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Economics > Glossary Definitions > Flashcards

Glossary Definitions Flashcards

1
Q

Absolute advantage

A

A situation where for a given set of resources, one country can produce more of a particular product than another country

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2
Q

Absolute poverty

A

A condition where people’s income is too low to enable them to meet their basic needs

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3
Q

Accelerator theory

A

A model that suggests investment depends on the rate of change in income

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4
Q

Active balances

A

The amount of money held by households or firms for possible near-future use

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5
Q

Actual economic growth

A

An increase in real GDP

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6
Q

Ad valorem tax

A

A tax that is charged as a given percentage of the price

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7
Q

Adverse selection

A

When sellers have information that buyers so not have on product quality or when buys have information that sellers do not have on product quality

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8
Q

Aggregate demand

A

The total demand for an economy’s goods and services at a given price level in a given time period

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9
Q

Aggregate expenditure

A

The total amount spent in the economy at different levels of income

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10
Q

Aggregate supply

A

The total output that producers in an economy are willing and able to supply at a given price level in a given time period

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11
Q

Aid

A

Assistance given to other countries on favourable terms

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12
Q

Allocative efficiency

A

Where price is equal to marginal cost; firms are producing those goods and services most wanted by customers

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13
Q

Annual average method

A

A way of calculating the inflation rate by comparing the average level of prices during a twelve-month period with the average level in the previous twelve months

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14
Q

Appreciation

A

An increase in the international price of a currency cause by market forces

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15
Q

Asian Tiger economy

A

Export-led, high growth economies in Asia

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16
Q

Asymmetric information

A

Where one party has more or better information than another in a business transaction

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17
Q

Automatic stabilisers

A

Changes in government spending an taxation that occur to reduce fluctuations in aggregate demand without any alteration in government policy

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18
Q

Autonomous investment

A

Investment that is made independent of income

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19
Q

Average cost

A

The cost per unit of output

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20
Q

Average product

A

Total product divided by the number of workers employed; a simple measure of productivity

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21
Q

Average prosperity to consume

A

The proportion of income that is consumed

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22
Q

Average prosperity to import

A

The proportion of income that is spent on imports

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23
Q

Average rate of taxation

A

The proportion of income that is taxed

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24
Q

Average revenue

A

Revenue per unit of output

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25
Q

Balanced budget

A

Government revenue equalling government expenditure

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26
Q

Balance

A

Debit items on the current account equalling credit items

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27
Q

Balance of payments account

A

A record of a country’s economic transactions with the rest of the world over a year

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28
Q

Bank credit multiplier

A

The process by which banks can make more loans than deposits avaliable

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29
Q

Barriers to entry

A

Restrictions that prevent new firms entering an industry

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30
Q

Barrier to exit

A

A restriction that prevents a firm leaving a market

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31
Q

Barter

A

Direct exchange of goods and services for other goods and services

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32
Q

Base year

A

The reference point in time. It is the starting year in an index and is given a value of 100

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33
Q

Basic prices

A

Prices charged by producers before the addition of indirect taxes and the deduction of subsidies

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34
Q

Benefit:cost ratio

A

Net benefits as a proportion of net costs

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35
Q

Bilateral aid

A

Aid given by one country to another country

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36
Q

Birth rate

A

The number of live births per thousand of the population in one year

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37
Q

Broad money

A

Money used for spending and saving

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38
Q

Budget

A

An annual statement in which the government outlines plans for its spending and tax revenue

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39
Q

Budget deficit

A

Government expenditure exceeding government revenue

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40
Q

Budget line

A

The combinations of two goods that can be purchased with given income and given prices

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41
Q

Budget surplus

A

Government revenue exceeding government expenditure

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42
Q

Buffer stock scheme

A

A type of commodity agreement designed to limit price fluctuations

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43
Q

Business cycle

A

Fluctuations in economic activity

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44
Q

Capital

A

A factor of production; a physical resource made by humans that aids the production of goods and services

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45
Q

Capital account

A

Within the balance of payments, a record of the sale and purchase of copyrights, patents, trademarks and money brought into the country by immigrants and taken out by emigrants

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46
Q

Capital government spending

A

Government spending on investment

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47
Q

Capital-output ratio

A

A measure of the amount of capital used to produce a given amount or value of output

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48
Q

Capital ratio

A

A bank’s available financial capital as a percentage of its risker assets

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49
Q

Capital tax

A

A progressive tax paid annually on the difference between the buying and selling price of an asset

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50
Q

Cartel

A

A formal agreement between firms to limit competition by limiting output or fixing prices

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51
Q

Casual unemployment

A

Unemployment that occurs when people have left one short-term job and before they take up another short-term job

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52
Q

Central bank

A

Bank owned by the government that provides banking services to the government and commerical banks and which operates monetary policy

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53
Q

Ceteris paribus

A

A Latin phrase meaning ‘other things equal’ or ‘other things are unchanged’

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54
Q

Changes in demand or supply

A

When there is a shift in the demand or supply curve due to a change in factors other than the price of the product

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55
Q

Choice

A

Resources are scarce so individuals, firms and government have to consider alternatives

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56
Q

Circular flow of income model

A

A simplified view of how income flows around the economy

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57
Q

Claimant count measure

A

A measure of unemployment based on those claiming unemployment benefits

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58
Q

Climate change

A

A change in the weather of a region over a period of time

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59
Q

Closed economy

A

An economy that does not trade with other economies

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60
Q

Collusion

A

An anti-competitive action by producers

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61
Q

Commercial banks

A

Bank which air to make a profit by providing a range of banking services to firms and households

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62
Q

Comparative advantage

A

A situation where a country can produce a product at a lower opportunity cost than any other country

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63
Q

Compensation of employees

A

Income of workers who work in another country for a short period of time

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64
Q

Complement

A

A good consumed with another

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65
Q

Concentration ratio

A

A measure of the combined market share of the piggest three, four or five firms in a market

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66
Q

Conglomerate

A

A company with a large number of diversified businesses

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67
Q

Constant prices

A

Prices in a base year

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68
Q

Consumer expenditure

A

Spending by households on good and services

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69
Q

Consumer price index

A

A measure that shows the average change in the prices of a representative basket of products purchased by households

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70
Q

Consumers

A

Individuals or households who buy good and services for their own use or others

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71
Q

Consumer purplus

A

The difference between the price a consumer is willing to pay for a product and its market price

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72
Q

Consumption

A

Spending by households on good and services

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73
Q

Consumption function

A

The relationship between income and consumption

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74
Q

Contestability

A

The extent to which barrier to entry into a market are free and exit from the market is costless

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75
Q

Contestable market

A

A market where entry is free and exit is costless

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76
Q

Contractionary fiscal policy

A

Decreases in government spending and increases in taxes designed to reduce the growth of aggregate demand

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77
Q

Cost-benefit analysis

A

A method of decision-making that takes into account the costs and benefits involved

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78
Q

Cost-push inflation

A

Inflation caused by increases in costs of production

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79
Q

Counter-cyclically

A

Going against the fluctuations in economic activity

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80
Q

Credit regulations

A

Rules affecting bank lending

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81
Q

Creeping inflation

A

A low rate of inflation

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82
Q

Cross elasticity of demand

A

Measure the responsiveness of the quantity demanded for one product following a change in the price of another product

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83
Q

Cross-subsidisation

A

Profits from one part of a firm are used to offset losses made elsewhere in the businessC

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84
Q

Crowding in

A

The idea that higher public sector spending will just replace private sector spending

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85
Q

Current account deficit

A

The value of debit items on the current account exceeding the value of credit items

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86
Q

Current account surplus

A

The value of credit items on the current account exceeding the value of debit items

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87
Q

Current account

A

A record of the trade in goods, trade in services, primary income and secondary income

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88
Q

Current government spending

A

Government spending on providing goods and services

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89
Q

Customs union

A

A trade bloc where there is free trade between member union countries and a common external tariff on imports from non-members

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90
Q

Cyclical budget deficit

A

A budget deficit caused by a decline in economic activity

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91
Q

Cyclical unemployment

A

Unemployment that results from a lack of aggregate demand

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92
Q

Deadweight welfare loss

A

The loss in welfare arising from an inefficient allocation of resources

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93
Q

Death rate

A

The number of deaths per thousand of the population in one year

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94
Q

Debtors

A

People, firms or governments who owe money

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95
Q

Decreasing returns to scale

A

Where factor inputs increase at a proportionately faster rate than the increase in output

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96
Q

Deflationary gap

A

A shortage of aggregate expenditure so that potential output is not reached

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97
Q

Deflation

A

A sustained fall in the price level

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98
Q

Demand

A

The quantity of a product that consumers are willing and able to buy at different prices per period of time, ceteris paribus

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99
Q

Demand curve

A

A line plotted on a graph that represents the relationship between the quantity demanded and the price of a product

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100
Q

Demand deposit account

A

A bank account that allows the holder to make a receive payments

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101
Q

Demand-pull inflation

A

Inflation caused by increases in aggregate demand not matched by equivalent increases in aggregate supply

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102
Q

Demand schedule

A

The data from which a demand curve is drawn on a graph

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103
Q

Demerit good

A

A good that is thought to be undesirable for consumers and is over provided by the market because of information failure

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104
Q

Demographers

A

People who study changes in the structure of human populations

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105
Q

Dependency ratio

A

The proportion of the economically inactive compared to the labour force

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106
Q

Depreciation

A

A decrease in the international price of a currency caused by market forces

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107
Q

Depreciation of capital goods

A

The value of capital goods that have worn out or become out-of-date

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108
Q

Depression

A

A fall in real GDP that lasts several yearsDe

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109
Q

Deregulation

A

When barriers to entry into an industry are removed

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110
Q

Derived demand

A

Where the demand for a good or service depends upon the use that can be made from it

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111
Q

Devaluation

A

A decision by the government to lower the international price of the country’s currency

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112
Q

Development traps

A

Restriction on the growth of developing economies that arise from low levels of savings and investment

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113
Q

Direct taxes

A

Taxes on income and wealth

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114
Q

Discouraged workers

A

Workers who would like a job but who have given up actively seeking work after a period of trying to find work

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115
Q

Discretionary fiscal policy

A

Deliberate changes in government spending and taxation

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116
Q

Diseconomies of scale

A

Where long-run average costs increase as the scale of output increases

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117
Q

Disequilibrium

A

A situation where demand and supply are not equal in a market

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118
Q

Disequilibrium unemployment

A

Unemployment that arises when the aggregate supply of labour is greater than the aggregate demand for labour at the current wage rate

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119
Q

Disinflation

A

A fall in the inflation rate

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120
Q

Disposable income

A

Income minus direct taxes plus state benefits

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121
Q

Dissaving

A

Consumer expenditure exceeds income, with people or countries drawing on past savings or borrowing

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122
Q

Diversification

A

Where a firm grows through the production or sale of a wide range of different products

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123
Q

Dividend payments

A

A share of a firms profits paid to its shareholders

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124
Q

Division of labour

A

Where a manufacturing process is split into a sequence of individual tasks

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125
Q

Double coincidence of wants

A

A situation where two people each have something to other one wants

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126
Q

Dumping

A

Selling products in a foreign market at below their cost of production

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127
Q

Dynamic efficiency

A

When resources are allocated efficiently over time

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128
Q

Economically active

A

People in the labour force

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129
Q

Economically inactive

A

People who are not in the labour force

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130
Q

Economic and monetary union

A

Coordination of policies and the operation of a single currency by a group of countries

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131
Q

Economic development

A

An increase in welfare and quality of life

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132
Q

Economic efficiency

A

Where scarce resources are used in the most efficient way to produce maximum output

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133
Q

Economic growth

A

In the short run an increase in a country’s output and in the long run, an increase in a country’s productive potential

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134
Q

Economic rent

A

A payment made to a factor of production above that which is necessary to keep it in its current use

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135
Q

Economic system

A

The way in which production is organised and choices are made in an economy

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136
Q

Economies of scale

A

The benefits gained from falling long-run average costs as the scale of output increases

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137
Q

Economies of scope

A

Where a reduction in average total cost is made possible by a firm changing the different gods it produces

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138
Q

Effective demand

A

Demand that is supported by the ability to pay

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139
Q

Elastic

A

Where the relative change in the quantity demanded is greater than the change in price, income or the prices of substitutes and complements

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140
Q

Elasticity

A

A numerical measure of responsiveness of one variable following a change in another variable, ceteris paribus

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141
Q

Embargo

A

A ban in imports and/or exports

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142
Q

Emerging economy

A

One that is making quick progress towards becoming a high-income economy

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143
Q

Employment rate

A

Employed workers as a percentage of the population of working age

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144
Q

Entrepreneur

A

AN individual who seeks out new business opportunities and is willing to take risks

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145
Q

Enterprise

A

As a factor of production involves organising production and taking risks

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146
Q

Equality

A

Where everyone is treated in the same way

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147
Q

Equilibrium

A

A situation where there is no tendency to change in a market

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148
Q

Equilibrium price

A

The price where demand and supply are equal, where the market clears

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149
Q

Equilibrium quantity

A

The amount that is traded at the equilibrium price

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150
Q

Equilibrium unemployment

A

The unemployment which exists when the labour market is in equilibrium. It includes voluntary, frictional and structural unemployment

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151
Q

Equi-marginal principle

A

Consumers maximise their utility where their marginal valuation for each product consumed is the same

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152
Q

Equities

A

Shares in firms

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153
Q

Exchange control

A

Restrictions on the purchases of foreign currency

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154
Q

Exchange rate

A

The price of one currency in terms of another currency

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155
Q

Excise duties

A

A specific tax that is levied on goods such as cigarettes

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156
Q

Excludability

A

Where it is possible to stop someone from consuming a good or service

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157
Q

Exhaustive government spending

A

Government spending which makes use of resources

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158
Q

Expansionary fiscal policy

A

Increases in government spending and cuts in taxation designed to increase aggregate demand

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159
Q

Expectations-augmented Phillips curve

A

A diagram that shows that while there mat be a trade-off between unemployment and inflation in the short run, there is no trade-off in the long run

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160
Q

Expenditure method

A

A way of calculating GDP by totalling all the spending on the country’s output

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161
Q

Expenditure reducing policy

A

Policy tools designed to reduce imports and increase exports by reducing demand

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162
Q

Expenditure switching policy

A

Policy tools designed to encourage people to switch form buying foreign-produced products to buying domestically produced products

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163
Q

Exports

A

Goods and services sold to other countries

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164
Q

Extension of demand or supply

A

An increase in the quantity demanded or quantity supplied

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165
Q

External benefits

A

Those benefits that are received by a third party not involved in the action

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166
Q

External costs

A

Those costs incurred and paid for by a third party not involved in the action

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167
Q

External economies of scale

A

Cost savings accruing to all firms as the scale of the industry increases

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168
Q

Externality

A

Where the action of a producer or consumer give rise to side effects on others not directly involved in the action

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169
Q

Extreme poverty

A

Where a household exists on less than $1.90 a day

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170
Q

Factor endownment

A

The availability of capital, enterprise, labour and land in an economy

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171
Q

Factors of production

A

Resources or inputs available in an economy that are used in the production of goods and services

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172
Q

Financial account

A

Within the balance of payments, a record of the transfer of financial and capital assets between the country and the rest of the world

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173
Q

Firm

A

Any business that hires factors of production to produce goods and services

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174
Q

Fiscal drag

A

The income of people and firms being pushed into higher tax brackets as a result of inflation

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175
Q

Fiscal policy

A

The use of taxation and government spending to influence aggregate demand

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176
Q

Fisher equation

A

The statement that MV = PT

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177
Q

Fixed costs

A

Costs that are independent of output in the short. run

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178
Q

Fixed exchange rate

A

An exchange rate set by the government and maintained by the central bank

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179
Q

Floating exchange rate

A

An exchange rate that is determined by the market forces of demand and supply

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180
Q

Foreign direct investment

A

The setting up of production units or the purchase of existing production units in other countries

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181
Q

Free goods

A

Goods that are not scarce and have 0 opportunity cost

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182
Q

Free rider

A

Someone who does not pay to use a public good

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183
Q

Free trade

A

International trade not restricted by taxes on important and other policy tools designed to give domestic producers protection from competition from imports

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184
Q

Free trade area

A

A trade bloc where member governments agree to remove trade restrictions among themselves

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185
Q

Frictional unemployment

A

Unemployment that is temporary and arises when workers are in-between jobs

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186
Q

Full economic union

A

A trade bloc where there is free trade between member countries, a common external tariff, common economic policies and the same currency

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187
Q

Full employment

A

The level of employment corresponding to where all who wish to work have found jobs, excluding frictional unemployment

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188
Q

Fundamental economic problem

A

Scarce resources but unlimited wants

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189
Q

GDP deflator

A

The price index of all domestically produced goods and services

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190
Q

Geographical mobility of labour

A

The ability of workers to move to a job in a different location

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191
Q

Giffen good

A

A type of inferior good where the quantity demanded falls as price falls and the quantity demanded inreases when price increases

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192
Q
A
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193
Q

Gig economy

A

A labour market based on short-term contracts

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194
Q

Gini coefficient

A

A numerical measure of income inequality

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195
Q

Global warming

A

A rise in the temperature of the earths atmosphere arising from the emission of greenhouse gases

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196
Q

Globalisation

A

The process by which the world is becoming increasingly interconnected through trade and other links

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197
Q

Government failure

A

Where government intervention to correct market failure leads to a net loss of economic welfare

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198
Q

Government macroeconomic failure

A

Government intervention reducing rather than increasing economic performance

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199
Q

Government securities

A

Bills and bond issued by the government to raise money

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200
Q

Government spending

A

The total of local and national government expenditure on goods and services

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201
Q

Greenhouse gases

A

Carbon dioxide, methane, nitrous oxide

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202
Q

GDP

A

The total output produced in a country

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203
Q

Gross investment

A

Total spending on capital goods

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204
Q

Gross national disposable income

A

GNI plus net transfer of worker’s income to their relatives to and from other countries

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205
Q

GNI

A

GDP plus net income from abroad

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206
Q

High-income countries

A

Economies where income per head was $12,376 or more in 2018

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207
Q

Homemakers

A

People who look after the household of their own families

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208
Q

Horizontal integration

A

Where a firm merges or acquires another in the same line of business

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209
Q

Hot money flows

A

Flows of money moved around the world to take advantages of changes in interest rates and exchange rates

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210
Q

Human capital

A

The value of labour to the productive potential of an economy

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211
Q

Human development index

A

A composite measure of living standards that includes GNI per head, education and life expectancy

212
Q

Hyperinflation

A

A very high rate of inflation which may result in people losing confidence in the economy

213
Q

Hysteresis

A

Unemployment causing unemployment due to workers becoming deskilled and demotivated when they are out of work for a long time

214
Q

Idle balances

A

The amount of money held temporarily as the returns from holding financial assets are too low

215
Q

Imbalance

A

Debit items in the current account not equaling credit items

216
Q

Imperfect competition

A

Any market structure except for perfect competition

217
Q

Imports

A

Goods and services purchased form other countries

218
Q

Incentive

A

Where low or high prices influence consumption and production by encouraging buyers to consume and sellers to produce

219
Q

Incidence

A

The extent to which the tax burden is borne by the producer or consumer or both

220
Q

Income effect

A

Where following a price change of a good a consumer has higher real income and will purchase more of this good

221
Q

Income elasticity of demand

A

Measures the responsiveness of the quantity demanded for a product following a change in income

222
Q

Income method

A

A way of measuring GDP by totalling all the incomes earned in producing the country’s output

223
Q

Increasing returns to scale

A

Where output increases at a proportionately faster rate than the increase in factor inputs

224
Q

Indifference curve

A

This shows all of the combinations of two goods that give a consumer equal satisfaction

225
Q

Indirect tax

A

A tax levied on goods and services such as a general sales tax

226
Q

Induced investment

A

Investment that is made in response to changes in income

227
Q

Ineslatic

A

Where the relative change in the quantity demanded is less than the change in price, income or the prices of substitutes or complements

228
Q

Infant industries

A

New industries that have a low output and a high average cost

229
Q

Infant mortality rate

A

The number of deaths of children aged under 1 per thousand live births in one year

230
Q

Inferior good

A

Where the quantity demanded increases as income decreases

231
Q

Inflation

A

A sustained increase in an economy’s price level over a period of time

232
Q

Inflationary gap

A

The excess of aggregate expenditure over potential output

233
Q

Inflationary noise

A

Confusion over relative prices caused by inflation

234
Q

Inflation rate

A

The percentage rise in an economy’s price level over a period of time

235
Q

Inflation target

A

The inflation rate a central bank is set to achieve

236
Q

Informal economy

A

The mart of the economy that is not regulated, protected or taxed by the government

237
Q

Information failure

A

A situation where consumers do not have full or complete information when making decisions

238
Q

Infrastructure

A

Buildings and constructions that support society and economic activity

239
Q

Inheritance tax

A

A progressive tax on an inheritance or gift

240
Q

Injections

A

Additions to the circular flow of income

241
Q

Interest rates

A

The price of borrowing money and the reward for saving

242
Q

International monetary fund

A

An international organisation that promotes free trade and helps countries in balance of payments difficulties

243
Q

International unemployment

A

Unemployment arising when a country loses its international competitiveness in producing a product or products

244
Q

Investment

A

Spending on capital goods

245
Q

Isocosts

A

Lines of constant relative costs for factors of production

246
Q

Isoquant

A

A curve showing combinations of labour and capital to produce a given level of output

247
Q

J curve effect

A

A fall in the exchange rate causing an increase in a current account deficit before it reduces it due to the time it takes for demand to respond

248
Q

Joint demand

A

When two goods are consumed together

249
Q

Joint supply

A

When two items are produced together

250
Q

Keynesians

A

People who agree with the view of economist John Maynard Keynes that government intervention is needed to achieve full employment

251
Q

Kinked demand curve

A

A traditional model of a firms behaviour in oligopoly

252
Q

Kuznets curve

A

A curve that shows the relationship between economic growth and income inequality

253
Q

Labour

A

A factor of production; human resources available in an economy

254
Q

Labour force

A

The unemployed and the employed

255
Q

Labour force participation rate

A

The proportion of the population that are of working age and who are either working or actively seeking work

256
Q

Labour force survey measure

A

A measure of unemployment based on a survey that identifies people who are actively seeking a job

257
Q

Labour mobility

A

Ability of workers to change where they work and in which occupation

258
Q

Laffer curve

A

A curve showing tax revenue rising at first as the tax rate is increasing and then falling beyond a certain rate

259
Q

Land

A

A factor of production; natural resources in an economy

260
Q

Law of diminishing marginal utility

A

As consumption increases, the satisfaction from consumption decreases

261
Q

Law of diminishing returns

A

Where the output from an additional unit of input leads to a fall in the marginal product

262
Q

Leakages

A

Withdrawals from the circular flow of income

263
Q

Level of unemployment

A

The number of workers who are unemployed

264
Q

Limit pricing

A

Where firms deliberately lower prices and abandon a policy pr profit maximisation to stop new firms entering a market

265
Q
A
266
Q

Liquidity

A

The ability to turn an asset into cash quickly and without loss

267
Q

Liquidity preference

A

A Keynesian concept that explains why people demand money

268
Q

Liquidity trap

A

A situation where interest rates cannot be reduced any more in order to stimulate an upturn in economy activity

269
Q

Loan

A

A sum of money lent at an agreed rate of interest for a specific time period

270
Q

Long run

A

Time period when all factors of production are variable but with a constant, such as the state of technology

271
Q

Long-run aggregate supply

A

The total output of a country supplied in the period when prices of factors of production have fully adjusted

272
Q

Long-term unemployment

A

Those who have been unemployed for a year or longer

273
Q

Lorenz curve

A

A diagram illustrating the extent of income or wealth inequality

274
Q

Lower middle-income countries

A

Countries where income per head was between $1026 and $3995 in 2018

275
Q

Low-income countries

A

Economies where income per head was $1025 or less in 2018

276
Q

Macroeconomic equilibrium

A

The output and price level achieved where AD equals AS

277
Q

Macroeconomics

A

The study of an economy or a group of economies

278
Q

Managed system

A

Where the exchange rate is influenced by state intervention

279
Q

Marginal cost

A

The addition to total cost when making one extra unit of output

280
Q

Marginal product

A

The change in output arising from the use of one more unit of a factor of production

281
Q

Marginal propensity to consume

A

The proportion of extra income that is spent

282
Q

Marginal prosperity to import

A

The proportion of extra income spent on imports

283
Q

Marginal prosperity to save

A

The proportion of extra income which is saved

284
Q

Marginal rate of substitution

A

The rate at which a consumer is willing to substitute one good for another

285
Q

Marginal rate of taxation

A

The proportion of extra income taken in tax

286
Q

Marginal revenue

A

The additional or extra revenue gained from the same of one more unit of output

287
Q

Marginal revenue product

A

The addition to total revenue as a result of employing one more worker

288
Q

Marginal utility

A

The utility derived from the consumption of one more unit of the good or service

289
Q

Market

A

Where buyers and sellers get together to trade

290
Q

Market demand

A

The total amount demanded by consumers

291
Q

Market economy

A

An economic system where most decisions are taken through the market mechanism

292
Q

Market failure

A

When the free market does not make the best use of scarce resources

293
Q

Market mechanism

A

Resource allocation decisions are taken by individual producers and consumer with no government intervention

294
Q

Market prices

A

Prices paid by consumers; they take into account indirect taxes and subsidies

295
Q

Market structure

A

The way in which a market is organised in terms of certain characteristics which can be used to explain the behaviour of firms in a market

296
Q

Marshall-Lerner condition

A

The requirement that for a fall in the exchange rate to be successful in reducing a current account deficit, the sum of the price elasticities of demand for exports and imports must be greater than 1

297
Q

Maximum price

A

A price that is fixed; the market price must not exceed this price (sometimes called a price ceiling)

298
Q

Means-tested benefits

A

Benefits that are paid only to those whose incomes fall below a certain level

299
Q

Measurable economics welfare

A

A composite measure of living standards that adjusts GDP for factors that reduce living standards and factors that improve living standards

300
Q

Menu costs

A

Costs to firms of having to change prices due to inflation

301
Q

Merit good

A

A good that is thought to be desirable for consumers but which is underprovided by the market because of information failure

302
Q

Microeconomics

A

The study of individual markets

303
Q

Middle-income economics

A

Economies where income per head was between $1026 and $3995 or $3996 and $12375 in 2018

304
Q

Minimum efficient scale

A

Lowest level of output at which costs are minimised

305
Q

Minimum price

A

A price that is fixed; the market must not go below this price

306
Q

Minimum wage

A

The least amount an employer can legally pay one of its workers

307
Q

Mixed economy

A

An economic system where both market forces and government are involved in resource allocation decisions

308
Q

Model

A

A simplified view of reality used to explain economic problems and issues

309
Q

Monetarists

A

Economists who consider that inflation is caused by an excessive growth in the money supply

310
Q

Monetary policy

A

The use of interest rates, the money supply, credit regulations and the exchange rate to influence aggregate demand

311
Q

Monetary union

A

A trade bloc which involves member countries operating the same currency, having one exchange rate and the same interest rate

312
Q

Money

A

An item which is generally acceptable as a means of payment

313
Q

Money supply

A

The total amount of money in an economy

314
Q

Money values

A

Values at the prices operating at the time

315
Q

Monopolistic competition

A

A market structure where there are many firms, differentiated products and few barriers to entry

316
Q

Monopoly

A

Where one firm dominates the market due to having a large market share

317
Q

Monopsony

A

Where there is a single buyer in a market

318
Q

Moral hazard

A

The temptation to take risks when some other party is covering these risks

319
Q

Movement up and down a demand curve

A

Shows how quantity demanded responds to a change in price

320
Q

Multidimensional poverty index

A

A composite measure of deprivation in terms of the proportion of households that lack the requirements for a reasonable standard of living

321
Q

Multilateral aid

A

Aid given by international organisations to a country or countries

322
Q

Multinational companies

A

Firms that operate in more than one country

323
Q

Multiplier

A

A numerical estimate of a change in spending in relation to the final change in spending

324
Q

Narrow money

A

Money that can be spent directly

325
Q

National debt

A

The total amount of government debt

326
Q

National income

A

A country’s total output

327
Q

National income statistics

A

Measure of the total output of an economy

328
Q

Nationalisation

A

When a government takes over a private sector business and transfers it to state ownership

329
Q

Natural increase in population

A

The number of live births exceeding the number of deaths

330
Q

Natural monopoly

A

Where with falling long-run average costs, it makes sense to have only one firm providing the good or service

331
Q

Natural rate of unemployent

A

The rate of unemployment that exists when the aggregate demand for labour equals the aggregate supply of labour at current wage rate and price level

332
Q

Necessity good

A

A type of normal good with a YED that is close to 0

333
Q

Needs

A

Things that are necessary for survival

334
Q

Negative externality

A

Where the side effects of an action have a negative impact that imposes costs on third parties

335
Q

Negative income tax

A

Money paid out by the government to those earning below an agreed annual fixed benefit limit

336
Q

Negative output gap

A

A situation where actual output is below potential output

337
Q

Net domestic product

A

GDP - depreciation

338
Q

Net errors and omissions

A

A figure included to ensure the balance of payments balances

339
Q

Net exports

A

Exports - imports

340
Q

Net investment

A

Additions to the capital stock

341
Q

Net migration

A

The difference between immigration and emigration

342
Q

Net migration rate

A

The number of migrants per thousand of the population in one year

343
Q

Net national imcome

A

Gross national income - depreciation

344
Q

Net property income from abroad

A

Receipts of profit, rent and interest earned on the ownership of foreign assets - the payments of profit, rent and interest to non-residents

345
Q

New classical economists

A

Economists who think that the LRAS curve is vertical and that the economy will move towards full employment without government intervention

346
Q

Nominal GDP

A

Total output measured in current prices

347
Q

Non-excludable

A

A situation where it is not possible to stop anyone else from using a good

348
Q

Non-exhaustive government spending

A

Government spending which allows others to decide how resources are used

349
Q

Non-price competition

A

When firms use methods other than price to attract consumers from rival producers

350
Q

Non-rival

A

Where consumption by one person does not reduce consumption by someone else

351
Q

Normal good

A

Where the quantity demanded increase as income increases

352
Q

Normal profit

A

A cost of production that is just sufficient for a firm to keep operating in a particular industry

353
Q

Normative statement

A

A statement that is based on the economist’s opinion or value judgement and which cannot be proven

354
Q

Notional demand

A

Where buyers may want to buy a product but which is not always backed up by the ability to pay

355
Q

Nudge theroy

A

Influencing choice by nudging individuals towards making more effective decisions

356
Q

Occupational mobility of labour

A

The ability of workers to move from one occupation to another occupation

357
Q

Oligopoly

A

A market structure with few firms and high barriers to entry

358
Q

Open economy

A

An economy that is involved in trade with other economies

359
Q

Opportunity cost

A

The cost expressed in terms of the next best alternative that is foregone when a choice is made

360
Q

Opportunity cost ratio

A

The quantity of one product compared to the quantity of another product that has to be sacrificed to produce it

361
Q

Optimum population

A

The size of population that maximises GDP per head

362
Q

Output gap

A

A gap between actual and potential output

363
Q

Output method

A

A way of measuring GDP by calculating the total production of goods and services of the country

364
Q

Overdraft

A

Permission to spend more than is in a demand deposit account

365
Q

Pareto opitimality

A

Where it is impossible to make someone better off without making someone else worse off

366
Q

Perfect competition

A

An ideal market structure that has many buyers and sellers, identical products, no barriers to entry

367
Q

Perfectly elastic

A

Where all that is produced is sold at a given price

368
Q

Perfectly inelastic

A

Where a change in price has no effect on the quantity demanded

369
Q

Phillips curve

A

A curve that shows the relationship between the unemployment rate and the inflation rate over a period of time

370
Q

Physical capital

A

Factors of production like machinery and infrastructure

371
Q

Planned economy

A

An economic system where resources are state owned and allocated by a central body

372
Q

Polluter pays principle

A

A policy that makes those responsible for causing damage to the environment pay for that damage

373
Q

Pollution permit

A

A form of license given by governments that allows a firm to pollute up to a given level

374
Q

Positive externality

A

Where the side effects of an action have a positive impact that provides benefits to third parties

375
Q

Positive net migration

A

More people coming to live in the country than people leaving the country to live elsewhere

376
Q

Positive output gap

A

A situation where actual output is above potential output

377
Q

Positive statement

A

A statement that is based on facts or actual evidence

378
Q

Potential economic growth

A

An increase in the productive capacity of the economy

379
Q

Poverty cycle

A

The links between for example low income, low savings, low investment and low productivity

380
Q

Poverty trap

A

Where an individual or a family are better off on means-tested benefits rater than working

381
Q

Precautionary motive

A

A reason for holding money for unexpected or unforseen events

382
Q

Predatory pricing

A

Where a firm sells its good below average variable cost to force competitors out of the market

383
Q

Price competition

A

Where firms compete on price to attract customers

384
Q

Price elastic

A

When the relative change in the quantity demanded is greater than the change in price of the product

385
Q

Price elasticity of demand

A

Measure of the responsiveness of the quantity demanded for a product following a change in the price of the product

386
Q

Price elasticity of supply

A

A numerical measure of the responsiveness of the quantity supplied to a change in the price of the product

387
Q

Price elastic supply

A

The quantity supplied responds more than proportionately to a change in its price

388
Q

Price index

A

A way of comparing changes in the price level over time. The value of the first year in the index is set at 100 and the value of each following year is a percentage of it

389
Q

Price inelastic

A

When the relative change in quantity demanded is less than the change in price of the product

390
Q

Price inelastic supply

A

The quantity supplied responds less than proportionately to a change in its price

391
Q

Price leadership

A

A situation in a market whereby a particular firm has the power to change prices, the result of which is that competitors follow this lead

392
Q

Price level

A

The average of all prices in an economy

393
Q

Price maker

A

A firm that can choose what price to sell its goods in the market

394
Q

Price mechanism

A

The means of allocating resources in a market economy

395
Q

Price ridigity

A

Where prices are unchanged despite a change in costs

396
Q

Price stability

A

A low and stable inflation rate

397
Q

Price taker

A

A firm that is not able to influence market price

398
Q

Primary sector

A

Industries involved in farming an extracting natural resources

399
Q

Principal-agent problemt

A

Where one person makes decisions on behalf of another person

400
Q

Private benefits

A

The benefits that accrue to the consumer or to the firm that produces a good or service

401
Q

Private costs

A

Those costs that are incurred by a consumer or by the firm that produces a good or service

402
Q

Private goods

A

Goods that are consumed by one person and not available to anyone else

403
Q

Private sector

A

That part of the economy under private ownership

404
Q

Privatisation

A

Where there is a change in ownership from the public to private sector

405
Q

Producer surplus

A

The difference between the price a producer is willing to accept and what is actually paid

406
Q

Production function

A

The maximum possible output from a given set of factor inputs

407
Q

Production possibility curve

A

A simple representation of the maximum level of output that an economy can achieve, given its current resources and state of technology

408
Q

Production quota

A

A physical limit on what cam be produced

409
Q

Productive capacity

A

The maximum output that can be produced when all resources are used fully

410
Q

Productive efficiency

A

When a firm is producing at the lowest possible costs

411
Q

Productive resources

A

Resources that are available to be used

412
Q

Profit

A

The difference between total revenue and total costs

413
Q

Profit maximisation

A

The assumed objective of a firm; the difference between total cost and total revenue is at a maximum

414
Q

Profit satisficing

A

A firm’s objective to make a reasonable or minimum level of profit

415
Q

Progressive tax

A

One where the rate of taxation rises more than proportionately to the rise in income

416
Q

Property rights

A

Where owners have a right to decide how their assets may be used

417
Q

Proportional tax

A

A tax which takes the same percentage of the income or wealth of all income groups

418
Q

Protectionsim

A

Protecting domestic producers from foreign competition

419
Q

Provision of information

A

When governments directly provide information to correct market failure

420
Q

Public good

A

A good that is non-excludable and non-rival

421
Q

Public sector

A

That part of an economy under government ownership

422
Q

Purchasing power parity

A

A way of comparing international living standards by using an exchange rate based on the amount of each currency needed to purchase the same basket of goods and services

423
Q

Pure monopoly

A

Where there is just one seller in the market

424
Q

Pure public good

A

Good which is both non-excludable and non-rival

425
Q

Quantitative easing

A

A situation where a central bank buys government and private securities from the private sector in order to increase the money supply and so stimulate economic activity

426
Q

Quantity theory of money

A

The theory that links inflation in an economy to changes in the money supply

427
Q

Quasi-public good

A

Good that has some but not the full characteristics of a public good

428
Q

Quota

A

A limit on imports

429
Q

Rationing

A

Where a producer limits the supply of products in the market to ensure the products remain exclusive

430
Q

Real data

A

Data adjusted for inflation

431
Q

Real exchange rate

A

A currency’s value in terms of its real purchasing power

432
Q

Real GDP

A

Total output measured in constant prices

433
Q

Recession

A

A decline in real GDP over at least two consecutive quarters

434
Q

Regional unemplpyment

A

Unemployment arising from a decline in job vacancies in a particular area of the country

435
Q

Regressive tax

A

A tax which takes a larger percentage of the income or wealth of those on low incomes

436
Q

Regulations

A

A wide range of legal and other restrictions that come from government or regulatory bodies

437
Q

Relative poverty

A

Where household income in 50% or less than the average income

438
Q

Reserve ratio

A

The proportion of liquid assets to total liabilities

439
Q

Resources

A

Input available for the production of goods and services

440
Q

Revaluation

A

A decision made by the government to raise the international price of the country’s currency

441
Q

Revenue maximisation

A

A firm’s objective to maximise total revenue

442
Q

Rivalry

A

Where consumption by one person of a good or service reduces the availability of the good or service for others

443
Q

Sales maximisation

A

A firm’s objective to maximise the volume of sales

444
Q

Sampling error

A

The people being surveyed having different characteristics or experiences to the rest of the population

445
Q

Saving

A

Income - consumption

446
Q

Savings deposit account

A

A bank account which pays interest and may require notice to be given before money can be withdrawn from it

447
Q

Savings function

A

The relationship between income and saving

448
Q

Scarcity

A

A situation in which wants and needs are greater than the resources available

449
Q

Search unemployment

A

Unemployment that exists when people take time looking for a job they are willing to accept

450
Q

Seasonal unemployment

A

Unemployment arising at a particular time of the year when demand from the product falls

451
Q

Secondary sector

A

Industries that manufacture products

452
Q

Self-employed

A

Those working for themselves

453
Q

Shadow economy

A

The output of goods and services hidden from the authorities

454
Q

Shadow price

A

One that is applied where there is no established market price available

455
Q

Shoe leather costs

A

Costs of moving money around in search of the highest interest rate

456
Q

Short-run aggregate supply

A

The total output of an economy that will be supplied then there has not been enough time for the prices of factors of production to change

457
Q

Short-run

A

Time period when a firm can change at least one but not all factor inputs

458
Q

Shut-down price

A

A firm will stop production when price falls below average variable cost

459
Q

Signalling

A

Where decisions taken by buyers or sellers are determined by price

460
Q

Sin taxes

A

Taxes on products considered harmful to consumers

461
Q

Social benefits

A

The total benefits of a particular action

462
Q

Social costs

A

The total costs of a particular action

463
Q

Specialisation

A

The process by which individuals, firms and. economies concentrate on producing those goods and services where they have an advantage over others

464
Q

Specific taxes

A

Taxes that are charged as a set amount per unit

465
Q

Speculative motive

A

A reason for holding money with a view to make future gains from buying financial assets

466
Q

Structural budget deficit

A

A budget deficit caused by an imbalance between government spending and taxation

467
Q

Structural unemployment

A

Unemployment caused as a result of the changing structure of economic activity

468
Q

Subnormal profit

A

That which is earned below normal profit

469
Q

Subsidies

A

Direct payments made by govnerments to the producers of goods and services

470
Q

Substitute

A

An alternative good

471
Q

Substitution effect

A

Where, following a price change, a consumer will substitute the cheaper good for the one that is now relatively more expensive

472
Q

Superior good

A

A good with a YED greater than 1

473
Q

Supernormal profit

A

That which is earned above normal profit

474
Q

Supply

A

The quantity of a product that producers are willing and able to sell at different prices within a time period, other things equal

475
Q

Supply chain

A

All the stages of a products progress from raw materials, production and distribution unit it reaches the consumer

476
Q

Supply curve

A

A line plotted on a graph that represents the relationship between the quantity supplied and the price of the product

477
Q

Supply schedule

A

The data from which a supply curve is drawn on a graph

478
Q

Supply-side policy

A

Government policy tools designed to increase aggregate supply

479
Q

Supply-side shocks

A

Large and unexpected changes in short-run aggregate supply

480
Q

Sustainable development

A

Development that ensures that the needs of the present generation can be met without harming the well-being of future generations

481
Q

Sustainable economic growth

A

Economic growth that des threaten the future generation’s ability to experience economic growth

482
Q

Target rate for inflation

A

The rate a central bank is set to achieve

483
Q

Tariff

A

A tax imposed on imports (sometimes also exports)

484
Q

Tax avoidance

A

The legal bending of the rules of the tax system to pay less tax

485
Q

Tax base

A

The coverage of what is taxed

486
Q

Tex evasion

A

The illegal non-payment or underpayment of a tax

487
Q

Technological unemployment

A

Unemployment caused by advances in technology

488
Q

Term of trade

A

A numerical measure of the relationship between export and import prices

489
Q

Tertiary sector

A

Industries that produce services

490
Q

Third party

A

Those not directly involved in the decision-making

491
Q

Tied aid

A

Aid with conditions attached

492
Q

Total cost

A

The sum of fixed costs and variable costs

493
Q

Total currency flow

A

The net amount of money that flows into or out of the country as a result of international transactions

494
Q

Total product

A

The same as total output

495
Q

Total revenue

A

A firm’s total sales or earning over a given period of time

496
Q

Total utility

A

The total satisfaction received from consumption

497
Q

Trade bloc

A

A regional group of countries that have entered into trade agreements

498
Q

Trade creation

A

Where high0cost domestic production is replaced by more efficiently produced imports from within the customs union

499
Q

Trade diversion

A

Where trade with a low-cost country outside a customs union ins replaced by higher-cost products supplied from within the customs union

500
Q

Trade-off

A

What is involved in deciding whether to give up one good for another good

501
Q

Trade union

A

An organisation of workers that aims to protect an enhance the well-being of its members through collective negotiations with employers and government

502
Q

Trade-weighted exchange rate

A

The price of one currency against a basket of currencies

503
Q

Trading possibility curve

A

A diagram showing the effects of a country specialising and trading

504
Q

Transactions motive

A

The desire to hold money for the day-to-day buying of goods and services

505
Q

Transfer earnings

A

The amount that is earned by a factor of production in its best alternative use

506
Q

Transfer payment

A

A payment made by the government to certain members of the community who may be unable to work or are in need of assistance

507
Q

Transmission of preferences

A

The automatic way in which the market allow the wants of consumers to be made known to producers

508
Q

Underemployment

A

A situation where people are working fewer hours they would like or working on jobs that they are overqualified for

509
Q

Unemployment

A

The state of being will and able to work but not having a job

510
Q

Unemployment rate

A

Unemployed workers as a percentage of the labour force

511
Q

Unit elasticity

A

Where the change in price is relatively the same as the change in quantity demanded

512
Q

Universal basic income

A

A regular unconditional cash payment made by the government

513
Q

Universal benefits

A

Benefits available to all irrespective of income or wealth

514
Q

Untied aid

A

Aid without conditions attached

515
Q

Utility

A

The satisfaction received from consumption

516
Q

Value added

A

The difference between the price at which products are sold and the price of the goos and services used in their production

517
Q

Variable costs

A

Costs that vary directly with output in the short run

518
Q

Vertical integration

A

Where a firm grows by producing backwards or forwards in its supply chain

519
Q

Very long run

A

Time period when all key inputs into production are variable

520
Q

Virtuous circle

A

The links between, for example, an increase in investment, increase in productivity, increase in income and increase in saving

521
Q

Voluntary export restraint

A

A limit placed on imports reached with the agreement of the supplying country

522
Q

Voluntary unemployment

A

Unemployment resulting from the unemployed choosing not to accept jobs at the going wage rate

523
Q

Wage differential

A

Difference in pay between workers with different skills and responsibilities

524
Q

Wage-price spiral

A

Higher wages causing prices to rise which, in turn, push up wages and so on

525
Q

Wants

A

The goods and services that people may like to have but are not always realised

526
Q

X-inefficiency

A

Where the firms costs are above those experience in a more competitive market

527
Q

Year-on-year method

A

A way of calculating the inflation rate by comparing the percentage change in the price level for a given month with that of the same month of the previous year

Economics (14 decks)

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