Definitions

Question 1

Absolute advantage

Answer 1

A country will have an absolute advantage when its output of a product is greater per unit of resource used than any other country

Question 2

Absolute poverty

Answer 2

This is when someone doesn’t have the income or wealth to meet their basic needs, such as food, shelter and water

Question 3

Accelerator process

Answer 3

This is where any change in demand for goods/services beyond current capacity will lead to a greater percentage increase in the demand for the capital goods that firms need to produce those goods/services

Question 4

Aggregate demand

Answer 4

The total demand, or total spending, in an economy at a given price level over a given period of time.
It’s made up of consumption, investment, government spending and net imports
AD = C+I+G+(X-M)

Question 5

Aggregate supply

Answer 5

The total amount of goods and services which can be supplied in an economy at a given price level over a given period of time

Question 6

Aid

Answer 6

The transfer of resources from one country to another

Question 7

Allocative efficiency

Answer 7

This is when the price of a food is equal to the price that consumers are happy to pay for it. This will happen when all resources are allocated efficiently.

Question 8

Asymmetric information

Answer 8

This is when the buyers have more information than seller (or the opposite) in a market

Question 9

Automatic stabilisers

Answer 9

These are parts of fiscal policies that will automatically react to changes in the economic cycle. For example, during a recession, government spending is likely to increase because the government will automatically pay out more unemployment benefits, which will reduce the problems the recession caused.

Question 10

Average cost

Answer 10

The cost of production per unit of output
I.e. a firms total cost for a given period of time divided by the quantity produced

Question 11

Average revenue

Answer 11

The revenue sold per unit
I.e. a firms total revenue did a given period of time, divided by the quantity sold

Question 12

What is meant by the term exchange rate?

Answer 12

The price of one currency expressed in the terms of another

Question 13

Opportunity cost

Answer 13

Is the value of the next best alternative given up when a choice is made

Question 14

Enterprise/entrepreneurship

Answer 14

The ability and willingness to organise, coordinate, and take risks in the production process

Question 15

Microeconomics

Answer 15

Is a branch of economics that studies the behaviour of individuals and firms in the market

Question 16

Macroeconomics

Answer 16

Considers the economy as a whole

Question 17

Factor mobility

Answer 17

Occurs when factors of production can easily be moved from one use to another

Question 18

Occupational mobility

Answer 18

Resources can move easily between different types of work

Question 19

Occupational immobility of labour

Answer 19

Can occur because of insufficient education and training, a lack of transferable skills, inability to afford training.

Question 20

Specialisation

Answer 20

The concentration of individuals, firms or nations on producing a limited range of goods and services.

Question 21

The division of labour

Answer 21

A form of specialisation where the tasks needed to produce an item are divided among workers