Chapter 4

Question 1

Political economy

Answer 1

The study of the interaction between states and markets

Question 2

Market

Answer 2

The interaction between the forces of supply and demand that allocates resources.

Question 3

Property

Answer 3

The ownership of anything tangible or intangible includes but is not limited to land, buildings, businesses, or personal items.

Question 4

Public Goods

Answer 4

Goods, provided or secured by that state, available to society, and which no private person or organization can own.

Question 5

Social expenditures

Answer 5

State provision of public benefits, such as education, health care, and transportation.

Question 6

Gross domestic product (GDP)

Answer 6

The total market value of all goods and services produced by a country over a period of one year.

Question 7

Central bank

Answer 7

The state institution that controls how much money is flowing through the economy as well as how much it costs to borrow money in that economy.

Question 8

Inflation

Answer 8

An increase in the general price level of goods and services in the economy.

Question 9

Hyperinflation

Answer 9

Inflation of more than 50 percent a month for more than two months in a row.

Question 10

Deflation

Answer 10

A decline in the prices of goods and services.

Question 11

Regulation

Answer 11

A rule or an order that sets the boundaries of a given procedure.

Question 12

Monopoly

Answer 12

A single producer that is able to dominate the market for a good or service without effective competition.

Question 13

Tariff

Answer 13

A tax on imported goods

Question 14

Quota

Answer 14

A nontariff barrier that limits the quantity of a good that may be imported into a country.

Question 15

nontariff regulatory barriers

Answer 15

Policies and regulations used to limit imports through methods other than taxation.

Question 16

Comparative advantage

Answer 16

The ability of one country to produce a particular good or service more effectively relative to another country’s efficiency in producing the same good or service.

Question 17

Political-economic system

Answer 17

The relationship between political and economic institutions in a particular country and the policies and outcomes they create.

Question 18

laissez-faire

Answer 18

The principle that the economy should be “allowed to do” what it wishes; a liberal system of minimal state interference in the economy.

Question 19

Capitalism

Answer 19

A system of production based on private property and free markets.

Question 20

Mercantilism

Answer 20

A political-economic system in which national economic power is paramount and the domestic economy is viewed as an instrument that exists primarily to serve the needs of the state.

Question 21

Parastatal

Answer 21

Industry partially owned by the state.

Question 22

Purchasing power parity (PPP)

Answer 22

A statistical tool that attempts to estimate the buying power of income across different countries by using prices in the United States as a benchmark.

Question 23

Gini index

Answer 23

A statistical formula that measures the amount of inequality in a society; its scale ranges from zero to 100, where zero corresponds to perfect equality and 100 to perfect inequality.

Question 24

Human Development Index (HDI)

Answer 24

A statistical tool that attempts to evaluate the overall wealth, health, and knowledge of a country’s people.

Question 25

Economic liberalization

Answer 25

Changes consistent with liberalism that aim to limit the power of the state and increase the power of the market and private property in an economy.