Chapter 4 Vocabulary

Question 1

Capitalism

Answer 1

A system of production based on private property and free markets. (Ex. UK, Nigeria, Mexico)

Question 1

Central Bank

Answer 1

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. (Ex. UK —> Bank of England)

Question 2

Comparative Advantage

Answer 2

The ability of one country to produce a particular good or service more efficiently relative to other countries’ efficiency in producing the same good or service. (Ex. China’s ability to produce cheap goods)

Question 3

Deflation

Answer 3

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

Question 4

Economic Liberalization

Answer 4

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. (UK past 20 years)

Question 5

Gini Index

Answer 5

A statistical formula that measure the amount of inequality in a society; its scale ranges from 0 to 100, where 0 corresponds to perfect equality and 100 to perfect inequality.

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

Human Development Index (HDI)

Answer 7

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

Question 8

Hyperinflation

Answer 8

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

Question 9

Inflation

Answer 9

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 10

Laissez-Faire

Answer 10

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

Question 11

Market

Answer 11

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

Question 12

Mercantilism

Answer 12

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. (Iran)

Question 13

Monopoly

Answer 13

A single producer that is able to dominate the market for a good or service without effective competition. (Gazprom in Russia)

Question 14

Nontariff Regulatory Barriers

Answer 14

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

Question 15

Parastatal

Answer 15

Industry partially owned by the state.

Question 16

Political-Economic System

Answer 16

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

Question 17

Political Economy

Answer 17

The study of the interaction between states and markets.

Question 18

Property

Answer 18

Goods or services that are owned by an individual or a group, privately or publicly.

Question 19

Public Goods

Answer 19

Goods, provided or secured by the state, available to society, and which no private person or organization can own. (Primary education in the UK)

Question 20

Purchasing Power Parity (PPP)

Answer 20

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 21

Quota

Answer 21

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

Question 22

Regulation

Answer 22

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

Question 23

Social Expenditures

Answer 23

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

Question 24

Tariff

Answer 24

A tax on imported goods.