Definitions Flashcards
national debt
total stock of gov debt over time
bop
measures inflows and outflows of money into and out of a country
accelerator effect
changes in investment can be directly linked to changes in the rate of gdp growth
economic integration / trading bloc
process whereby countries coordinate to reduce trade barriers and increase trade between themselves
bilateral/multilateral trade agreement
agreement to reduce trade barriers between 2/multiple countries
bilateral aid
when aid is given from one gov to another gov directly
investment
when firms spend money (on capital goods) to increase their efficiency/productive capacity
economic growth
an increase in real gdp in an economy in a year caused by an increase in ad or lras
pta
countries join together to reduce tariffs/quotas but only on certain g/s
eg eu and african Caribbean countries
full economic integration
countries completely harmonize all policy (fiscal+monetary) + political power under one governing body
eg uk
fta
countries join together and eliminate all trade barriers between each other, but they are free to trade w any other country outside the fta
eg NAFTA
customs union
countries join together and eliminate all trade barriers between each other, and impose a common external barrier (eg tariff) on countries outside the union
eg eu
fta but w/o freedom of trade w countries outside union
common/single market / economic union
countries join together and eliminate all trade barriers between each other along w complete free movement of fops, and impose a common external barrier (eg tariff) on countries outside the union
customs union but w complete free movement of fops
monetary union
economic union/common/single market
countries join together and eliminate all trade barriers between each other along w complete free movement of fops, and impose a common external barrier (eg tariff) on countries outside the union.
also adopt same currency, central bank and therefore same monetary policy
diversification
moving away from primary product dependence and into manufacturing
systemic risk
risk that collapse of one financial institution could lead to entire financial system collapse
Negative output gap
where actual output is less than potential output
+ output gap
where actual output is greater than potential output
near money
non cash assets which can be quickly converted into cash
eg bonds
liabilities
anything that is not owned and owed to someone else
automatic stabilisers
fiscal policy tools to influence gdp and counter fluctuations in the economic cycle
protectionsism
any barrier that restricts free trade taking place between nations
wto
int org that regulates world trade
international competitiveneess
the ability of a nation to compete successfully overseas and sustain improvements in living standards + output
bond
a piece of paper that guarantees the owner of the bond yearly couponn payments and the face value of the bond back when it matures
occupational immobility
skills mismatch between skills that workers have and job vacancies that exist
seasonal u
temporary fall in d for workers
eg ice cream, tourism, skiing
market making
place where financial assets can be bought and sold on behalf of lenders + borrowers
gni
total income generated by a country’s fops, regardless of where they are located
gni = gdp + net factor income (y earnt by domestic workers - y earnt by foreign workers)
Yfe
the max level of output an economy can produce using all fops at sustainable levels
Inflation
Sustained rise in the average p of g/s in an economy over a period of time reducing purchasing power
Structural u
Immobility of labour due to a lt change in the structure of an industry
Ad
Total d for a country’s g/s at a given pl in a given time period
=C+g+i+(x-m)
Bank run
Not enough liquid st assets to meet st liabilities
Globalisation
The process by which national economies become increasingly integrated and interdependent
Monetary policy
Changes to the ir sm and ex rate by the central bank to influence ad
Fishers eqn of exchange
Money s x velocity of circulation = q of final g+s sold in an economy x average p of g+s sold in an economy
M=p as v+q don’t change st
So only changes in m will affect i
Money markets eg
Gov bonds
Interbank lending
Multiplier
Any change to components of ad will have an even greater change in national output
Marginal propensity to consume
The willingness of a household to spend any extra y that they earn
Fiscal/budget surplus/deficit
When t >< g in a year
Market bubble
Where the p of assets are much greater than the assets true worth
Multi national corp
Firms which function in at least one other country aside from their country of origin
Sustainability
Meeting the needs of the present generation without reducing the ability of future generations to meet their own needs
M sub
Tariffs on m manufactured goods to allow domestic industries to grow
Trade creation
Movement from a high cost domestic/foreign producer to a low cost producer inside the customs union
