All Economic definitions Flashcards
Define Abnormal losses
Where businesses are not making enough profit to justify ongoing supply to a market. That is, businesses are making less than ‘normal profits’. These losses are likely to encourage firms to exit the industry.
Define Abnormal profits
Where businesses are making more than enough profit to justify ongoing supply to a market. That is, businesses are making more than ‘normal profits’. Also referred to as ‘supernormal profits’ and they are likely to encourage firms to enter the industry.
Define ABS
Australian Bureau of Statistics. The government body responsible for gathering and reporting statistical information.
Define Absolute advantage
Where a country is more efficient than another country in producing all goods and services in the sense that it can produce more of every good or service using the same inputs as another country.
Define Absolute poverty
A situation where a person or a household has insufficient income to purchase the basic necessities such as food, clothing and shelter.
Define ACCC
Australian Competition and Consumer Commission.
Define Advertising
Paid, non-personal communication used to persuade consumers to buy products. E.g when a business promotes their products with a view to increasing consumer demand and differentiating their products from those of rival businesses.
Define Affluenza
The addictive pursuit of more and more goods and services.
Define Aggregate Demand
Total expenditure on Australian made goods and services.
Define Aggregate demand policies
Government policies such as budgetary policy and monetary policy that are used to stimulate or restrain aggregate demand to promote the achievement of the government’s macroeconomic goals.
Define Aggregate supply
The total value of goods and services available for sale in an economy in a given time frame.
Define Aggregate supply policies
Any government initiative that is designed to reduce the costs of production and/or improve supply conditions for businesses.
Define AIRC
Australian Industrial Relations Commission.
Define All ordinaries index
An index comprising the prices of major companies on the Australian stock exchange. An increase in the index indicates that the sharemarket has improved.
Define Allocative efficiency
A type of efficiency measured by how well resources are being allocated in the economy. The most efficient allocation of resources occurs when living standards and welfare are maximised and it is not possible to further increase living standards by changing the way resources are allocated
Define Anchoring effect
Is where consumers’ judgments are affected by some arbitrary starting value or ‘anchor’.
Define Appreciation
When one currency is able to purchase more of another currency. For example, if the Australian dollar appreciates, one AUD will purchase more USD than it could before.
Define Assembly plant Asset markets
A factory where manufactured parts are assembled (put together) to create a finished product. The share market and property market.
Define Australian Competition and Consumer Commission (ACCC)
The government body responsible for policing the Trade Practices Act (or competition policy) and whose role is to improve competition and efficiency in markets and to foster adherence to fair trading practices.
Define Australian Industrial Relations Commission (AIRC)
The government body that was once responsible for the conciliation and arbitration of industrial disputes and the determination of minimum wages. Colloquially, the industrial relations ‘umpire’. It has since been replaced by Fair Work Australia.
Define Australian Fair Pay Commission (AFPC)
The government body set up under Workchoices to set minimum wages, but now replaced by Fair Work Australia .
Define Availability heuristic
A tendency for consumers to rely on, and use information, that is most convenient and accessible when making decisions.
Define Average weekly earnings
Gross (before tax) earnings of employees and derived by dividing total weekly earnings by the number of employees.
Define Award system
A feature of the highly ‘centralised’ system of industrial relations that existed in the past where wages and conqitions.
Define Awards
Legal documents establishing the minimum wages and conditions applying to various occupations, and normally each Award covers one industry.
Define Balance of Payments Payments (BOP}
An accounting summary of all the financial transactions between residents of Australia and residents of the rest of the world. Includes the Current Account and the Capital and Financial Account.
Define Balance of trade
The value of all exports minus imports (including both services and goods}. See Balance on Merchandise Trade (BOMT}
Define Balance on goods and services (BOGS)
The combination of the Balance on Merchandise Trade (BOMT} and Net Services in the Balance of Payments. Made up of total exports of goods and services less the total imports of goods and services.
Define Balance on Merchandise Trade (BOMT)
A sub-account in the Balance of Payments made up of the total value of exports (credits} minus the total value of imports (debits} of goods.
Define Balanced budget
When government revenue (or receipts} is equal to government expenses (or expenditure}.
Define Barriers to entry
Factors making it difficult for firms to commence operations or enter an industry, such as large ‘set-up’ costs, government regulations or the market power of incumbent firms already in the industry..
Define Behavioural economics
A field of study that seeks to incorporate the insights of psychology into economics, to enhance the explanatory power of economics.
Define Behavioural economist
A practitioner of behavioural economics.
Define Benefit-cost ratio
A ratio of the benefits to costs where a ratio greater than 1.0 indicates that a project’s benefits outweighs the costs, whereas a ratio of less than 1.0 indicates that the costs outweigh the benefits.
Define BEPS
A tax avoidance strategy used by MNCs, where profits are shifted from jurisdictions that have high taxes (such as the United States and Australia} jurisdictions that have low (or no} taxes. Often achieved by manipulating transfer prices (contracts between MNCs subsidiaries in different jurisdictions at prices that are designed to minimise tax but not lose money overall for the company}. The term is used in the OECD project designed to stop the practice.
Define Bilateral foreign aid
Bilateral foreign aid is aid given from one country government to another country’s government,
Define Blind recruitment
The practice of removing personally identifiable information from the resumes of applicants including their name, gender, age, education, and even sometimes the number of years of experience, in order to promote a selectin process that achieves more diverse outcomes.
Define Bonds Boom
Debt instruments issued by governments or corporations, and used to raise money for the government, often to finance budget deficits. The bond purchaser becomes the lender to the bond issuer.
Define BOP
A period of very high rates of growth in production (or real GDP) that is likely to be unsustainable. See Balance of Payments.
Define Bounded rationality
The notion that a consumer’s ability to make consistently rational decisions is compromised by the availability of information, the complexity of the decision, the brain’s cognitive limitations and time constraints.
Define Bounded self-interest
The notion that consumers are social beings and as such care about fairness, and are not always driven by narrow self interest to maximise their personal benefit. The degree of competition that exists amongst different producers (or sellers) of goods and services in their quest to increase market share.
Define Bounded willpower
The notion that consumers do not possess absolute self-control when confronted
Define Brand loyalty
The continuing willingness of consumers to purchase and repurchase particular brands of goods and services. This implies that consumers are unwilling to entertain the purchase of other brands. Business seeks to cultivate brand loyalty.
Define Budget constraint
The amount of income that consumers have at their disposal to spend on goods and services.
Define Budget deficit
When government revenue (or receipts) is less than government expenses (or expenditure).
Define Budget outcome
The outcome of the budget, either balanced, surplus or deficit.
Define Budget surplus
When government revenue (or receipts) exceeds government expenses (or expenditure).
Define Budgetary policy
The manipulation of the level and composition of federal government receipts and outlays in order to assist in the achievement of its economic and social goals for Australia.
Define Business
An entity that provides a good or service for sale with the objective of making a profit.
Define Business confidence
The general business community’s perception of their future levels of sales and profitability (also referred to as business sentiment).
Define Business cycle
The cyclical movement of economic activity over time, with periods of above average rates of economic growth and periods of negative or low rates of growth. Also referred to as the economic cycle. ‘Booms’ and ‘busts’ can be a feature of the business cycle. The business cycle needs to be judiciously managed by policy makers to avoid such occurrences.
Define CAD
Current Account Deficit.
Define CAFA
Capital and Financial Account.
