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Economics > Definitions > Flashcards

Definitions Flashcards

1
Q

Abnormal Profit

A

When average revenue is greater than the average cost.

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2
Q

Absolute Advantage

A

The ability of a country to produce a good with fewer resources than another country.

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3
Q

Absolute Poverty

A

People living below the minimum income necessary to satisfy basic physical needs (set at $1.90 PPP).

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4
Q

Abuse of Market Power

A

When a firm acts with the intention to eliminate competitors or to prevent entry of new firm in a market.

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5
Q

Actual Growth

A

When real GDP increases through time and is a result of higher quantity or quality of resources (illustrated by a movement in the PPC model).

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6
Q

Administrative Barriers

A

Trade barriers in the form of regulations that aim to limit imports into a country.

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7
Q

Adverse Selection

A

A type of market failure involving asymmetric information.

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8
Q

Aggregate Demand

A

Planned spending on domestic goods and services at different average price levels, per period of time.

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9
Q

Aggregate Supply

A

The planned level of output domestic firms are willing and able to offer at different average price levels.

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10
Q

Allocative Efficiency

A

Achieved when P = MC or MSB = MSC therefore scarce resources are allocated in the best possible way.

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11
Q

Allocative Inefficiency

A

When MSB > MSC or MSB < MSC so that there is a misallocation of scarce resources.

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12
Q

Anchoring

A

Situations in which people rely on a piece of unrelated information when making a decision.

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13
Q

Anti-dumping

A

Tariffs that aim at raising the artificially low price of a dumped imported good to the level of the higher domestic price.

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14
Q

Anti-monopoly Regulation

A

Laws and regulations intended to restrict anti-competitive behavior of firms that are abusing market power.

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15
Q

Appreciation

A

When the price of a currency increases in a floating exchange rate system.

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16
Q

Appropriate Technology

A

Technology that relies on the relatively abundant factor an economy is endowed with.

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17
Q

Asymmetric Information

A

A type of market failure where one party in an economic transaction has access to more or better information than the other party.

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18
Q

Automatic stabilizers

A

Institutionally built-in features that tend to decrease the short-term fluctuations of the business cycle without needing government intervention.

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19
Q

Average Costs

A

Total costs per unit of output produced.

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20
Q

Average Revenue

A

Revenue earned per unit sold thus equal to the price of the good.

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21
Q

Average Tax Rate

A

The ratio of the tax paid by an individual over their income expressed as a percentage.

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22
Q

Balance of Payments

A

A record of the value of all transactions of a country with the rest of the world over a period of time.

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23
Q

Balance of Trade in Goods

A

The value of exports of goods of a country minus the value of imports of goods over a given period of time.

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24
Q

Balance of Trade in Services

A

The value of exports of services of a country minus the value of imports of services over a given period of time.

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25
Q

Barriers to Entry

A

Anything that deters entry of new firms into a market such as licenses or patents.

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26
Q

Behavioral Economics

A

A subdiscipline of economics which focuses on cognitive psychology to better understand the behavior of economic decision-makers.

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27
Q

Biases

A

Systematic deviations from rational choice decision-making.

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28
Q

Bilateral Trade Agreements

A

An agreement between two countries to phase-out or eliminate trade related barriers.

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29
Q

Bounded Rationality

A

The idea that consumers and producers are rational only within limits.

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30
Q

Bounded Self-Control

A

The idea that individuals may not be able to act in their interests (e.g. procrastination).

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31
Q

Bounded Selfishness

A

The idea that individuals do not always maximise self-interest but also have concern for the well-being of others.

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32
Q

Budget Deficit

A

When government expenditures exceed government revenues usually over a period of a year.

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33
Q

Business Confidence

A

A measure of the degree of optimism that businesses have about the economic future.

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34
Q

Business Cycle

A

The short-term fluctuations of real GDP around its long-term trend.

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35
Q

Business Tax

A

Tax levied on the income of a business or corporation.

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36
Q

Capital

A

Physical capital refers to means of production whilst human capital refers to the skills embodied in the labor force of a country.

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37
Q

Capital Account

A

A subaccount of the balance of payments that includes credit and debit entries for non- produced and non-financial assets, capital transfers between residents and non-residents.

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38
Q

Capital Flight

A

When money and other assets flow out of a country to seek a “safe haven” in another country.

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39
Q

Capital Gains Tax

A

A tax on the profits realized from the sale of financial assets.

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40
Q

Capital Transfers

A

Part of the balance of payments, they are financial or non-financial assets for items including debt forgiveness, investment, non-life insurance claims.

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41
Q

Carbon Taxes

A

Pigouvian taxes levied on the carbon content of fuel.

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42
Q

Central Bank

A

Institution in charge of conducting monetary and exchange rate policy, and providing banking services to the government and commercial banks.

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43
Q

Ceteris Paribus

A

Latin expression meaning “other things being equal”.

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44
Q

Choice Architecture

A

The design of environments based on the idea that the range and layout of choices affects the decisions made by consumers.

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45
Q

Circular Economy

A

An economic system that aims to redefine growth, focusing on society-wide benefits.

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46
Q

Circular Flow of Income

A

A simplified model that shows the flows of income and expenditures in an economy.

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47
Q

Collective Self-Governence

A

The monitoring and regulating the use of a common pool resource between its users (e.g. fishery).

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48
Q

Collusive Oligopoly

A

A market where firms agree to fix price and/or to engage in other anti-competitive behaviour.

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49
Q

Common Market

A

When a group of countries agree not only to free trade of goods and services but also to free movement of capital and labour.

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50
Q

Common Pool Resources

A

Natural resources that are non-excludable and rivalrous.

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51
Q

Comparative Advantage

A

When a country can produce a good at a lower opportunity cost compared to another country.

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52
Q

Competitive Market

A

A market with many firms acting independently where no firm has the ability to control the price.

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53
Q

Competitive Market Equilibrium

A

Occurs when in a free competitive market, quantity demanded is equal to quantity supplied.

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54
Q

Competitive Supply

A

When goods that a firm is producing use the same resources in their production process.

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55
Q

Complements

A

Goods that are jointly consumed.

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56
Q

Composite Indicator

A

An indicator that is comprised as an average of more than one economic variable (e.g. HDI).

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57
Q

Concentration Ratios

A

The proportion of industry sales accounted for by the largest firms indicating the degree of market power.

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58
Q

Consumer Confidence

A

A measure of the degree of optimism that households have about their income and economic prospects.

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59
Q

Consumer Price Index (CPI)

A

The average of the prices of the goods and services consumed.

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60
Q

Consumer Surplus

A

The difference between how much a consumer is willing to pay and how much they actually pay.

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61
Q

Consumption

A

Spending by households on goods and services over a period of time.

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62
Q

Contractionary Fiscal Policy

A

Refers to a decrease in government expenditures and/or an increase in taxes that aim at decreasing aggregate demand and thus reducing inflationary pressures.

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63
Q

Contractionary Monetary Policy

A

A policy employed by the central bank involving an increase in interest rates and aimed at decreasing aggregate demand and thus inflationary pressures.

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64
Q

Corporate Indebtedness

A

The sum of what a corporation owes to holders of its debt.

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65
Q

Corporate Social Responsibility

A

A corporate goal adopted by many firms that aims to create and maintain an ethical and environmentally responsible image.

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66
Q

Cost-Push Inflation

A

Inflation that is a result of increased production costs and illustrated by a leftward shift of the SRAS curve.

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67
Q

Credit Items

A

Refers to transactions within the balance of payments of a country that lead to an inflow of currency.

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68
Q

Credit Rating

A

A grade assigned by certain agencies on the borrowing risks a prospective issuer of debt presents to lenders.

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69
Q

Crowding Out

A

When the increased borrowing needs of the government to finance the increased expenditures could lead to increased interest rates. Thus, reducing components of AD.

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70
Q

Current Account

A

A subaccount of the balance of payments that records the value of net exports, income and current transfers of a country over a period of time.

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71
Q

Current Account Deficit

A

Exists when debits or outflows are greater than credits or inflows.

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72
Q

Current Account Deficit

A

Exists when credits or inflows are greater than debits or inflows.

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73
Q

Current Transfers

A

An entry in the current account that records payments between residents and non-residents of a country without something of economic value being received in return.

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74
Q

Customs Union

A

An agreement between countries to phase out or eliminate tariffs and other trade barriers and establish a common external barrier toward non-members.

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75
Q

Cyclical Unemployment

A

Unemployment that is a result of a decrease in aggregate demand (occurs in a recession).

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76
Q

Debit Items

A

The transactions within the balance of payments of a country that lead to an outflow of currency.

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77
Q

Debt Relief (Cancellation)

A

A reduction of the debt burden of developing countries.

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78
Q

Debt Servicing

A

The repayment of principal and interest on the debt of a person, firm or country.

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79
Q

Default Choice

A

When a choice is made by default: selected when one does not do anything.

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80
Q

Deflation

A

A sustained decrease in the average price level of a country.

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81
Q

Deflationary Gap

A

Arises when the equilibrium level of real output is less than potential output as a result of a decrease in AD.

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82
Q

Demand

A

The relationship between price and quantity of a good or service that consumers are willing and able to buy over a time period, ceteris paribus.

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83
Q

Demand Management

A

Policies that aim at manipulating aggregate demand through changes in interest rates or changes in government expenditures and taxation.

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84
Q

Demand-pull Inflation

A

Inflation that is caused by increases in aggregate demand.

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85
Q

Demand-side Policies

A

Refers to economic policies that aim at affecting aggregate demand.

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86
Q

Demerit Goods

A

Goods or services that harm consumers and society, and tend to be over-consumed.

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87
Q

Depreciation

A

A decrease in the value of a currency in terms of another currency in a floating or managed exchange rate system.

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88
Q

Deregulation

A

A decrease in the value of a currency in a fixed exchange rate system.

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89
Q

Development Aid

A

Aid aimed at assisting developing countries in their development efforts.

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90
Q

Direct Taxes

A

Taxes on income, profits or wealth paid directly to the government.

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91
Q

Discount Rate

A

The interest rate that a central bank charges commercial banks for short-term loans.

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92
Q

Disinflation

A

When the average price level continues to rise at a slow rate so that the rate of inflation is positive but lower.

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93
Q

Dumping

A

When a firm sells abroad at a price below average cost or below the domestic price.

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94
Q

Economically Least Developed Countries (EDLCs)

A

Low-income countries facing severe structural constraints to sustainable development with low levels of human assets and highly vulnerable to economic and environmental shocks.

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95
Q

Economic Development

A

A multidimensional concept involving a sustained increase in living standards.

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96
Q

Economic Growth

A

Refers to increases in real GDP over time.

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97
Q

Economic Integration

A

Economic interdependence between countries involving agreements between to phase-out or eliminate trade and other barriers between them.

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98
Q

Economies of Scale

A

Falling average costs that a firm experiences when it increases its scale of operations.

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99
Q

Efficiency

A

Making the best use of scarce resources, where MSC = MSB or where social surplus is maximum.

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100
Q

Elasticity of Demand for Exports

A

A measure of the responsiveness of the volume of exports to a change in their price.

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101
Q

Elasticity of Demand for Imports

A

A measure of the responsiveness of the volume of imports to a change in their price.

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102
Q

Engel Curve

A

A curve showing the relationship between consumers’ income and quantity demanded of a good. It indicates whether a good is normal or inferior.

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103
Q

Entrepreneurship

A

The ability to organize the factors of production and willingness to take risks.

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104
Q

Equilibrium

A

A state of balance that is self-perpetuating in the absence of any outside disturbance.

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105
Q

Equity

A

The concept or idea of fairness.

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106
Q

Excess Demand

A

When quantity demanded at some price is greater than quantity supplied.

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107
Q

Excess Supply

A

when quantity supplied at some price is greater than quantity demanded.

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108
Q

Exchange Rate

A

The value of one currency expressed in term of another currency.

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109
Q

Excludable

A

Goods which producers can charge at a price which excludes whoever is not willing or able to pay for it from enjoying it.

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110
Q

Expansionary Fiscal Policy

A

An increase in government expenditures and/or a decrease in taxes that aim at increasing aggregate demand.

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111
Q

Expansionary Monetary Policy

A

Monetary policy aiming at increasing aggregate demand through a decrease in interest rates.

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112
Q

Expenditure Approach

A

One approach of measuring GDP that adds all the expenditures made on final domestic goods and services
over a period of time.

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113
Q

Expenditure Reducing

A

Contractionary demand side policies aiming at decreasing national income to narrow the current account deficit.

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114
Q

Expenditure Switching

A

Policies aimed at switching expenditures away from imports towards domestically produced goods and services.

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115
Q

Exports

A

Goods and services produced in one country and purchased by consumers in another country.

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116
Q

Export Promotion

A

Growth policies aiming at expansion of export revenues.

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117
Q

Export Revenue

A

The revenues collected by exporting firms.

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118
Q

Export Subsidy

A

Payments made by the government to exporting firms.

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119
Q

External Balance

A

A situation where the value of a country’s exports is balanced by the value of its imports over a period of time.

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120
Q

Externalities

A

External costs or benefits to third parties when a good or service is produced or consumed.

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121
Q

Factors of Production

A

Resources used in the production of goods and services including land, labour, capital and entrepreneurship.

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122
Q

Financial Account

A

Records inflows and outflows of portfolio and FDI funds over a period of time.

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123
Q

Firm

A

An entity (such as a business) that uses factors of production in order to produce and sell goods and services and earn profits.

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124
Q

Fiscal Policy

A

A demand-side policy using changes in government expenditure or direct taxation to influence aggregate demand.

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125
Q

Fixed Exchange Rate

A

An exchange rate system where the exchange rate is pegged to the value of another currency and maintained there with central bank intervention.

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126
Q

Floating Exchange Rate

A

An exchange rate system where the exchange rate is determined by the market demand and supply of the currency in the foreign exchange market without any intervention.

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127
Q

Foreign Aid

A

Refers to flows of grants or loans from developed to developing countries that are non-commercial and terms are concessional.

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128
Q

Foreign Direct Investment (FDI)

A

When a firm establishes a productive facility in a foreign country or acquires controlling interest (at least 10% of the ordinary shares) in an existing foreign firm.

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129
Q

Foreign Sector

A

In an open economy the term refers to exports and imports.

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130
Q

Framing

A

Shows how the way choices are presented that may affect the choice made.

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131
Q

Free Goods

A

Goods that are not considered scarce and hence do not have opportunity cost.

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132
Q

Free Market Economy

A

An economy where production is privately owned and where market forces determine the answers to the economic questions.

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133
Q

Free Rider Problem

A

When individuals consume a good or service without paying for it because they cannot be excluded from enjoying it.

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134
Q

Free Trade

A

International trade that is not subject any kind of trade barriers.

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135
Q

Free Trade Area

A

An agreement between two or more countries to phase-out or eliminate trade barriers between them.

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136
Q

Frictional Unemployment

A

Unemployment of individuals who are in- between jobs.

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137
Q

Full Employment

A

Exists when the economy is producing at its potential level

of real output and thus there is only natural unemployment.

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138
Q

Game Theory

A

A branch of mathematics that studies the strategic interaction of economic decision-makers.

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139
Q

Gender Equality Index (GII)

A

An indicator that measures gender inequalities in the dimensions of human development, reproductive health, empowerment and economic status.

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140
Q

Gini Coefficient

A

A measure of the degree of income inequality of a country ranging from zero (perfect equality) to 1 (perfect inequality).

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141
Q

Government Debt

A

The total amount the government owes to creditors.

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142
Q

Government Spending

A

All spending by the government including current and capital expenditures and transfer payments.

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143
Q

Gross Domestic Product (GDP)

A

The value of all final goods and services produced within an economy over a period of time (year or quarter).

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144
Q

Gross National Income (GNI)

A

The income earned by all national factors of production independently of where they are located over a period of time.

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145
Q

Happiness Index

A

An index used to measure economic well-being of a population using quality of life dimensions.

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146
Q

Happy Planet Index

A

An index that shows how efficiently residents of different countries are using environmental resources.

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147
Q

Homogeneous Products

A

Goods that are considered identical across firms in the eyes of consumers.

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148
Q

Household Indebtedness

A

The money that households owe.

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149
Q

Households

A

Groups of individuals in the economy who share the same living accomodation, pool their income and jointly decide the set of goods to consume.

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150
Q

Human Capital

A

The education, training, skills, experience and health embodied in the labor force of a country.

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151
Q

Human Development Index (HDI)

A

An index that reflects the three basic goals of development including health, education and standards of living.

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152
Q

Humanitarian Aid

A

Aid given to alleviate short-term suffering resulting from a natural catastrophe or war.

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153
Q

Imperfect Competition

A

A market structure where firms have a degree of market power as they face a negatively sloped demand curve.

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154
Q

Imperfect Information

A

When the information about a market or a transaction is incomplete.

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155
Q

Import Expenditure

A

The value of imports of goods and services.

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156
Q

Imports

A

The value of goods and services purchased domestically that are produced abroad.

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157
Q

Import Substitution

A

A growth strategy where domestic production is substituted for imports in an attempt to industrialize.

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158
Q

Incentive-related Policies

A

Policies that aim at improving economic incentives of individuals and firms.

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159
Q

Income

A

A flow of earnings from using factors of production to produce goods and services.

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160
Q

Income Approach

A

One of the methods used to measure GDP; adds up all incomes generated in the production process for a given time period.

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161
Q

Income Effect

A

Based on the law of demand, explains that if the price of a good increases then the real income of consumers decreases and they will tend to buy less of the good.

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162
Q

Income Elasticity of Demand (YED)

A

The responsiveness of demand for a good or service to a change in income.

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163
Q

Indirect Taxes

A

Taxes on expenditure to buy goods and services.

164
Q

Industrial Policies

A

A type of interventionist supply-side policies whereby the government chooses to support specific industries.

165
Q

Inequality adjusted Human Development Index (HDI)

A

An indicator consisting of an average of a country’s achievements in health, education and income adjusted for the degree of inequality characterizing each.

166
Q

Infant Industry

A

A new industry that should be protected from foreign competition until it is large enough to achieve economies of scale.

167
Q

Inferior Goods

A

Lower quality goods for which higher quality substitutes exists.

168
Q

Inflation

A

A sustained increase in the average level of prices.

169
Q

Inflationary Gap

A

The case where equilibrium real output exceeds potential output as a result of an increase in AD.

170
Q

Inflation Rate

A

The percentage change between two periods of the average price level, usually measured through the CPI.

171
Q

Informal Economy

A

The part of an economy where activity is not officially recorded, regulated or taxed.

172
Q

Infrastructure

A

Physical capital typically financed by governments that is essential for economic activity to take place.

173
Q

Injections

A

Spending on domestic output that does not originate from households.

174
Q

Interest Rate

A

The cost of borrowing money or the reward for saving money over a period of time as a percentage.

175
Q

International Monetary Fund (IMF)

A

An international financial institution whose objectives include to improve global monetary cooperation and secure financial stability.

176
Q

International Trade

A

Trade that involves the exports and imports of goods or services between countries.

177
Q

Interventionist Supply-side Policies

A

A set of policies that aim to increase an economy’s productive capacity that relies on government intervention.

178
Q

Investment

A

Spending by firms on capital goods.

179
Q

J-curve

A

Following devaluation or a sharp depreciation,
a trade deficit will typically widen before it
starts improving thus tracing the letter “J” if plotted against time.

180
Q

Joint Supply

A

Goods jointly produced hence producing one automatically leads to the production of the other.

181
Q

Keynesian Aggregate Supply Curve

A

An aggregate supply curve that shows the level of real output produced in an economy in relation to the price level.

182
Q

Keynesian Multiplier

A

The idea that an increase in any injection will lead to a greater increase in real GDP.

183
Q

Keynesian Revolution

A

An economic school of thought based upon the works of Keynes, advocating an interventionist role for the government in managing economic activity.

184
Q

Labor

A

One of the four factors of production that refers to the physical and mental contribution of workers to the production process.

185
Q

Labor Market Flexibility

A

The labour market is considered flexible if it can adjust to changes in labour demand and supply conditions.

186
Q

Labor Union

A

An organization of workers whose goals include improving working conditions and achieving higher compensation.

187
Q

Laissez Faire

A

The view that if market forces are left without government intervention the outcome will be efficient.

188
Q

Land

A

One of the four factors of production that refers to the natural resources within an economy.

189
Q

Land Rights

A

Legal rights over land holdings.

190
Q

Law of Demand

A

As the price of a good falls, the quantity demanded will increase over a certain period of time, ceteris paribus.

191
Q

Law of Diminishing Marginal Returns

A

The idea that as a variable factor (labor) is added to a fixed factor (capital) it will increase until reaching a point beyond which it is inefficient and total product falls.

192
Q

Law of Diminishing Marginal Utility

A

The idea that as an individual consumes additional units of a good, the additional satisfaction enjoyed decreases.

193
Q

Law of Supply

A

As the price of a good rises, the quantity supplied will rise over a certain period of time, ceteris paribus.

194
Q

Leakages

A

Income not spent on domestic goods and services.

195
Q

Long-run Aggregate Supply (SRAS)

A

Aggregate supply that is dependent upon the resources and technology in the economy and independent of price level.

196
Q

Long-run Phillips Curve

A

A curve showing the monetarist view that there is no trade-off between inflation and unemployment in the long run and that there exists a natural rate of unemployment at the level of potential output.

197
Q

Long-run in Microeconomics

A

The period of time when all factors of production are variable.

198
Q

Long-run in Macroeconomics

A

The period of time when the prices of all factors of production change to match changes in the price level.

199
Q

Long-term Growth

A

Growth over long periods of time.

200
Q

Long-term Growth Trend

A

Refers to average growth over long periods of time shown in the business cycle diagram as the line that runs through short-term fluctuations.

201
Q

Lorenz Curve

A

A curve showing what percentage of the population owns what percentage of the
total income or wealth in the economy.

202
Q

Loss

A

Occurs when total costs of a firm are greater than total revenues.

203
Q

Luxury Goods

A

Goods that are not considered essential by consumers therefore they have a price and income elastic demand.

204
Q

Macroeconomics

A

The study of aggregate economic activity that investigates how the economy as a whole works.

205
Q

Managed Exchange Rate

A

An exchange rate that floats in the foreign exchange markets but is subject to intervention in order to prevent undesirable movements.

206
Q

Mandated Choices

A

Choices made by consumers who are required to state whether or not they wish to take part in an action.

207
Q

Manufactured Products

A

Products or goods that have been produced by workers with capital goods.

208
Q

Marginal Benefit

A

The extra or additional benefit enjoyed by consumers that arises from consuming one more unit of output.

209
Q

Marginal Cost

A

The extra or additional costs of producing one more unit of output.

210
Q

Marginal Propensity to Consume (MPC)

A

The proportion of additional income that is spent by households on goods and services.

211
Q

Marginal Propensity to Import (MPM)

A

The proportion of additional income that is spent by households on imported goods and services.

212
Q

Marginal Propensity to Save (MPS)

A

The proportion of additional income that is saved by households.

213
Q

Marginal Propensity to Tax (MPT)

A

The proportion of additional income that is paid in taxes.

214
Q

Marginal Revenue

A

The additional revenue that arises for a firm when it sells one more unit of output.

215
Q

Marginal Social Benefit (MSB)

A

The additional benefit to society of consuming an additional unit of output.

216
Q

Marginal Social Cost (MSC)

A

The additional cost to society of producing an additional unit of output.

217
Q

Marginal Tax Rate

A

The proportion of additional income that is paid in taxes as a percentage.

218
Q

Marginal Utility

A

The extra or additional utility derived from consuming one more unit of a good or service.

219
Q

Market

A

Any arrangement where buyers and sellers interact to carry out an economic transaction.

220
Q

Market-based Supply-side Policies

A

A set of policies based on the competitive market, used to promote long-term economic growth.

221
Q

Market Concentration

A

The extent to which the total sales in a market are accounted for by the largest firms.

222
Q

Market Demand

A

The sum of the individual demand curves for a product of all the consumers in a market.

223
Q

Market Equilibrium

A

Occurs at the price where the quantity of a product demanded is equal to the quantity supplied.

224
Q

Market Failure

A

The failure of markets to achieve allocative efficiency.

225
Q

Market/price Mechanism

A

The system in which the forces of demand and supply determine the prices of products.

226
Q

Market-oriented Approaches

A

Approaches based on the actions of private decision-makers operating in markets with a minimum amount of government intervention.

227
Q

Market Power

A

The ability of a firm/s to raise and maintain price above the level of perfect competition (P > MC).

228
Q

Market Share

A

The percentage of total sales in a market accounted for by one firm.

229
Q

Market Supply

A

The sum of the individual supply curves for a product of all the producers in a market.

230
Q

Marshall-Lerner Condition

A

A condition stating that a depreciation or devaluation of a currency will lead to an improvement in the current account balance if the sum of export PED plus the import PED is greater than one.

231
Q

Maximum Price

A

A price set below the market equilibrium price of a good or service (price ceiling).

232
Q

Merit Goods

A

Goods or services considered to be beneficial for people that are under-provided by the market.

233
Q

Microeconomics

A

The study of the behaviour of individual economic decision-makers, the determination of market prices and quantities of goods, services, and factors of production.

234
Q

Microfinance

A

The provision of small loans to poor entrepreneurs who lack access to traditional banking services.

235
Q

Minimum Income Standards

A

A measure of poverty based on the beliefs of people regarding what is essential in order to achieve an acceptable standard of living.

236
Q

Minimum Lending Rate

A

The interest rate that is charged by a central bank when it lends to commercial banks.

237
Q

Minimum Price

A

A price set above the market equilibrium price of a good or service (price floor).

238
Q

Minimum Reserve Requirement

A

A requirement by the central bank that sets the minimum amount of reserves that commercial banks must maintain to back their loans.

239
Q

Minimum Wage

A

A type of price floor where the wage rate is set above the market equilibrium.

240
Q

Mixed Economy

A

An economy that has elements of a planned and free market economy.

241
Q

Monetarist/new Classical Counter Revolution

A

An economic school of thought arguing that the price mechanism along with well-functioning competitive markets are sufficient to lead the economy to full employment.

242
Q

Monetary Policy

A

A demand-side policy using changes in the money supply or interest rates to achieve economic objectives.

243
Q

Monetary Union

A

Where two or more countries share the same currency and have a common central bank.

244
Q

Money Creation

A

The process of creating new money by commercial banks through loans.

245
Q

Money Supply

A

The total amount of money available at a particular time.

246
Q

Monopolistic Competition

A

A market structure where there are many sellers, producing differentiated products, with no barriers to entry.

247
Q

Monopoly

A

A market structure where there is only one firm in the industry and there are high barriers to entry.

248
Q

Moral Hazard

A

A type of market failure where a party takes risks but does not face their full costs by changing behaviour after a transaction has taken place.

249
Q

Multidimensional Poverty Index (MPI)

A

An international measure of poverty.

250
Q

Multilateral Development Assistance

A

Assistance provided by multilateral organizations when they lend to developing countries to help them reach development objectives.

251
Q

Multilateral Trade Agreement

A

An agreement between many countries to lower tariffs or other protectionist measures, carried out through the WTO.

252
Q

National Income

A

The income earned by the factors of production of an economy.

253
Q

National Income Accounting

A

The services that measure the economy’s national income and output as well as other economic activity.

254
Q

National Income Statistics

A

The statistical data used to measure a nation’s income and output.

255
Q

Natural Monopoly

A

A monopoly that can produce enough output to cover the entire industry while still achieving economies of scale.

256
Q

Natural Rate of Unemployment

A

The rate of unemployment that occurs when the economy is producing at its potential output.

257
Q

Necessity

A

The degree to which a good is necessary or essential.

258
Q

Negative Externality of Consumption

A

Negative effects suffered by a third party whose interests are not considered when a good or service is consumed.

259
Q

Negative Externality of Production

A

Negative effects suffered by a third party whose interests are not considered when a good or service is produced.

260
Q

Net Exports

A

Export revenues minus import expenditure.

261
Q

Nominal Gross Domestic Product

A

The total money value of all final goods and services produced in an economy in a given time period at current values.

262
Q

Nominal Gross National Income

A

The total income earned by all the residents of a country (regardless of where they are located) in a given time period at current prices.

263
Q

Nominal Interest Rates

A

Interest rates that have not been adjusted for inflation.

264
Q

Non-collusive Oligopoly

A

When firms in an oligopoly do not resort to agreements hence there is competition.

265
Q

Non-excludable

A

A good which is impossible to prevent a person from using it.

266
Q

Non-governmental Organization (NGO)

A

Organizations that are not part of the government that promote economic development/ humanitarian ideals/ sustainable development.

267
Q

Non-price Competition

A

Competition between firms that is based on factors other than price.

268
Q

Non-produced Non-financial Assets

A

A measure of the net international sales and purchases of non-produced assets (e.g. land) and intangible assets (e.g. copyright).

269
Q

Non-rivalrous

A

Goods which consumption by one individual does not reduce the ability of others to consume them.

270
Q

Normal Good

A

A good where the demand for it increases as income increases.

271
Q

Normal Profit

A

The minimum return that must be received by a firm in order to stay in business.

272
Q

Normative Economics

A

Areas of the subject that are open to personal opinion and belief.

273
Q

Nudge Theory

A

Prompts or hints used to influence the choices made by consumers.

274
Q

OECD Better Life Index

A

An index to compare well-being across countries based on dimensions including living conditions and quality of life.

275
Q

Official Borrowing

A

International borrowing by a government.

276
Q

Official Development Assistance (ODA)

A

Aid that is provided to a country by another government or multilateral agency.

277
Q

Oligopoly

A

A market structure where there are a few large firms that dominate the market, with high barriers to entry.

278
Q

Open Market Operations

A

A tool of monetary policy involving the exchange of government bonds by the central bank in order to increase or decrease the money supply.

279
Q

Opportunity Cost

A

The next best alternative foregone when an economic decision is made.

280
Q

Output Approach

A

One of the methods to measure GDP; adds up the value of final goods and services produced in a given time period.

281
Q

Overvalued Currency

A

A currency whose value or exchange rate is greater than its equilibrium exchange rate.

282
Q

Payoff Matrix

A

A table showing all possible outcomes of decisions taken by decision-makers in game theory.

283
Q

Perfect Competition

A

A market structure where there is a very large number of small firms, producing identical products, with no barriers to entry or exit, and perfect information.

284
Q

Perfect Information

A

Where all stakeholders in an economic transaction have access to the same information.

285
Q

Perfectly Elastic Demand

A

Occurs with a horizontal demand curve showing that any amount can be bought at a particular price.

286
Q

Perfectly Elastic Supply

A

Occurs with a horizontal supply curve showing that any amount can be supplied at a particular price.

287
Q

Perfectly Inelastic Demand

A

Where a change in the price of a good or service leads to no change in the quantity demanded.

288
Q

Perfectly Inelastic Supply

A

Where a change in the price of a good or service leads to no change in the quantity supplied.

289
Q

Personal Income Taxes

A

Taxes paid by individuals or households on their incomes.

290
Q

Philips Curve

A

A curve showing the relationship between the rate of unemployment and the rate of inflation.

291
Q

Pigouvian Taxes

A

An indirect tax that is imposed to eliminate the external costs of production or consumption.

292
Q

Planned Economy

A

An economy where the means of production are owned by the state.

293
Q

Portfolio Investment

A

The purchase of financial assets such as shares and bonds in order to gain interest or dividends.

294
Q

Positive Economics

A

Deals with areas of the subject that are capable of being falsified (testable).

295
Q

Positive Externalities of Consumption

A

The beneficial effects that are enjoyed by third parties whose interests are not accounted for when a good or service is consumed.

296
Q

Positive Externalities of Production

A

The beneficial effects that are enjoyed by third parties whose interests are not accounted for when a good or service is produced.

297
Q

Potential Output

A

Output produced by an economy when it is at full employment equilibrium or long-run equilibrium (new classical).

298
Q

Poverty

A

Arises when the lack of possessions or money prevent an individual from achieving a satisfactory standard of living.

299
Q

Poverty Line

A

A level of income determined that is enough to ensure a family can satisfy minimum needs.

300
Q

Poverty Trap/cycle

A

Any circular chain of events starting and ending in poverty.

301
Q

Preferential Trade Agreement

A

Where a country agrees to give preferential access for certain products to its trading partners.

302
Q

Price Ceiling

A

A price imposed by an authority and set below the equilibrium price.

303
Q

Price Competition

A

Competition between firms that is based on price.

304
Q

Price Controls

A

Prices imposed by an authority, set above or below the equilibrium market price.

305
Q

Price Deflator

A

A price index that removes the impact of changes in the price level.

306
Q

Price Elastic Demand (PED)

A

A measure of the responsiveness of the quantity demanded of a good or service to a change in its price.

307
Q

Price Elasticity of Supply (PES)

A

A measure of the responsiveness of the quantity supplied of a good or service to a change in its price.

308
Q

Price Expectations

A

The forecasts or views that consumers or firms hold about future price movements.

309
Q

Price Floor

A

A price imposed by an authority and set above the market price.

310
Q

Price Maker

A

A firm that is able to influence the price at which it sells its product.

311
Q

Price Mechanism

A

The system where the forces of demand and supply determine the prices of products

312
Q

Price Taker

A

A firm that is unable to influence the price at which it sells its product.

313
Q

Price War

A

Occurs when firms successively cut their prices in an effort to match the price cuts of other firms.

314
Q

Primary Commodities

A

Raw materials that are produced in the primary sector.

315
Q

Primary Sector

A

Anything derived from the factor of production land.

316
Q

Privatization

A

The sale of public assets to the private sector.

317
Q

Producer Surplus

A

The benefit enjoyed by producers by receiving a price that is higher than the price they were willing to receive.

318
Q

Product Differentiation

A

The process by which firms try to make their products different from the products of
other firms in an effort to increase their sales.

319
Q

Production Possibilities Curve (PPC)

A

A curve showing the maximum combinations of goods or services that can be produced by an economy in a given time period given all resources are employed.

320
Q

Productive Capacity

A

The greatest capability of an economy to produce.

321
Q

Progressive Taxation

A

Taxation where the fraction of tax paid increases as income increases.

322
Q

Property Rights

A

The authority to own property and determine how that property is used.

323
Q

Proportional Tax

A

A system of taxation where tax is levied at a constant rate as income rises.

324
Q

Public Goods

A

Goods or services that have the characteristics of non-rivalry and non-excludability.

325
Q

Purchasing Power Parity (PPP)

A

A method used to make the buying power of different currencies equal to the buying power of US $1.

326
Q

Quantitative Easing

A

An expansionary monetary policy where a central bank buys government bonds or other financial assets.

327
Q

Quantity Demanded

A

The quantity of a good or service demanded at a particular price over a given time period, ceteris paribus.

328
Q

Quantity Supplied

A

The quantity of a good or service supplied at a particular price over a given time period, ceteris paribus.

329
Q

Quota

A

An import barrier that set limits on the quantity or value of imports that may be imported into a country.

330
Q

Rational Consumer Choice

A

Occurs when consumers make choices based on assumptions.

331
Q

Rational Producer Behavior

A

Occurs when firms try to maximize profit.

332
Q

Rationing

A

A method used to divide or apportion goods and services or resources among the various interested parties.

333
Q

Real GDP

A

The total value of all final goods and services produced in an economy in a given time period adjusted for inflation.

334
Q

Real GDP per Capita

A

Real GDP divided by the population of the country.

335
Q

Real GNI per Capita

A

Real GNI divided by the population of the country.

336
Q

Real Interest Rates

A

Interest rates that have been adjusted for inflation.

337
Q

Recession

A

Occurs when real GDP falls for at least two consecutive quarters.

338
Q

Refutation

A

A method used where any proposition must be subjected to an empirical test in order to see if it can be disproven or refuted.

339
Q

Regional Trade Agreement

A

An agreement between a group of countries usually within a geographical region to lower or eliminate trade barriers.

340
Q

Regressive Taxation

A

Taxation where the fraction of tax paid decreases as income increases.

341
Q

Relative Poverty

A

A comparative measure of poverty according to which income levels do not allow people to reach a standard of living typical for the society in which they live.

342
Q

Remittances

A

The transfer of money by foreign workers to individuals in their home country.

343
Q

Reserve Assets

A

Foreign currencies and precious metals held by central banks as a result of international trade.

344
Q

Resource Allocation

A

Apportioning resources to particular uses for production.

345
Q

Restricted Choices

A

This is when the choice of a consumer is restricted.

346
Q

Revaluation

A

An increase in the value of a currency in a fixed exchange rate system.

347
Q

Revenues

A

Payments received by firms when they sell their output.

348
Q

Rivalrous

A

Goods which the consumption by one person reduces the amount available for others.

349
Q

Rules of Thumb

A

Mental shortcuts for decision-making used to make a decision to a complex choice.

350
Q

Satisficing

A

The objective to achieve a satisfactory outcome with more objectives rather than focusing on one at the expense of others.

351
Q

Say’s Law

A

The supply of goods creates its own demand.

352
Q

Scarcity

A

The limited availability of economic resources relative to society’s unlimited needs and wants of goods and services.

353
Q

Screening

A

The use of a process by the participant with less information to gain more information regarding a transaction.

354
Q

Seasonal Unemployment

A

Unemployment that arises when people are out of work because their usual job is out of season.

355
Q

Shortage

A

Arises when the quantity demanded of a good or services is more than the quantity supplied at some particular price.

356
Q

Short-run Aggregate Supply (SRAS)

A

The total quantity of real GDP offered at different possible price levels in the short run.

357
Q

Short-run in Macroeconomics

A

The period of time when the prices of factors of production are considered fixed.

358
Q

Short-run in Microeconomics

A

The period of time when at least one factor of production is fixed.

359
Q

Short-run Phillips Curve

A

Shows the relationship between the rate of unemployment and the rate of inflation suggesting a tradeoff between inflation and unemployment.

360
Q

Short-term Fluctuations of Economic Activity

A

Periods of growth of real GDP followed by periods of contraction part of the business cycle.

361
Q

Signalling

A

The participant with more information sending a signal revealing relevant information about a transaction to the participant with less information.

362
Q

Social Surplus

A

The combination of consumer and producer surplus.

363
Q

Social Enterprise

A

A company whose main objective is to have a social impact rather than to make a profit.

364
Q

Socially Optimum Output

A

This occurs where there is allocative efficiency or MSB = MSC.

365
Q

Social Sciences

A

Academic studies of human societies and how people interact with each other.

366
Q

Specialization

A

When a firm or country focuses on the production of one or a few goods or services.

367
Q

Speculation

A

Process where something is bought or sold with a view to making a short term profit.

368
Q

Stakeholder

A

An individual or group of individuals who have an interest in an economic activity.

369
Q

Structural Unemployment

A

A kind of long-term unemployment that

arises from changes (technology, demand patterns, geographical location, labor market rigidities, etc.) in an economy.

370
Q

Subsidies

A

An amount of money paid by the government to a firm, per unit of output, to encourage production and lower the price to consumers.

371
Q

Export Subsidy

A

An amount of money paid by the government to a firm, per unit of output, to encourage production and provide the firm an advantage over foreign competition.

372
Q

Substitutes

A

Goods that can be used in place of each other, as they satisfy a similar need.

373
Q

Substitution Effect

A

When the price of a product falls compared to other product prices, consumers purchase more of that product as it is now cheaper.

374
Q

Supply

A

Quantities of a good that firms are willing and able to supply at different possible prices, over a given time period, ceteris paribus.

375
Q

Supply-side Policies

A

Government policies designed to shift the long- run aggregate supply curve to the right in order to achieve economic growth.

376
Q

Sustainability

A

Refers to the preserving the environment so that it can continue to satisfy needs and wants into the future.

377
Q

Sustainable Debt

A

A level of government debt such that the borrowing government can make its payments of interest and debt repayment whilst also being able to meet objectives.

378
Q

Sustainable Development

A

The degree to which the current generation is able to meet its needs whilst still conserving resources for future generations.

379
Q

Tariff

A

A tax placed on imports to protect domestic industries from foreign competition and raise revenue for the government.

380
Q

Total Costs

A

All the costs of a firm incurred for the use of resources to produce something.

381
Q

Total Revenue

A

The amount of revenue received by a firm from the sale of a quantity of output.

382
Q

Tradable Permits

A

Permits to pollute issued by a governing body that sets a maximum amount of pollution allowable (can be traded).

383
Q

Trade Creation

A

When higher cost imports are replaced by lower cost imports due to the formation of a trading bloc or agreement.

384
Q

Trade Diversion

A

In international trade it occurs when lower cost imports are replaced by higher cost imports due to the formation of a trading bloc or agreement.

385
Q

Trade Liberalization

A

The process of reducing barriers to international trade.

386
Q

Trade Protection

A

Government intervention which limits imports and/or encourage exports by setting up trade barriers that protect from foreign competition.

387
Q

Trading Bloc

A

Countries that have agreed to reduce protectionist measures between them.

388
Q

Tragedy of Commons

A

A situation with common pool resources, where individual users acting in self-interest go against the common good of all users by depleting that resource.

389
Q

Transfer Payments

A

Payments made by the government to vulnerable groups in a society.

390
Q

Undervalued Currency

A

A currency whose value or exchange rate is lower than its equilibrium exchange rate.

391
Q

Unemployment

A

When a person (above age and available to work) is actively looking for work but is without a job.

392
Q

Unemployment Benefits

A

Payments made by the government to those who are unemployed.

393
Q

Unemployment Rate

A

The number of unemployed workers expressed as a percentage of the total workforce.

394
Q

Unfair Competition (in international Trade)

A

Practices of countries trying to gain an unfair advantage through methods as undervalued exchange rates.

395
Q

Unitary Elastic Demand

A

When a change in the price of a good or service leads to an equal change in quantity demanded.

396
Q

Unitary Elastic Supply

A

When a change in the price of a good or service leads to an equal change in quantity supplied.

397
Q

Universal Basic Income

A

A regular cash payment given to all persons in an economy independent of any other source of income they may have.

398
Q

Sustainable Development Goals (SDGs)

A

17 goals set by the UN tackling poverty, inequalities and climate change.

399
Q

Utility

A

A measure of the satisfaction derived from consuming a good or service.

400
Q

Wage

A

Payment received by labour, which is a certain amount per unit of time.

401
Q

Wealth

A

The total value of assets owned by an entity minus what is owed to financial institutions.

402
Q

Weighted Price Index

A

A measure of average prices over a period of time that gives a weight to each item according to its relative importance in the consumers’ budgets, used to measure changes in the price level.

403
Q

Welfare Loss

A

A loss of a part of social surplus that occurs when there is market failure.

404
Q

World Bank

A

An international organization that provides loans and advice to less developed countries to promote development and reducing poverty.

405
Q

World Trade Organization (WTO)

A

An international body that sets the rules for global trading and resolves disputes between its member countries.

Economics (18 decks)

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