the future rate of inflation.
Automatic stabilisers
Features of government spending and taxation that minimise fluctuations in the economic cycle.
Average cost pricing
When the price is set at the average cost.
Backward bending supply curve for labour.
The individual labour supply curve is thought to be this shape because it is assumed workers will prefer to work fewer hours as their income increases above a certain level.
Base rate
The interest rate a bank sets to determine it’s lending and borrowing rates.
Benefit principle
The argument that taxes should be linked to the benefits received by taxpayers.
Broad money
Money held in banks and building societies that is not immediately accessible.
Canons of taxation
The characteristics of a “good tax”, after Adam Smith.
Capital expenditure
Government spending to improve the productive capacity of the nation, for example, on schools or hospitals.
Capital market discipline
Where firms may be taken over by other firms if they appear to be making lower profits than their assets would suggest.
Casual unemployment
A kind of frictional unemployment occurring when workers are laid off on a short-term basis.
Classical or real-wage unemployment.
Results from real wages being above their market-clearing level, creating an excess supply of labour.
Collusion
Where firms cooperate in their pricing and output policies.
Comparative advantage
Where a country can produce a good with a lower resource cost input than other countries.