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Economics > Economic Terms > Flashcards

Economic Terms Flashcards

1
Q

Transfer Payments

A

Payments received for which no factor of production has been supplied or offered.

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2
Q

Current Revenue

A

Tax that is not long-term e.g. (PAYE, Social Welfare)

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3
Q

Privitisation

A

The sale of state-owned companies to private investors e.g. Aer Lingus, Eircom (Now Eir)

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4
Q

Fiscal Policy

A

Actions taken by the government that influence the timing, magnitude and structure of current revenue and expenditure

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5
Q

Direct Tax

A

Taxes on income and wealth e.g. P.A.Y.E, D.I.R.T, Corp. Tax

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6
Q

Indirect Tax

A

Taxes on transactions/spending e.g V.A.T, Stamp duty

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7
Q

Tax Avoidance

A

Arranging one’s tax affairs within the law so as to minimise tax liabilities e.g. join a pension scheme

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8
Q

Tax Evasion

A

Reducing tax liabilities by making false returns or not making any returns at all.

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9
Q

Finance Act

A

Gives affect to proposed changes in taxation and expenditure proposed by the Minister for Finance in the budget.

  1. Inflationary effect
  2. Tax band/rates
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10
Q

Demand-pull Inflation

A

This is a situation in which demand for a good or service is greater than supply of that good or service. This causes prices to rise e.g. Inflationary Pressure.

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11
Q

Broaden Tax Base

A

Increase the number of people/areas on which the tax is levied - more caught in tax

e.g. NCT, WATER, PROPERTY CHARGES

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12
Q

Progressive Tax

A

A progressive tax takes a higher percentage of income from a person as that person’s taxable income increases. This form of taxation takes into account a person’s ability to pay e.g. PAYE

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13
Q

Regressive Tax

A

A regressive tax takes a higher percentage of income from a low-income earner than from a high-income earner e.g. V.A.T

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14
Q

Black Economy

A

All economic activity that goes unrecorded in the national income accounts.

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15
Q

Equity

A

The system of taxation should take a higher proportion o income in tax as taxable income in tax as income rises o the ability of each person to pay must be taken into account.

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16
Q

Economy

A

The amount of revenue collected should exceed the costs of collection.

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17
Q

Certainty

A

The amount paid should be unambiguous, certain and clear.

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18
Q

Convenience

A

Tax should be levied at a convenient time and manner for the contributor.

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19
Q

National Debt

A

The total amount of outstanding, borrowing by the government as a proportion of GDP.

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20
Q

Current Budget Deficit

A

One in which current planned expenditure exceeds current planned government revenue.

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21
Q

Tax Harmonisation

A

The aim of members of the European Union and other trading blocs to move all tax rates to the same rates i.e. align with each member state/country.

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22
Q

Legal Tender

A

The money that must be accepted if offered as payment for a purchase or settlement of a debt.

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23
Q

Monetary Policy

A

Those actions by the ECB that influence money supply, interest rates and the availability of credit.

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24
Q

Commercial Banks

A

Institutions that provide deposit and lending services to personal consumers and businesses.

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25
Q

Primary Liquidity Ratio

A

The amount of money with respect to short-term deposits that the Central Bank requires commercial banks to keep in cash form.

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26
Q

Capital Adequacy Ratio

A

The percentage of a bank’s capital to its risk-weighted assets. Tier 1 capital is comprised of profits (i.e retained earnings) and certain types of shares.

Effectively, this is the amount of back-up a bank has apart from cash as security e.g. common shares.

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27
Q

Nominal Interest Rate

A

The interest rate unadjusted for inflation

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28
Q

Real Rate of Interest

A

The nominal rate of interest minus the rate of inflation.

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29
Q

Laissez-faie principles

A

Minimum state intervention, deregulation of markets and privatisation of state bodies.

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30
Q

Commercial (retail) bank

A

Institutions that provide deposit/lending services to personal consumers/businesses.

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31
Q

Quantitive Easing

A

–

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32
Q

Nationalisation

A

–

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33
Q

Consumer

A

An individual who makes the decision whether to buy goods or services.

34
Q

Utility

A

The amount of benefit or satisfaction derived from the consumption of a good or service.

35
Q

Economic Good

A

A product or service which commands a price, derives utility and is transferable.

36
Q

Marginal Utility

A

(MU) is the addition to total utility (TU) brought about by the extra utility received caused by the consumption of one extra unit of a good.

In other words, marginal utility refers to the extra satisfaction a costumer gets from consuming an extra unit of a good.

37
Q

The Law of Diminishing Marginal Utility

A

The law states that as more units of a good are consumed, a point will be reached where marginal (extra) utility eventually begins to decline.

38
Q

Equilibrium

A

The condition where there is no tendency to change.

  • A consumer must spend their income in such a way that the ratio of marginal utility to price is the same for all the commodities which they buy.
39
Q

Effective Demand

A

Consumers must be willing to buy and be capable of paying the price set by the supplier. i.e money

40
Q

Derived Demand

A

When one commodity is an essential part of another commodity and it is demanded not for its own sake but because it is required to manufacture another good.

e.g timer and furniture, steel and cars.

41
Q

Composite Demand

A

When a commodity is required for a number of different uses.

e.g sugar

42
Q

Joint Demand

A

When the demand for one commodity is joined with the demand for another.

43
Q

Inferior Goods

A

A good with a negative income effect. [Income rises, demand falls]

e.g Shop for new dress and income levels increase = buy designer dress than department store dress.

44
Q

Normal Goods

A

A good that obeys the law of demand and which has a positive income effect.

45
Q

Substitute Goods

A

Goods that satisfy the same needs and thus can be considered as alternatives to each other.

e.g butter and low-fat spread.

46
Q

Complementary Goods

A

Goods that are used jointly. The use of one involves the use of the other.

NOTE!

If the phone increases in price, the demand for the phone AND the charger decreases

47
Q

The Law of Absolute Advantage

A

The law states that each country should specialise in the production of that good in which it has an absolute advantage.

i.e if it can produce the good more efficiently/cheaply than other countries

48
Q

The Law of Comparative Advantage

A

A country should specialise in the production of those goods and services in which it is relatively most efficient and trade for the remainder of its requirements.

49
Q

Enterprise

A

The factor of production that organises other factors of production in order to produce a good or service and takes all the risk in the hope of making a profit. The return to enterprise is profit or loss.

50
Q

Government Subsidy

A

Sum of money given by the government to a firm to help reduce costs of production and therefore, maintain price competitiveness.

51
Q

National Income

A

All income occurring to the permanent residents of a country due to economic activity in a specific period of time. i.e usually one year.

52
Q

Gross Domestic Product

A

This refers to all income generated within the physical boundary of Ireland including the earnings of both domestic and foreign firms.

53
Q

Repatriation of Profits

A

The sending of profits made in another country back to the firm’s country of origin

e.g Intel repatriates to California.

54
Q

Demand

A

The number of units of goods a consumer will buy at various prices.

55
Q

The Law of Demand

A

The law states than an increase in price leads to a decrease in quantity demand or decrease in price lads to an increase in quantity demand.

56
Q

Consumer Surplus

A

The benefit to consumers due to the difference between what consumers actually pay to consume a good and what they would have been willing to pay rather than go without the good.

e.g budget of €30, bought the item for €28. There is a consumer surplus of €2.

57
Q

Individual Demand

A

Individual demand studies the quantities of a good than an individual consumer is prepared to buy at each price.

58
Q

Giffen Goods

A

Goods with a positive price effect, i.e more is bought as the price rises and less is bought as the price falls.

59
Q

Supply

A

Refers to the quantity of a good that firms are willing to make available at various prices over a particular period of time.

60
Q

Individual Supply

A

The quantity of a good supplied by an individual firm at different prices.

61
Q

Market Supply

A

Refers to the quantity of a good supplied by all the firms in the market at different prices.

62
Q

Market Equilibrium

A

If no interference in the market occurs, price will eventually settle at the level where quantity demand equals quantity supplied. This positions where there is no tendency to chance.

63
Q

Land

A

Land, as a factor, is anything provided by nature, that helps in the production of an output, including goods, services and wealth.

64
Q

Supernormal Profits

A

When a company receives more profits generated than the minimum to stay in the business.

65
Q

Opportunity Cost

A

Opportunity cost is the cost of forgone alternatives involved in making a choice

66
Q

Mixed Economy

A

An economy that incorporates elements of both central planning (government involvement) and private enterprise in its economic system.

67
Q

Free Enterprise

A

The system where all businesses are privately owned by individuals.

68
Q

Economics

A

A social science which studies the allocation of scarce resources which have alternative uses.

69
Q

Economic Rent

A

Any earnings of a factor of production above its supply price.

70
Q

Merit Wants

A

Merit wants are goods and services which the government considers to be basic to life and so undertakes to provide to its citizens minimum standard irrespective of income

71
Q

Supply services (in national budget)

A

-

72
Q

Exchequer Borrowing Requirement

A

Borrowing by the state to finance a current budget deficit and borrowing for capital purposes.

73
Q

Public sector borrowing requirement

A

The exchequer borrowing requirement plus borrowing for semi-state bodies and local authorities

74
Q

Fiscal Drag

A

Fiscal drag is the delay between the government receiving extra taxation and increasing its current expenditure as a result

75
Q

Tax Wedge

A

The tax wedge is the deviation from equilibrium price/quantity as a result of a tax, which results in consumers paying more, and suppliers receiving less.

76
Q

Inflation

A

A steady and persistent increase in the general level of prices

77
Q

Velocity of Circulation

A

Velocity of circulation is the amount of units of money circulated in the economy during a given period of time

78
Q

Over/under population

A

A county is over/underpopulated when an increase/decrease in population causes a decrease/increase in the average income per head under given economic resources.

79
Q

Terms of Trade

A

The ratio between the average price of exports and the average price of imports.

80
Q

Purchasing power parity of theory

A

A theory which states that the exchange rate between one currency and another is in equilibrium when their domestic purchasing powers at that rate of exchange are equivalent.

In short, what this means is that a bundle of goods should cost the same in Canada and the United States once you take the exchange rate into account.

81
Q

Visible exports

A

Goods sold to other countries

82
Q

Visible imports

A

Goods that are bought from foreign countries.

Economics (9 decks)

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