chapter 4: political economy

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

goods or services that are owned by an individual or a group privately or publicly

Question 4

public goods

Answer 4

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

Question 5

social expenditures

Answer 5

state’s provision of public benefits, such as education, transportation and health care (welfare), usually paid for by tax

Question 6

gross domestic product (GDP)

Answer 6

the total market value of goods and services produced by a country in a over a period of one year

Question 7

central bank

Answer 7

that 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
(lowers interest rate to stimulate economy, raises interest rates to check inflation)

Question 8

inflation

Answer 8

an outstripping of supply by demand, resulting in an increase in the general price level of goods and services and a consequent loss of value in a country’s currency

Question 9

hyperinflation

Answer 9

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

Question 10

deflation

Answer 10

a period of falling prices and values for goods, services, investments, and wages

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 a service without effective competition

Question 13

tariffs

Answer 13

a tax on imported goods

Question 14

quotas

Answer 14

a non-tariff that limits the quantity of a good that may be imported into a country

Question 15

non-tariff 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 relatively more efficiently than other countries’ efficiency in producing the same good or service

Question 17

political-economy 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

parastatals

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 across different countries by using prices in the United States as a benchmark

Question 23

gini index

Answer 23

a statistical tool that measures the amount of economic inequality in a society; its scale ranges from zero to one hundred, where zero corresponds with perfect equality, and one hundred to perfect inequality

Question 24

human development index (HDI)

Answer 24

a statistical tool that attempts to 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 - cutting taxes, reducing regulation, privatizing state-owned businesses and public goods, expanding property rights