Extra Definitions for Paper 2

Question 1

Capital

Answer 1

Produced means of production

Question 2

Central Bank

Answer 2

An institution responsible for monetary and exchange rate policy which provides banking services to the government and to commercial banks and which is considered the lender of last resort

Question 3

Ceteris paribus

Answer 3

All other facts affecting the relationship examined remaining constant

Question 4

Discouraged workers

Answer 4

Unemployed workers who quit searching for a job after looking for one for a long time and are thus not considered unemployed or part of the labour force but who would gladly accept a job if one became available

Question 5

Economic costs

Answer 5

The value of all resources sacrificed in the production process that include the value of firm-owned resources as well as normal profit

Question 6

Hidden unemployment

Answer 6

Unemployment that is not reflected in official unemployment statistics which includes discouraged workers, involuntary part-timers, workers forced into early retirement or working below their capacity

Question 7

Human Development Index

Answer 7

The HDI measures average achievements of a population in terms of health, education and access to goods and services. These three dimensions are measured by the following indicators: Life expectancy at birth, mean years of schooling and expected years of schooling and GNI per capita (in US$ PPP)

Question 8

Indebtedness

Answer 8

Within a development framework the external debt of a country. The money a developing country owes to foreign governments, multilateral institutions and commercial banks

Question 9

Industrial policies

Answer 9

A set of interventionist supply-side policies whereby the government supports specific industries to exhibit high growth potential and to create significant positive spill overs for the whole economy.

Question 10

Infrastructure

Answer 10

Physical capital, typically financed by the government, that decreases the overall cost of economic activity as significant positive externalities are generated

Question 11

Land

Answer 11

Natural resources that an economy is endowed with

Question 12

Institutional framework

Answer 12

Refers to the laws and regulations of product, labour and capital markets in a country; more generally to the legal and regulatory framework within which economic activity is conducted

Question 13

Long-term growth

Answer 13

Growth as a result of more or better resources becoming available or of improved technology

Question 14

Potential output

Answer 14

The level of output an economy can produce in the long run when money wages are flexible and the labour market is in equilibrium, so that only natural unemployment is present

Question 15

Short-term growth

Answer 15

Economic growth that is the result of greater or better use of existing resources