Definitions F->I(nve) Flashcards
What is foreign direct investment?
Investment in capital assets, e.g. manufacturing and service industry capacity, in a foreign country by a business with headquarters in another country
Often involves establishing subsidiary companies in the countries where the investment is made.
What are foreign exchange markets?
Global, decentralized markets for the trading of currencies
The main participants are large international commercial banks.
What is forward guidance?
Attempts to send signals to financial markets, businesses, and individuals about the Bank of England’s interest rate policy in the future
Aims to prevent surprises from sudden changes in policy.
What defines a freely floating exchange rate?
The exchange rate is determined solely by the interplay of demand for, and supply of, the currency.
What is a free trade area?
A region where member countries abolish tariffs on mutual trade but set their own tariffs on trade with non-member countries.
What is frictional unemployment?
Unemployment that is usually short term and occurs when a worker switches between jobs
Also known as transitional unemployment.
How does Beveridge define full employment?
Full employment means 3% or less of the labour force unemployed.
What is the free-market definition of full employment?
The level of employment occurring at the market-clearing real-wage rate, where the number of workers whom employers wish to hire equals the number of workers wanting to work.
What is full employment income?
The level of income when the economy is producing on its production possibility frontier, with no spare capacity.
What is globalization?
The process of increasing economic integration of the world’s economies.
What are government bonds?
Debt security issued by a government, known in the UK as gilt-edged securities or gilts
They can be resold second-hand on a stock exchange.
What is gross domestic product (GDP)?
The sum of all goods and services, or level of output, produced in the economy over a period of time, e.g. 1 year.
What is the hidden economy?
All economic transactions conducted in cash which are not recorded in the national income figures because of tax evasion
Also known as the informal economy, underground economy, and black economy.
What is human capital?
The skills, knowledge, and experience possessed by the population.
What are imports?
Goods or services produced in other countries and sold to residents of this country.
What is indexation?
The automatic adjustment of items such as pensions and welfare benefits to changes in the price level, through the use of a price index.
What is an index number?
A number used in an index, such as the consumer prices index, to enable accurate comparisons over time
The base year index number is typically 100.
What are indicators of development?
Includes gross domestic product (GDP) per head, information on the distribution of income, mortality rates, and health statistics.
What is an indirect tax?
A tax that can be shifted by the person legally liable to pay the tax onto someone else, e.g. through raising the price of a good being sold
Indirect taxes are levied on spending.
What is inflation?
A persistent or continuing rise in the average price level.
What is infrastructure?
The result of past investment in buildings, roads, bridges, power supplies, fast broadband, and other fixed capital goods needed for the economy to operate efficiently.
What is injection in economic terms?
Spending entering the circular flow of income as a result of investment, government spending, and exports.
What are institutional factors?
Examples include rules, laws, constitutions, the financial system, and defined property rights.
What are interventionist policies?
Policies where the government intervenes in, and sometimes replaces, free markets
Includes government funding of research and development.
