General points of interest Flashcards
Who was Adam Smith and what was his main idea in 1723?
Famous for his 1776 book: An inquiry into the naturae and causes of the wealth of nations. Smith argued that the ultimate source of increased wealth and productivity would come via division of labour ie splitting production into smaller, specialized parts. He argued that this had three benefits:
- Workers became good at what they do more quickly (practice makes perfect)
- Workers do not have to spend time moving - physically and mentally - between tasks
- Breakdown of the process allows it to become automated and speeds things up (mechanization)
What is an LLC or PLC?
A limited liability company or public liability company - where if something goes wrong with a company, shareholders lose only the money invested in the shares and that is that.
What is feudalism?
the dominant social system in medieval Europe, in which the nobility held lands from the Crown in exchange for military service, and vassals were in turn tenants of the nobles, while the peasants (villeins or serfs) were obliged to live on their lord’s land and give him homage, labour, and a share of the produce, notionally in exchange for military protection.
Monopsony and Oligopsony
Where companies are the sole buyer (monopsony) or one of the few buyers (oligopsony).
What is supply side economics?
Supply-side economics is a macroeconomic theory that argues economic growth can be most effectively created by investing in capital and by lowering barriers on the production of goods and services
What does the world trade organisation do?
Sets rules on international economic interactions, including international trade, international investment and even the cross-border protection of intellectual property rights such as patents and copyrights. It is importantly, the only international organization that is based on the one-country-one-vote rule.
What does the gross refer to in GDP?
Gross (implying that something is yet to be taken away - e.g. gross and net) because the figure is not accounting for the depreciation of goods that have been used to generate the output.
There is a figure called the net domestic product but since it is hard to agree on calculations for depreciation it is not commonly used.
What does the domestic refer to in GDP?
Within the boundaries of a country (so including companies and employees that are working in a country where they are not citizens for example).
The measure of all output by your nationals is called the gross national product (GNP).
What are positional goods?
These are goods whose values derive from the fact that only a small proportion of potential customers can have them.
What is the investment ratio?
In order to be used, most technologies need to be embodied in fixed capital, namely machines and structures. Hence without investment in fixed capital (technically known as gross fixed capital formation - GFCF), an economy cannot develop its potential much.
The investment ratio is GFCF/GDP and it is a good indicator of a country’s development potential. The positive relationship between investment ratio and rate of economic growth is one of the few undisputed relationships in economics.
What are typical figures for the investment ratio?
For the world as a whole it is around 20% however there is large variation. In China it has been as high as 45% where in the DRC it can be as low as 2%. A higher investment ratio may not necessarily be a good thing as investment sacrifices today’s consumption in hope of achieving higher consumption in the future.
What are typical figures for GDP among rich and poor countries?
The world GDP in 2010 was around: $63.4 trillion.
Using 2010 data: highest - USA - $14.4 trillion, China $5.9tn, Japan $5.5tn, $3.3tn Germany and $2.5tn France.
Examples of developing countries - Central African Republic - 1 or 2 billion dollars (ie $0.001 trillion)
In 2010 the 35 lowest income countries collectively had a GDP of $0.42 tn, less than 1% of the total GDP in the world.
How can R and D also be used as an indicator of economic development?
By looking at the R&D spending as a proportion of GDP, more developed countries spend a larger amount. The OECD average is 2.3% with several countries spending over 3%. Most developing countries spent practically nothing on R&D - can be as low as 0.1-0.2%.
What is the NASDAQ?
The National Association of Securities Dealers Automated Quotation - a US stock exchange founded as a virtual market in 1971 (it didn’t not initially have a physcial marketplace). Currently the second biggest stock exchange in the world after the NYSE.
How is relative poverty defined in the UK?
It is defined as living on less than 60% of the median wage in the UK.
