Econ definitions Flashcards
key words
What is absolute poverty?
The inability of an individual or a family to afford a basic standard of goods and services, defined in relation to a nationally or internationally determined ‘poverty line’.
What are ad valorem taxes?
Taxes calculated as a fixed percentage of the price of the good or service; the amount of tax increases as the price increases.
What are administrative barriers?
Trade protection measures in the form of administrative procedures that countries use to prevent the free flow of imports.
What is aggregate demand?
The total quantity of goods and services that all buyers in an economy want to buy over a particular time period, at different possible price levels, ceteris paribus.
What is aggregate supply?
The total quantity of goods and services produced in an economy over a particular time period, at different price levels, ceteris paribus.
What is allocative efficiency?
An allocation of resources that results in producing the combination and quantity of goods and services mostly preferred by consumers.
What does appreciation of a currency refer to?
An increase in the value of a currency in the context of a floating or managed exchange rate system.
What are automatic stabilisers?
Factors that automatically work toward stabilising the economy by reducing short-term fluctuations of the business cycle.
What is the balance of payments?
A record of all transactions between the residents of a country and the residents of all other countries, showing all payments received and made.
What is a bilateral trade agreement?
Any trade agreement involving two trading partners, usually two countries.
What is a budget deficit/surplus?
The situation where government tax revenues are less/greater than government expenditures over a specific period.
What is business confidence?
A measure of the degree of optimism among firms in an economy about future performance.
What is the business cycle?
Fluctuations in the growth of real output, consisting of alternating periods of expansion and contraction.
What is a cap and trade scheme?
A scheme where a government sets a limit on pollutants that can be emitted, with tradable permits for firms.
What is the capital account?
In the balance of payments, it refers to the inflows minus outflows of funds for capital transfers and non-produced natural resources.
What is the current account?
Includes the balance of trade, balance on services, and inflows minus outflows of income and current transfers.
What is a carbon tax?
A tax per unit of carbon emissions of fossil fuels, aimed at addressing climate change.
What are common access resources?
Resources not owned by anyone, available for anyone to use without payment, leading to environmental unsustainability.
What are complementary goods?
Two or more goods that tend to be used together; an increase in the price of one leads to a decrease in demand for the other.
What is a composite indicator?
A summary measure of more than one indicator, often used to measure economic development.
What is a concessional loan?
Loans offered as part of foreign aid, at interest rates lower than commercial rates.
What is conditional aid?
Development aid provided on the condition that countries satisfy certain requirements.
What is the consumer price index?
A measure of the cost of living for the typical household, comparing the value of a basket of goods over time.
What is consumer surplus?
The difference between the highest prices consumers are willing to pay and the price actually paid.
What is cost-push inflation?
Inflation caused by a fall in aggregate supply due to increases in production costs.
What is cross-price elasticity of demand (XED)?
A measure of the responsiveness of the demand for one good to a change in the price of another good.
What is crowding-out?
The possible impacts on real GDP of increased government spending financed by borrowing, which may reduce private investment.
What is cyclical unemployment?
Unemployment that occurs during downturns of the business cycle due to declining aggregate demand.
What is deflation?
A continuing decrease in the general price level.
What is demand?
The various quantities of a good that consumers are willing and able to buy at different prices.
What are demerit goods?
Goods considered undesirable for consumers and overprovided by the market.
What is depreciation of a currency?
A decrease in the value of a currency in the context of a floating exchange rate system.
What is devaluation of a currency?
A decrease in the value of a currency in the context of a fixed exchange rate system.
What is development aid?
Foreign aid intended to help economically less developed countries.
What is disinflation?
A fall in the rate of inflation, involving a positive rate of inflation.
What is dumping?
The practice of selling a good in international markets at a price below the cost of production.
What is economic development?
Broad-based rises in the standard of living and well-being of a population.
What is economic growth?
Increases in total real output produced by an economy over time.
What is economic integration?
Economic interdependence between countries achieved by reducing or eliminating trade barriers.
What is equity?
The condition of being fair or just, not necessarily equal.
What is an exchange rate?
The rate at which one currency can be exchanged for another.
What are excise taxes?
Taxes imposed on spending on particular goods or services.
What does excludable mean?
A characteristic of goods where people can be excluded from using it by charging a price.
What is the expenditure approach?
A method used to measure the value of aggregate output by adding up all spending on final goods and services.
What is an externality?
When the actions of consumers or producers give rise to positive or negative side-effects on others.
What is export promotion?
A growth strategy where a country attempts to achieve economic growth by expanding its exports.
What is the financial account?
In the balance of payments, it refers to inflows minus outflows of funds due to foreign direct investment.
What is a fixed exchange rate?
An exchange rate fixed by the central bank, not permitted to change in response to supply and demand.
What is foreign aid?
Concessional financial flows from developed countries to economically less developed countries.
What is the free rider problem?
Occurs when people can enjoy the use of a good without paying for it, often associated with public goods.
What is free trade?
The absence of government intervention in international trade.
What is a free trade area?
A type of trading bloc where countries agree to eliminate trade barriers among themselves.
What is a freely floating exchange rate?
An exchange rate determined entirely by market forces without government intervention.
What is frictional unemployment?
Unemployment that occurs when workers are between jobs, tends to be short term.
What is the Gini coefficient?
A summary measure of income inequality, with a value between 0 and 1.
What is government intervention?
The practice of government to interfere in markets to achieve particular economic or social objectives.
What is green GDP?
Gross domestic product adjusted for environmental destruction and health consequences.
What is gross domestic product (GDP)?
A measure of the market value of all final goods and services produced within a country during a given time period.
What does it mean to intervene in markets?
To interfere in markets, preventing the free functioning of the market, usually for the purpose of achieving particular economic or social objectives.
What is Green GDP?
Gross domestic product (GDP) that has been adjusted to take into account environmental destruction and/or health consequences of environmental problems.
What is Gross Domestic Product (GDP)?
A measure of the value of aggregate output of an economy, it is the market value of all final goods and services produced within a country during a given time period (usually a year).
What is Gross National Income (GNI)?
A measure of the total income received by the residents of a country, equal to the value of all final goods and services produced by the factors of production supplied by the country’s residents regardless of where the factors are located.
What is the Human Development Index (HDI)?
A composite indicator of development which includes indicators that measure three dimensions of development: income per capita, levels of health and educational attainment.
What is humanitarian aid?
Foreign aid extended in regions where there are emergencies caused by violent conflicts or natural disasters, intended to save lives and ensure access to basic necessities.
What is import substitution?
A growth and trade strategy where a country begins to manufacture simple consumer goods oriented towards the domestic market to promote its domestic industry.
What is the income approach?
A method used to measure the value of aggregate output of an economy, which adds up all income earned by the factors of production in the course of producing all goods and services within a country.
What is income elasticity of demand?
A measure of the responsiveness of demand to changes in income; measured by the percentage change in quantity demanded divided by the percentage change in income.
What are indirect taxes?
Taxes levied on spending to buy goods and services, paid to the government authorities by the suppliers.
What is an infant industry?
A new domestic industry that has not had time to establish itself and achieve efficiencies in production.
What is an inferior good?
A good the demand for which varies negatively with income; as income increases, the demand for the good decreases.
What is inflation?
A continuing increase in the general price level.
What is infrastructure?
Numerous types of physical capital resulting from investments, making major contributions to economic growth and development.
What is an interest rate?
Interest expressed as a percentage; in the case of borrowed money, it is interest as a percentage of the amount borrowed.
What is the International Monetary Fund (IMF)?
An international financial institution composed of 185 member countries, whose purpose is to make short-term loans to governments on commercial terms.
What are labour market reforms?
Reforms intended to make labour markets more competitive and flexible, to lower labour costs and increase employment.
What are labour market rigidities?
Factors preventing the forces of supply and demand from operating in the labour market, preventing labour market flexibility.
What is the law of demand?
A law stating that there is a negative causal relationship between the price of a good and quantity of the good demanded.
What is the law of supply?
A law stating that there is a positive causal relationship between the price of a good and quantity of the good supplied.
What is the Lorenz curve?
A curve illustrating the degree of equality of income distribution in an economy.
What are luxuries?
Goods that are not necessary or essential; they have a price elastic demand and income elastic demand.
What are managed exchange rates?
Exchange rates that are for the most part free to float to their market levels, but central banks periodically intervene to stabilize them.
What are marginal social benefits (MSB)?
The extra benefits to society of consuming one more unit of a good.
What are marginal social costs (MSC)?
The extra costs to society of producing one more unit of a good.
What is market failure?
Occurs when the market fails to allocate resources efficiently, resulting in allocative inefficiency.
What is a price ceiling?
A maximum price set by the government for a particular good, resulting in a shortage of the product.
What are merit goods?
Goods that are held to be desirable for consumers, but which are underprovided by the market.
What is a price floor?
A minimum price set by the government for a particular good, resulting in a surplus of the product.
What is multilateral development assistance?
Lending to developing countries for the purpose of assisting their development on non-concessional terms.
What is a multilateral trade agreement?
A trade agreement between many countries, mainly carried out within the framework of the World Trade Organization (WTO).
What is a multinational corporation (MNC)?
A firm involved in foreign direct investment (FDI), based in one country and undertaking productive investments in another country.
What are necessities?
Goods that are necessary or essential; they have a price inelastic demand and income inelastic demand.
What is a negative externality of consumption?
A negative externality caused by consumption activities, leading to a situation where marginal social benefits are less than marginal private benefits.
What is a negative externality of production?
A negative externality caused by production activities, leading to a situation where marginal social costs are greater than marginal private costs.
What is nominal GDP?
Gross domestic product measured in terms of current prices, which does not account for changes in the price level.
What does non-excludable mean?
A characteristic of some goods where it is not possible to exclude someone from using a good.
What does non-rivalrous mean?
A characteristic of some goods where the consumption of the good by one person does not reduce consumption by someone else.
What is a normal good?
A good the demand for which varies positively with income; as income increases, demand for the good increases.
What is Official Development Assistance (ODA)?
The most important part of foreign aid, referring to foreign aid offered by countries or international organisations.
What is opportunity cost?
The value of the next best alternative that must be given up in order to obtain something else.
What is the output approach?
A method used to measure the value of aggregate output of an economy, which calculates the value of all final goods and services produced in the country.
What is overallocation of resources?
Occurs when too many resources are allocated to the production of a good relative to what is socially most desirable.
What is an overvalued currency?
A currency whose value is higher than its free-market value; may occur if the exchange rate is fixed.
What is portfolio investment?
Financial investment, including investment in stocks and bonds.
What is a positive externality of consumption?
A positive externality caused by consumption activities, leading to a situation where marginal social benefits are greater than marginal private benefits.
What is a positive externality of production?
A positive externality caused by production activities, leading to a situation where marginal social costs are less than marginal private costs.
What is potential output (potential GDP)?
The level of output that can be produced when there is ‘full employment’, meaning that unemployment is equal to the natural rate of unemployment.
