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econ > definitions theme 4 > Flashcards

definitions theme 4 Flashcards

1
Q

what is absolute advantage

A

when a country can produce a good note cheaply in absolute terms than another country

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2
Q

what’s absolute poverty

A

when people are unable to afford sufficient necessities to maintain life: those on <$1.90 a day

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3
Q

what is aid

A

when a country voluntarily transfers resources to another or gives loans on a concessionary basis

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4
Q

what’re automatic stabilisers

A

mechanisms which reduce the impact of changes in the economy on national income

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5
Q

what’re balance of payments

A

a record of all financial dealings over a period of time between economic agents of one country and another

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6
Q

what is the capital account

A

a part of the balance of payments; records debt forgiveness, inheritance taxes, transfers of financial assets and sales of assets

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7
Q

what’s capital expenditure

A

government spending on investment goods such as new roads, schools and hospitals, which will be consumed in over a year

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8
Q

what is capital flight

A

when large amounts of money are taken out of the country, rather than being left there for people to borrow and invest

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9
Q

what’re central banks

A

a financial institution that has direct responsibility to control the money supply and monetary policy, to manage gold reserves and foreign currency and to issue government debt

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10
Q

what is the common market

A

members trade freely in all economic resources and impose a common external tariff

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11
Q

what is comparative advantage

A

when a country is able to produce a good more cheaply relative to other goods produced; it has a lower opportunity cost

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12
Q

what is the current account

A

a part of the BoP; records payments for the purchase and sale of goods/services, as well as incomes and transfers

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13
Q

what is the customs union

A

the removal of all tariff barriers between members and the introduction of a common external tariff

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14
Q

what is current expenditure

A

general government final consumption plus transfer payments plus interest payments

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15
Q

what is the cyclical deficit

A

the part of the deficit that occurs because government spending fluctuates around the trade cycle

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16
Q

what is the difference between depreciation and devaluation

A

depreciation is the fall in value of the currency using floating exchange rates; devaluation is against another under a fixed system

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17
Q

what is a developed country

A

countries with high GDP/capita and high living standards

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18
Q

what is a developing country

A

countries with a low GDP/capita and a low standard of living

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19
Q

what is discretionary fiscal policy

A

deliberate manipulation of government expenditure and taxes to influence the economy; expansionary and deflationary policies

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20
Q

what is economic development

A

improvements in living standards

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21
Q

what’re emerging economies

A

a country growing quickly and has some characteristics of a developed country but is not fully there yet

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22
Q

what is the exchange rate

A

the purchasing power of a currency in terms of what it can buy of other currencies

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23
Q

what is the financial account

A

a part of the BoP; records FDI, portfolio investment and the transfer of gold and currency reserves

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24
Q

what’re financial markets

A

where buyers and sellers can buy and trade a range of services or assets that are fundamentally monetary in nature

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25
Q

what is the fiscal deficit

A

when the government spends more than it receives in a year

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26
Q

what is the fiscal deficit

A

when the government spends more than it receives in a year

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27
Q

what is the fixed exchange rate

A

the value of the currency is set against the value of another and that exchange rate doesn’t change

28
Q

what is a foreign currency gap

A

when a country doesn’t export enough to finance the purchase of goods from overseas

29
Q

what is free trade

A

trade with no barriers or restrictions

30
Q

what is the free floating exchange rate

A

the value of the currency is determined purely by market demand and supply of currency

31
Q

what is general government final consumption

A

spending on goods and services which will be consumed within the next year

32
Q

what is the gini coefficient

A

a measure of income inequality; the ratio of the area below the 45° line and the Lorenz curve and the whole area under the 45° line

33
Q

what is globalisation

A

the growing interdependence of countries and the rapid rate of change it brings about; movement towards free trade of goods/services, free movement of labour and capital and tree interchange of technology and intellectual capital

34
Q

what is the Harrod-Domar model

A

savings -> funds used for investment, and growth rates depend on the level of saving and the productivity of investment.
growth in developing countries is limited by the lack of investment

35
Q

what is human capital

A

the economic value of an individual’s skills, experience, training etc

36
Q

what is the HDI

A

measures an economy’s development based on income, health and eduxation

37
Q

what is international competitiveness

A

the ability of a country to compete effectively and become attractive in international markets; measures the costs of producing goods/services

38
Q

what is the Lewis model

A

suggests that countries develop through industrialisation as labour is moved from the unproductive agriculture sector to the more productive urban sector. this increases wages and leads to more savings and investmebt

39
Q

what is the Lorenz curve

A

cum. % of the population (x) plotted against the cum. % of income (y) that those people have

40
Q

what’re market bubbles

A

when the price of an asset rises massively and greatly exceeds the value of the asset itsekf

41
Q

what is market rigging

A

a group of individuals/institutions collide to fix prices or exchange info leading to gains for themselves at the expense of others in the market

42
Q

what’re micro finance schemes

A

schemes which aim to give poor and near-poor households permanent access to a range of financial services

43
Q

what is a managed floating exchange rate

A

value of the currency is determined by demand and supply but the CB intervened to prevent large changes

44
Q

what is the Marshall-Lerner condition

A

the sun of the price elasticities of imports and exports must be >1 if a currency depreciation is to have a positive impact on the trade balancr

45
Q

what’re monetary unions

A

2 or more countries with a single currency

46
Q

what is moral hazard

A

individuals acting in their own best interests knowing there are potential risks - another cause of financial market failure

47
Q

what is primary product dependency

A

when a country relies heavily on primary products, such as agricultural goods or mining

48
Q

what is progressive/proportional taxation

A

progressive: those on higher incomes pay a higher marginal rate of tax; those in higher incomes pay a higher % of their income on tax

proportional: proportion of income paid on the tax remains constant whilst the taxpayer income changes; everyone pays the same percentage of their income on tax

49
Q

what is protectionism

A

when the government enacts policies to restrict the free entry of imports into their country, such as tariffs and quotas

50
Q

what is regressive taxation

A

where the proportion of income paid in tax falls whilst the income of the taxpayer increases; those on lower incomes pay a higher % of their income on tax

51
Q

what is relative poverty

A

when income falls below an average income threshold, <60% of median household income in the UK

52
Q

what is revaluation

A

when the currency is increased against the value of another under a fixed system

53
Q

what is speculation

A

trading financial assets in hope of significant returns

54
Q

what is structural deficit

A

the deficit which occurs when the cyclical deficit is 0

55
Q

what’re tariffs

A

taxes placed on imported goods in an attempt to prevent people from buying them

56
Q

what’re terms of trade

A

ratio of an index of a country’s export prices to an index of its import prices

(average export price index /
average import price index) x100

57
Q

what is the theory of comparative advantage

A

countries will find specialisation mutually advantageous if the opportunity costs of production are different

58
Q

what is trade creation

A

when a country moves from buying goods from a high cost to a lower cost producer

59
Q

what is trade diversion

A

when a country moves from buying goods from a low cost producer to a higher cost one

60
Q

what is trade liberalisation

A

reduction/removal of protectionist polciies

61
Q

what’s a trading bloc

A

a group of countries that reduce or remove trade barriers between them

62
Q

what’re transfer payments

A

government spending for which there is no corresponding output, where money is taken from one group and given to another

63
Q

what is transfer pricing

A

where firms manipulate the price of their good so that profit is increased in areas of low tax

64
Q

what are unit labour costs

A

the cost of employing workers for each unit of a hood

total wages/real output

65
Q

what is the poverty trap/cycle

A

low incomes
low savings
low investment
low economic growth
“”

66
Q

what is the development trap/cycle

A

low incomes
low access to education and healthcare
low human capital
low productivity
“”

econ (10 decks)

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