Formal definitions Flashcards
Abnormal Profit
When total revenue > total costs; price > average costs
Absolute Advantage
A country’s ability to produce goods using fewer resources than another.
Absolute Poverty
Living on less than $1.90 a day
Abuse of market power
When firms use market power to restrict competition
Administrative Barriers
Trade protection measures in the form of administrative procedures that countries may use to prevent the free flow of imports into a country.
Adverse Selection
A type of asymmetric information where one party knows more than other about the quality of the product being sold.
Aggregate Demand (definition)
The total quantity of goods and services that all buyer in an economy want to buy over a particular time period.
Aggregate Demand (equation)
Consumption (C) + Investment (I) + Government Spending (G) + Exports (X) - Imports (M)
Aggregate Supply
The total quantity of goods and services produces in an economy over a particular time period.
Allocative Efficiency
An allocation of resources that results in producing the combination and quantity of goods and services preferred by consumers. MSC = MSB or P = MC
Anchoring
The use of irrelevant information from the past to make decisions (previous prices for example).
Appreciation
An increase in the value of a currency in the context of a floating exchange rate system or managed exchange rate system.
Asymmetric Information
A type of market failure where buyers and sellers do not have equal access to information, usually resulting in a misallocation of scarce resources.
Automatic stabilizers
Factors that automatically, without any action by government authorities, work toward stabilizing the economy by reducing the short-term fluctuations of the business cycle. (progressive income taxes and unemployment benefits).
Availability Bias/Recency Bias
The logical fallacy that refers to the use of information that is more recently available which people tend to rely on more heavily.
Average Costs
Cost per unit of output: Total costs/Total output
Average Tax Rate
Tax divided by total income expressed as a percentage.
Balance of Payments
A record (typically over a year) of all the transactions between the residents of a country and the residents of all other countries. Payments received are CREDITS and payments made are DEBITS.
Balance of Trade in Goods
Part of the balance of payments, it is the value of exports of goods minus the value of imports of goods over a period of time (usually a year).
Balance of Trade in Services
Part of the balance of payments, it is the value of exports of services minus the value of imports of services over a period of time (usually a year).
Barriers to Entry
Anything that can prevent a firm from entering an industry and beginning production, as a result limiting the degree of competition in the industry.
Behavioral Economics
A relatively new branch of Economics with strong influences from psychology that pushes away from Homo Economicus and the idea that humans are super-rational individuals.
Biases
Systematic errors in thinking or evaluating.
Bilateral Trade Agreement
Any trade agreement involving two trading partners, usually two countries.
Bounded Rationality
The idea that consumers are rational only within limits, as a consumers’ rationality is limited by consumers’ insufficient information. It is ultimately not worth it for the consumer to spend their time maximizing their information over any and all purchases.
Bounded Self-control
The idea that people in reality exercise self-control only within limits. “Everything in moderation, including moderation.”
Bounded Selfishness
People are selfish only within limits; the Neo-classical assumption cannot account fore countless selfless acts.
Budget Deficit
Referring usually to the government’s budget, it is the situation where government tax revenues are less than government expenditures typically measured over a year.
Budget Surplus
Referring usually to the government’s budget, it is the situation where government tax revenues are greater than government expenditures typically measured over a year.
Business cycle
Fluctuations. in the growth of real output, or real GDP, consisting of alternating periods of expansion and contraction known as peaks and troughs.
Capital
One of the factors of production, which itself has been produced (unless natural) including machinery, tools, equipment, buildings etc.
Capital Account
Within the balance of payments, refers to the inflows minus the outflows of funds for capital transfers (debt forgiveness and non-life insurance claims) and the purchase of non-produced natural resources. Relatively unimportant in the balance of payments.
Capital Expenditures
Public investment or the production of physical capital including infrastructure.
Capital Flight
The large-scale transfer of privately-owned financial capital (funds) to another country as a result of domestic uncertainty and instability.
Carbon tax
A tex per unit of carbon emissions of fossil fuels.
Central Bank
A financial institution responsible for regulating the country’s financial system and commercial banks and carrying out monetary policy.
Ceteris Paribus
All else being equal
Choice Architecture
The design of environments in which people makes choices, based on the idea that context influences how people make decisions.
Circular Economy + Example
The idea that goods should be produced in such a way that they can be repaired rather than thrown out. Donut Economics: Amsterdam.
Circular flow of Income
A flow of income in an economy where the value of output produced is equal to the total income generated in pricing that output, which is equal to expenditures made to purchase that output.
Collusion
An agreement among firms to fix prices, or divide the market between them, so as to limit competition and maximize profit (typically in an oligopoly).
Commercial Bank
A financial institution (private or public) whose main functions are to hold deposits for their customers (consumers and firms), to make loans to their customers, to transfer funds by check from one bank to another and to buy government bonds (regulated by central bank).
Common Market + Example
A type of trading bloc in which countries that have formed a customs union proceed to:
- Eliminate tariffs between
- Common external policy
- Eliminate restrictions on movement of factors of production (Labour)
Ex. European Economic Community
Common Pool Resources
A good which is rival and non-excludable (fish, grazing land)
Comparative Advantage
When a country has a lower opportunity cost than another country in the production of a good.
Competition
When there are many buyers and sellers acting independently so no one can influence the price of a good.
Complementary Goods
Two or more goods that tend to be used together. An increase in the price of one will lead to a fall in demand of the other. (Pancakes, Maple Syrup)
Composite Indicator
A summary measure of more than one indicator (HDI).
Concentration Ratio
A measure of how much an industry’s production is concentrated among the industry’s largest firms. (The degree of competitiveness).
Consumer Confidence
The degree of optimism of consumers about their future income and the future of the economy. Determinant of Consumer Expenditure in AD.
Consumer Price Index
A measure of the cost of living for the typical household via comparing the value of a basket of goods and services from one year to another. Measure inflation.
Consumer Surplus
The difference between the prices consumers are willing to pay and the price they have to pay in a given market. Area left of demand curve above the price line.
Consumption
Spending by households on goods and services.
Contracting Out
When a government makes an arrangement with a private firm to carry out an activity they were previously doing themselves.
Contractionary Fiscal Policy
Fiscal policy used to combat inflation typically involving a cut in government spending or an increase in taxes.
Contractionary Monetary Policy
Monetary Policy used to combat inflation typically involving the increase in intrest rates to reduce investment and spending.
Corporate Income Tax
Tax on the profits of corporations.
Cost-push Inflation
A type of inflation caused by a fall in aggregate supply , usually resulting from increases in costs of production. A leftwards shift in AS.
Costs of Production
Payments by firms to obtain and use factors of production in their production process.
Crowding Out
The possible impacts on real GDP of government spending financed by borrowing.
Current Account Balance
The sum of credits minus debits in the current account.
Current Account Deficit
When the current account balance has a negative value; debits are larger than credits.
Current Account
In the balance of payments, this includes the balance of trade plus the balance of services, plus net flow of income and current transfers. The most important part of the BOP in many countries.
Current Account Surplus
When the current account has a positive value meaning that credits are larger than debits.
Current Transfers
An Item in the current account of the BOP referring to inflows and outflows of funds for items including gifts foreign aid and pensions.
Customs Union
A type of trading bloc, consisting of a group of countries that fulfil the requirements of a free trade area and in addition adopt a common policy toward all non-member states. Act as a group in negotiations.
Cyclical Unemployment
A type of unemployment that occurs during the downturns of the business cycle, when the economy is in a recessionary gap.
Debit Items
Payments made to other countries in the BOP.
Default Choice
In behavioural economics, the choice made when no information is known.
Deflation
A continuing or sustained decrease in the general price level.
Demand-pull Inflation
Inflation caused by an increase in Aggregate Demand. Rightwards shift in AD curve.
Demand-side Policies
Policies that attempt to change aggregate demand in order to achieve goals of price stability, full employment and economic growth.
Demerit Goods
Goods with negative consumption externalities on both the consumer and third parties. Over-produced and over-consumer.
Depreciation
A decrease in the value of a currency in the context of a floating exchange rate system or managed exchange rate system.
Deregulation
Policies involving the elimination or reduction of government regulation of private sector activities.
Devaluation
A decrease in the value of a currency in the context of a fixed or managed exchange rate system or managed exchange rate system.
Development Aid
Foreign aid intended to help economically less developed countries with growth and development.
Direct Taxes
Taxes paid directly to the government by the taxpayer (personal income, corporate and wealth tax).
Disinflation
A fall in the rate of inflation.
Distribution of Income
How much of an economy’s total income different individuals or groups in the population recieve.
Economic Development
A concept broader than economic growth which encompasses a general rise in living standards including education, healthcare and shelter.
Economic Growth
Increase in total real output (GDP).
Economic Integration
Economic interdependence between countries usually achieved by agreement between countries to reduce or eliminate trade barriers.
Economies of Scale
A fall in the average costs of production as a firm increases in output and size.
Elasticity
The responsiveness or sensitivity of a variable to changes in any of the variable’s determinants.
Equity
The condition of being fair or just.
Exchange rate
The rate at which one currency can be traded for another.
Excludable
A characteristic of a good making it able to stop others from using it and charge a price for its benefits.
Externality
When actions of consumers or producers give rise to negative or positive effects on third parties.
Four Factors of Production
Land, Labour, Capital and Entrepreneurship.
Financial Account
In the BOP, inflows minus outflows of funds due to FDI, portfolio investment, changes in reserve assets and changes in official borrowing.
Fiscal Policy
Governmental manipulations f its own expenditures and taxes in order to influence AD.
Foreign Aid
The transfer of funds or goods and services to developing countries with the main objective to bring about improvements in their economic, social and political conditions.
FDI
Investment by firms based in one country in productive activities in another country.
Framing (BE)
How choices are presented to decision makers.
Free Good
Any good that is not scarce, therefore has zero opportunity cost.
Free Rider Problem
Provision of public goods allows people to enjoy the benefits without paying.
Free Trade Area + Example
A type of trading bloc that agree to eliminate trade barriers between themselves. North American Free Trade Agreement (NAFTA).
Frictional Unemployment
A type of unemployment that occurs when workers are between jobs; tends to be short term.
Gini Coefficient
A summary measure of the information contained in the Lorenz Curve of an economy. The Area between the diagonal and the curve. Inequality increase when Gini is closer to 1.
Government Intervention
The practice of government to intervene in markets preventing the free functioning of the market.
GDP
A nation’s aggregate output: all the goods and services produced in a nation (over a year).
GNI
The total income received by the residents of a country. GDP + income from abroad - income sent abroad (remittances).
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 necessities.
Imports
Goods or services produced in other nations that are bought and brought into the domestic economy.
Income
The money people receive form their employment along with interest from savings accounts and bonds, rents from property, pensions… etc.
Income elasticity of demand
the responsiveness of demand to changes in income.
Income taxes
taxes paid by households on their incomes
indirect taxes
taxes levied on spending to buy goods and services called indicret because whereas payment of some or all of the tax by the consumer in involved they are paid to the government by the supplies (firms) here indirect.
Inelastic
refers to a low responsiveness of a variable to change in another variable.
Infant indusrty
a new domestic industry that has not had time to establish itself and achieve efficiencies in production making it difficult to compete with more mature firms from abroad.
Inferior good
a good the demand for which varies negatively with income. Income falls, demand increases.
Inflation
A continuing or sustained increase in the general price level.
Inflationary gap
When real GDP is greater than potential GDP and unemployment is below the natural gap.
Informal Economy
Politically correct black market. Unregistered economic activity that is unregistered and unregulated.
Infrastructure
Physical capital resulting from investments making major contributions to economic growth and development by lowering costs of production and increasing productivity.
Injections
The entry into income flow of funds corresponding to investment.
Interdependence
The idea that economic decision-makers interact with and depend on each other; arises from the fact that no one is self-sufficient.
Interest
A payment, per unit of time, for the use of borrowed money.
Interest Rate
Interest expressed as a percentage of the money borrowed.
International Monetary Fund (IMF)
An International financial institution composed of 189 member countries, whose purpose is to make short-term loans to governments on commercial terms in order to stabilize exchange rate, alleviate BOP difficulties and help countries meet their foreign debt obligations.
Investment
includes spending by firms or the government on capital goods and all spending on new construction.
J-curve effect
A curve that plots the balance of trade on the vertical axis and time on the horizontal axis showing that a country with depreciating/devaluing currency may see a worsening in its trade balance in the period immediately following said depreciation. Later the deficit will shrink if ML condition holds.
Marginal Utility
The extra additional utility received from consuming one more unit of a good.
Market concentration
The degree to which a market us dominated by a small number of firms. Less firms = higher concentration.
Market Failure
When a market fails to allocate resources efficiently, or to provide the quantity and combination of goods and services mostly wanted by society.
Market
the interaction between buyers and sellers in order to exchange goods or services.
Market power
the control that a seller may have over the price of the product they sell.
Market Share
the percentage of total sales in a market that is earned by a single firm.
Market-oriented policy
A policy in which government intervention is minimal - Laissez-faire. Economic decisions are largely made by the private decision makers (firms and consumers) and the market has significant freedom to determine resource allocation.
Marshall-Lerner Condition
A condition stating when depreciation or devaluation of a country’s currency will lead to an improvement in the country’s balance of trade: the sum of the price elasticities of demand for imports and exports must be greater that 1 for the trade balance to improve (decrease trade deficit). Holds long term but not short term (J curve)
Merit goods + example
Goods that are desirable for consumers and offer positive consumption externalities which are naturally under provided by a market (Vaccines and education).
Microfinance
Programs to provide credit (loans) in small amounts to people who do not ordinarily have access to credit due to lack of collateral. Helps poor people climb out of poverty.
Minimum lending rate
the interest rate charged by the central bank when it lends funds to commercial banks.
Mixed Economy
An economy that combines the command approach with the market approach to resource ownership, decision-making and rationing.
Mobile Banking
The use of mobile phones and the internet to pay bills and to receive or pay money, meeting the needs of users for easier banking transactions. Helps reduce poverty in LEDCs.
Monetary Policy
Policy carried out by the central bank, aiming to change interest rates in order to influence AD.
Monetary Union + Example
A high form of economic integration involving the adoption by a group of countries of a single currency and a common monetary policy carried out by a single central bank. (countries in EU that use Euro).
Monopolistic Competition
A market structure with a large number of firms, substantial control over market price, product differentiation and no barriers to entry.
Monopoly
A market structure with a single or dominant firm in the industry, significant control over price, unique product with no close substitutes and high barriers to entry.
Moral Hazard
Situations where one party takes risks but does not face the full costs of these risks because another party bears the full risk.
Multilateral Trade Agreement
A trade agreement between many countries. In modern circumstances, typically carried out by the WTO.
Multinational Corporation (MNC)
A firm involved in FDI: based in one country and engages in productive activity in another.
National Income
the total income of an economy, consisting of factor payments or the sum of wages, interest, rent plus profit, often used interchangeably with the value of aggregate output.
National Output
Total output produced by an economy, also known as aggregate output; measure by real GDP.
Natural Monopoly + Example
A single firm (a monopoly) that can produce for the entire market at a lower average cost than two or more smaller firms. Occurs due to economies of scale. (Water and gas).
Natural rate of unemployment
unemployment that occurs when the economy is producing at its potential or full employment level of output and is equal to the sum of structural, frictional plus seasonal unemployment.
Necessities
Essential goods: they have price inelastic demand (PED<1) and income inelastic demand (YED<1).
Negative consumption externality
A negative externality resulting from the consumption of a good causing (MPB>MSB)
Negative externality
A type of externality where the side effects on third parties are negative or harmful.
Negative Production externality
A negative externality resulting from the production of a good causing (MPC
net exports
the value of exports minus imports
Nominal GDP
GDP measured in terms of current prices; does not account for changes in GPL.
Non-collusive oligopoly
A type of oligopoly where firms do not make agreements among themselves in order to fix prices.
non-excludable
A characteristic of some goods where it is no possible to exclude someone from using a good.
NGOs
Non-profit organizations that provide a very wide range of services and humanitarian functions; in LDCs they provide foreign aid (only in grants not loans). Goal oriented organizations.
Non-price competition
When firms compete with each other on the basis of methods other than price (differentiation or marketing).
Non-rivalrous
A characteristic of some goods where the consumption of the good by one person does not reduce consumption by someone else (public goods and club goods).
Normal good
A good for which the demand varies positively with income.
normal profit
the minimum amount of revenue that a firm must receive so that it keeps the business running (AR/P = AC)
Nudge
In BE, a method designed to influence consumer’s choices in a predictable way, without offering financial incentives, imposing sanctions or limiting choice.
Official borrowing
Governmental borrowing from abroad; part of the financial account.
Oligopoly
A market structure which has a small number of large firms, significant price control, firms are interdependent, products can be differentiated or homogenous and high barriers to entry.
Opportunity Cost
The value of the next best alternative that must be given up or sacrificed in order to obtain something else.
Payoff Matrix
In game theory shows all possible combinations of outcomes of different decisions made by the players.
Perfect Competition + Example
A market structure with a large number of small firms, no price control, homogenous goods, no barriers to entry, perfect information and perfect resource mobility. (Farmers Market).
Phillips Curve
A curve showing the relationship between unemployment and inflation. Short run shows a negative relationship while long run is a vertical line at the natural rate of unemployment.
Pigovian Taxes
Indirect taxes designed to correct negative externalities or production or consumption.
Planned Economy
An economy where all economic decision making is carried out by the government.
Portfolio Investment
Financial investment in stocks and bonds. Found in financial account in BOP.
Positive consumption Externality
A positive externality caused by the consumption activities meaning MSB>MPB (Electric cars)
Positive externality
A type of externality where the side effects on their parties are positive or beneficial.
Positive production externality
A positive externality caused by the production activities meaning MSC
Potential Output
The level of output that can be produced when there is full employment.
Poverty
the inability of a family or individual to afford an adequate standard of goods and services (absolute or relative).
Poverty Line
An income level that is juts enough to ensure a family with the minimum necessary food, housing, clothing and medical needs.
Preferential trade agreement
An agreement between two or more countries to lower trade barriers between them on particular products.
Price Ceiling
A maximum price set by the government for a particular good.
Price Competition
When a firm lowers its price to attract consumers away from rival firms thus increasing the sales at the expense of other firms.
Price Control
The setting of minimum or maximum prices by the government so that prices are unable to adjust to their equilibrium level determined by demand and supply.
Price Deflator
A price index used to convert nominal values into real values, such as nominal GDP into real GDP.
Price Elasticity of Demand
A measure of the responsiveness of the quantity of a good demanded to changes in price.
Price Elasticity of Supply
A measure of the responsiveness of the quantity of a good supplied to changes in price.
Price Floor
A minimum price set by the government of a particular good, meaning that the price that can be legally charged by the sellers of the good cannot be lower than the legal minimum.
price mechanism
the system where prices are determined by demand and supply in competitive markets resulting form the free interaction of buyers and sellers.
price war
Competitive price cutting by firms, usually in an oligopoly.
Price-maker
Any firm that has the ability to influence price of its product.
Price-taker
A firm that accepts a price at which it sells its product.
Primary Commodity/Products
Any product that is produced in the primary sector which. includes agriculture, forestry, fishing and extractive industries.
Privatization
A transfer of ownership from the public sector to the private sector.
Producer Surplus
the difference between the price received by firms for a good and the lowest price a producer is willing to accept. (Area under the price and above the supply curve)
Product Differentiation
When each firm in an industry tries to make its product different from those of its competitors.
Production Possibilities
All possible combinations of the maximum amounts of two goods that can be produced by an economy.
Profit
A payment per unit of time to owners of entrepreneurship/management (a factor of production)
Profit Maximisation
the goal of firms according to the standard theory of firms (not NGOs).
Progressive taxation
taxation where, as income increases, the faction of income paid as taxes increases. Increasing average tax rate.
Property Rights
the laws and regulations that define rights to ownership, use and transfer of property.
Proportional Taxation
Taxation where, as income increases, the fraction of income paid as tax remains the same, flat tax rate.
Public Good
Non-rivalrous and non-excludable.
Purchasing power parity
the purchasing power of a country’s currency: the number of units of that currency required to purchase the same basket of goods and services in another country.
Quantitate Easing
A tool used by central banks to increase the supply of money in the economy and facilitate commercial bank lending as a part of expansionary monetary policy.
Quota
A type of trade protection that involves setting a legal limit to the quantity of a good that can be imported over a particular time period (usually year).
Rationing
A method used to apportion or divide something up between interested users. A function of the market.
Real GDP
GDP adjusted to a constant price level in accordance to a given base year.
Real GNI
GNI adjusted to a constant price level in accordance to a given base year.
Real interest rate
the interest rate that has been corrected for inflation.
real value
value that has limited the influence of changes in price level
Recession
An economic contraction, where there is falling real GDP and increasing unemployment.
Recessionary Gap
A situation where real GDP is less than potential GDP and unemployment is greater than the natural rate of unemployment. (Aka deflationary Gap)
Regional Trade Agreement + Example
A trade agreement between several countries that are located within a geographical region. (NAFTA)
Regressive Taxation + Example
Taxation where, as income increases, the fraction of income paid as tax decreases. (VAT)
Relative Poverty
The inability of an individual or a family to afford an adequate standard of goods and services where the adequate standard is relative and changes over time; defined as what is typical in a society, taken to be a particular percentage (often 50%) of a society’s median income.
Remittances
A transfer of money form one country to another, in most cases by foreign workers who send money from their earnings in their country of residence to their family in their home country.
Reserve Assets
Refers to foreign currency reserves that the central bank maintains and can buy or sell to influence the value of country’s currency exchange rate.
Resource Allocation
Assigning available resources, or factors of production, to specific uses chosen among many possible and competing alternatives.
Resources
Factors of production used by firms as inputs in the production process.
Restricted Choice
In BE, a choice that is limited by the government or another authority.
Revaluation (of a currency)
An increase in the value off a currency in the context of a fixed or pegged exchange rate system.
Revenue
The payment that firms receive when they sell their goods and services.
Rivalrous
The characteristic of a good according to which its consumption by one person reduces its availability for someone else.
Rules of Thumb/Heuristics
In BE, simple guidelines based on experience or common sense simplifying complicated decisions. A logical fallacy.
Satisficing
A goal of firms to achieve satisfactory results, rather than pursuing a single maximizing objective (revenues or profits).
Scarcity
Where available resources are limited.
Screening
In the event of asymmetric information, this is a method used by the buyer when the buyer has limited information. Includes online research or asking a friend.
Seasonal Unemployment
A type of unemployment that occurs when the demand for labour in certain industries changes on a seasonal basis because of variations in needs.
Shortage
In the context of demand and supply, it is the amount by which quantity demanded is greater than the quantity supplied.
Signalling
In the event of Asymmetric information, this is a method used by the seller when the seller has more information which attempts to convince the buyer that the product os of good quality.
Social Enterprise
A type of commercial organization that aims to achieve particular social goals in an effort to improve people’s well-being.
Socially Optimal Output
A level of output that is the best from the social point of view, determined by the achieved of allocative efficiency.
Social Surplus
The sum of consumer and producer surplus.
Specialization
When a firm or country concentrates production on one or a few goods and services.
Speculation of a currency
Rapidly buying and selling something in the hop of making a profit based on expectations of changes in the value of a currency.
Structural Unemployment
A type of unemployment that occurs as a result of technological changes and changing patterns of demand (change in demand for certain skills).
Subsidy
An amount of money paid by the government to firms for a variety of reasons.
Substitute good
Two or more goods that satisfy a similar need so that one good can be used in place of another.
Substitution Effect
There is an inverse relationship between price and quantity demanded because as price falls consumers substitute the now less expensive good for other products.
Supply
The various quantities of a good that firms are willing and able to produce and sell at different possible prices during a particular time period.
Supply-side Policies
A variety of policies that focus on AS largely on shifting LRAS right. Long term growth.
Sustainability
the ability of the economy and the environment to continue to produce and satisfy the meeds and wants into the future for future generations.
Sustainable Debt
A level of debt where the borrowing government has enough revenues to meet its debt obligations without overdue debt payments while allowing also allowing economic growth at an acceptable rate.
Sustainable Development Goals (SDGs)
A set of 17 goals developed at the UN conference on Sustainable Development in Rio de Janeiro in 2012. 169 Targets over a broad set of issues: poverty, hunger, health, education, climate change, oceans and forests.
Tariffs
Taxes on imported goods; most common form of trade restriction; serve to generate government revenue and protect domestic industry.
Total Costs
The total costs incurred by a firm that undertakes production of something.
Total product
The total quantity of output produced by a firm.
Total Revenue
The amount of money received by firms when they sella good or service. Price x Quantity.
Tradable Permits
Permits that can be issued to firms by a government authority or an international body which can be traded in a market with the objective of controlling and limiting the total volume of pollutants emitted by firms.
Trade creation
The replacement of higher cost products by lower cost imports that results when a trading bloc is formed and barriers are removed.
Trade Diversion
the replacement of lower cost products by higher cost imports that results when a trading bloc is formed and barriers are removed.
Trade Liberalization
the policy of freeing up international trade by eliminating trade protection and barriers to trade.
Trade protection
Government intervention in international trade through the imposition of trade restrictions to prevent the free entry of imports into a country and protect the domestic economy from foreign competition.
Trading bloc
A group of countries that have agreed to reduce tariffs and other barriers to trade for the purpose of encouraging the development of free or freer trade and cooperation between them.
Transfer Payments
Payments made by the government and individuals specifically for the purpose of redistributing income thus transferring income from those who work and pay taxes to those who cannot work and need assistance.
Unemployment Rate
A measurement of the amount of unemployment in an economy expressed as a percentage and calculated by taking the total number of unemployed people and dividing it by the labour force.
Unemployment
The number of unemployed people defined as all people above a particular age who are not working and are not actively looking for a job.
Unfair Competition
Practises that countries may use in order to gain a competitive advantage over other countries in order to unfairly increase their exports at the expense of other countries.
Universal Basic Income
A method intended to provide everyone in a country with a sum of money that they would receive regardless of any other income they may have.
Unsustainable Production
Production that uses resources unsustainably leading to their depletion or degradation.
Utility
A subjective concept, the satisfaction that a consumer gains from consuming something.
Wage
A payment per unit of time to those who provide labour includes salaries and bonuses/commissions.
Wealth
The money or things of value that people own minus debts to banks or other financial institutions.
Wealth Taxes
taxes on ownership of wealth (property tax)
Weighted Price Index
A measure of average prices in one period relative to average prices in a reference period called a base period; price index that weighs the various goods and services according to their relative importance.
Welfare
Refers to the well-being of a population. In MACRO measured by the amount of social surplus that is generated by a market.
Welfare Loss
A loss of a portion of social surplus that arises when marginal social benefits are not equal to marginal social costs due to market failure.
World Bank
A development assistance organisation composed of 189 member countries which are its joint owners, that extends long term credit to developing country governments for the purpose of promoting economic development and structural change.
World Trade Organization (WTO)
An international organization that provides the institutional and legal framework for the trading system that exists between member nations worldwide, responsible for liberalizing trade, operating a system of trade rules and providing a forum for trade negotiations between governments, and for settling trade disputes.
