Definitions Flashcards
Absolute advantage
A country will have an absolute advantage when its output of a product is greater per unit of resource used than any other country
Absolute poverty
This is when someone doesn’t have the income or wealth to meet their basic needs, such as food, shelter and water
Accelerator process
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
Aggregate demand
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)
Aggregate supply
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
Aid
The transfer of resources from one country to another
Allocative efficiency
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.
Asymmetric information
This is when the buyers have more information than seller (or the opposite) in a market
Automatic stabilisers
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.
Average cost
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
Average revenue
The revenue sold per unit
I.e. a firms total revenue did a given period of time, divided by the quantity sold
What is meant by the term exchange rate?
The price of one currency expressed in the terms of another
