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
2
Q
Absolute poverty
A
A condition where people’s income is too low to enable them to meet their basic needs
3
Q
Accelerator theory
A
A model that suggests investment depends on the rate of change in income
4
Q
Active balances
A
The amount of money held by households or firms for possible near-future use
5
Q
Actual economic growth
A
An increase in real GDP
6
Q
Ad valorem tax
A
A tax that is charged as a given percentage of the price
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
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
9
Q
Aggregate expenditure
A
The total amount spent in the economy at different levels of income
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
11
Q
Aid
A
Assistance given to other countries on favourable terms
12
Q
Allocative efficiency
A
Where price is equal to marginal cost; firms are producing those goods and services most wanted by customers
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
14
Q
Appreciation
A
An increase in the international price of a currency cause by market forces
15
Q
Asian Tiger economy
A
Export-led, high growth economies in Asia
16
Q
Asymmetric information
A
Where one party has more or better information than another in a business transaction
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
18
Q
Autonomous investment
A
Investment that is made independent of income
19
Q
Average cost
A
The cost per unit of output
20
Q
Average product
A
Total product divided by the number of workers employed; a simple measure of productivity
21
Q
Average prosperity to consume
A
The proportion of income that is consumed
22
Q
Average prosperity to import
A
The proportion of income that is spent on imports
23
Q
Average rate of taxation
A
The proportion of income that is taxed
24
Q
Average revenue
A
Revenue per unit of output
25
Balanced budget
Government revenue equalling government expenditure
26
Balance
Debit items on the current account equalling credit items
27
Balance of payments account
A record of a country's economic transactions with the rest of the world over a year
28
Bank credit multiplier
The process by which banks can make more loans than deposits avaliable
29
Barriers to entry
Restrictions that prevent new firms entering an industry
30
Barrier to exit
A restriction that prevents a firm leaving a market
31
Barter
Direct exchange of goods and services for other goods and services
32
Base year
The reference point in time. It is the starting year in an index and is given a value of 100
33
Basic prices
Prices charged by producers before the addition of indirect taxes and the deduction of subsidies
34
Benefit:cost ratio
Net benefits as a proportion of net costs
35
Bilateral aid
Aid given by one country to another country
36
Birth rate
The number of live births per thousand of the population in one year
37
Broad money
Money used for spending and saving
38
Budget
An annual statement in which the government outlines plans for its spending and tax revenue
39
Budget deficit
Government expenditure exceeding government revenue
40
Budget line
The combinations of two goods that can be purchased with given income and given prices
41
Budget surplus
Government revenue exceeding government expenditure
42
Buffer stock scheme
A type of commodity agreement designed to limit price fluctuations
43
Business cycle
Fluctuations in economic activity
44
Capital
A factor of production; a physical resource made by humans that aids the production of goods and services
45
Capital account
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
46
Capital government spending
Government spending on investment
47
Capital-output ratio
A measure of the amount of capital used to produce a given amount or value of output
48
Capital ratio
A bank's available financial capital as a percentage of its risker assets
49
Capital tax
A progressive tax paid annually on the difference between the buying and selling price of an asset
50
Cartel
A formal agreement between firms to limit competition by limiting output or fixing prices
51
Casual unemployment
Unemployment that occurs when people have left one short-term job and before they take up another short-term job
52
Central bank
Bank owned by the government that provides banking services to the government and commerical banks and which operates monetary policy
53
Ceteris paribus
A Latin phrase meaning 'other things equal' or 'other things are unchanged'
54
Changes in demand or supply
When there is a shift in the demand or supply curve due to a change in factors other than the price of the product
55
Choice
Resources are scarce so individuals, firms and government have to consider alternatives
56
Circular flow of income model
A simplified view of how income flows around the economy
57
Claimant count measure
A measure of unemployment based on those claiming unemployment benefits
58
Climate change
A change in the weather of a region over a period of time
59
Closed economy
An economy that does not trade with other economies
60
Collusion
An anti-competitive action by producers
61
Commercial banks
Bank which air to make a profit by providing a range of banking services to firms and households
62
Comparative advantage
A situation where a country can produce a product at a lower opportunity cost than any other country
63
Compensation of employees
Income of workers who work in another country for a short period of time
64
Complement
A good consumed with another
65
Concentration ratio
A measure of the combined market share of the piggest three, four or five firms in a market
66
Conglomerate
A company with a large number of diversified businesses
67
Constant prices
Prices in a base year
68
Consumer expenditure
Spending by households on good and services
69
Consumer price index
A measure that shows the average change in the prices of a representative basket of products purchased by households
70
Consumers
Individuals or households who buy good and services for their own use or others
71
Consumer purplus
The difference between the price a consumer is willing to pay for a product and its market price
72
Consumption
Spending by households on good and services
73
Consumption function
The relationship between income and consumption
74
Contestability
The extent to which barrier to entry into a market are free and exit from the market is costless
75
Contestable market
A market where entry is free and exit is costless
76
Contractionary fiscal policy
Decreases in government spending and increases in taxes designed to reduce the growth of aggregate demand
77
Cost-benefit analysis
A method of decision-making that takes into account the costs and benefits involved
78
Cost-push inflation
Inflation caused by increases in costs of production
79
Counter-cyclically
Going against the fluctuations in economic activity
80
Credit regulations
Rules affecting bank lending
81
Creeping inflation
A low rate of inflation
82
Cross elasticity of demand
Measure the responsiveness of the quantity demanded for one product following a change in the price of another product
83
Cross-subsidisation
Profits from one part of a firm are used to offset losses made elsewhere in the businessC
84
Crowding in
The idea that higher public sector spending will just replace private sector spending
85
Current account deficit
The value of debit items on the current account exceeding the value of credit items
86
Current account surplus
The value of credit items on the current account exceeding the value of debit items
87
Current account
A record of the trade in goods, trade in services, primary income and secondary income
88
Current government spending
Government spending on providing goods and services
89
Customs union
A trade bloc where there is free trade between member union countries and a common external tariff on imports from non-members
90
Cyclical budget deficit
A budget deficit caused by a decline in economic activity
91
Cyclical unemployment
Unemployment that results from a lack of aggregate demand
92
Deadweight welfare loss
The loss in welfare arising from an inefficient allocation of resources
93
Death rate
The number of deaths per thousand of the population in one year
94
Debtors
People, firms or governments who owe money
95
Decreasing returns to scale
Where factor inputs increase at a proportionately faster rate than the increase in output
96
Deflationary gap
A shortage of aggregate expenditure so that potential output is not reached
97
Deflation
A sustained fall in the price level
98
Demand
The quantity of a product that consumers are willing and able to buy at different prices per period of time, ceteris paribus
99
Demand curve
A line plotted on a graph that represents the relationship between the quantity demanded and the price of a product
100
Demand deposit account
A bank account that allows the holder to make a receive payments
101
Demand-pull inflation
Inflation caused by increases in aggregate demand not matched by equivalent increases in aggregate supply
102
Demand schedule
The data from which a demand curve is drawn on a graph
103
Demerit good
A good that is thought to be undesirable for consumers and is over provided by the market because of information failure
104
Demographers
People who study changes in the structure of human populations
105
Dependency ratio
The proportion of the economically inactive compared to the labour force
106
Depreciation
A decrease in the international price of a currency caused by market forces
107
Depreciation of capital goods
The value of capital goods that have worn out or become out-of-date
108
Depression
A fall in real GDP that lasts several yearsDe
109
Deregulation
When barriers to entry into an industry are removed
110
Derived demand
Where the demand for a good or service depends upon the use that can be made from it
111
Devaluation
A decision by the government to lower the international price of the country's currency
112
Development traps
Restriction on the growth of developing economies that arise from low levels of savings and investment
113
Direct taxes
Taxes on income and wealth
114
Discouraged workers
Workers who would like a job but who have given up actively seeking work after a period of trying to find work
115
Discretionary fiscal policy
Deliberate changes in government spending and taxation
116
Diseconomies of scale
Where long-run average costs increase as the scale of output increases
117
Disequilibrium
A situation where demand and supply are not equal in a market
118
Disequilibrium unemployment
Unemployment that arises when the aggregate supply of labour is greater than the aggregate demand for labour at the current wage rate
119
Disinflation
A fall in the inflation rate
120
Disposable income
Income minus direct taxes plus state benefits
121
Dissaving
Consumer expenditure exceeds income, with people or countries drawing on past savings or borrowing
122
Diversification
Where a firm grows through the production or sale of a wide range of different products
123
Dividend payments
A share of a firms profits paid to its shareholders
124
Division of labour
Where a manufacturing process is split into a sequence of individual tasks
125
Double coincidence of wants
A situation where two people each have something to other one wants
126
Dumping
Selling products in a foreign market at below their cost of production
127
Dynamic efficiency
When resources are allocated efficiently over time
128
Economically active
People in the labour force
129
Economically inactive
People who are not in the labour force
130
Economic and monetary union
Coordination of policies and the operation of a single currency by a group of countries
131
Economic development
An increase in welfare and quality of life
132
Economic efficiency
Where scarce resources are used in the most efficient way to produce maximum output
133
Economic growth
In the short run an increase in a country's output and in the long run, an increase in a country's productive potential
134
Economic rent
A payment made to a factor of production above that which is necessary to keep it in its current use
135
Economic system
The way in which production is organised and choices are made in an economy
136
Economies of scale
The benefits gained from falling long-run average costs as the scale of output increases
137
Economies of scope
Where a reduction in average total cost is made possible by a firm changing the different gods it produces
138
Effective demand
Demand that is supported by the ability to pay
139
Elastic
Where the relative change in the quantity demanded is greater than the change in price, income or the prices of substitutes and complements
140
Elasticity
A numerical measure of responsiveness of one variable following a change in another variable, ceteris paribus
141
Embargo
A ban in imports and/or exports
142
Emerging economy
One that is making quick progress towards becoming a high-income economy
143
Employment rate
Employed workers as a percentage of the population of working age
144
Entrepreneur
AN individual who seeks out new business opportunities and is willing to take risks
145
Enterprise
As a factor of production involves organising production and taking risks
146
Equality
Where everyone is treated in the same way
147
Equilibrium
A situation where there is no tendency to change in a market
148
Equilibrium price
The price where demand and supply are equal, where the market clears
149
Equilibrium quantity
The amount that is traded at the equilibrium price
150
Equilibrium unemployment
The unemployment which exists when the labour market is in equilibrium. It includes voluntary, frictional and structural unemployment
151
Equi-marginal principle
Consumers maximise their utility where their marginal valuation for each product consumed is the same
152
Equities
Shares in firms
153
Exchange control
Restrictions on the purchases of foreign currency
154
Exchange rate
The price of one currency in terms of another currency
155
Excise duties
A specific tax that is levied on goods such as cigarettes
156
Excludability
Where it is possible to stop someone from consuming a good or service
157
Exhaustive government spending
Government spending which makes use of resources
158
Expansionary fiscal policy
Increases in government spending and cuts in taxation designed to increase aggregate demand
159
Expectations-augmented Phillips curve
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
160
Expenditure method
A way of calculating GDP by totalling all the spending on the country's output
161
Expenditure reducing policy
Policy tools designed to reduce imports and increase exports by reducing demand
162
Expenditure switching policy
Policy tools designed to encourage people to switch form buying foreign-produced products to buying domestically produced products
163
Exports
Goods and services sold to other countries
164
Extension of demand or supply
An increase in the quantity demanded or quantity supplied
165
External benefits
Those benefits that are received by a third party not involved in the action
166
External costs
Those costs incurred and paid for by a third party not involved in the action
167
External economies of scale
Cost savings accruing to all firms as the scale of the industry increases
168
Externality
Where the action of a producer or consumer give rise to side effects on others not directly involved in the action
169
Extreme poverty
Where a household exists on less than $1.90 a day
170
Factor endownment
The availability of capital, enterprise, labour and land in an economy
171
Factors of production
Resources or inputs available in an economy that are used in the production of goods and services
172
Financial account
Within the balance of payments, a record of the transfer of financial and capital assets between the country and the rest of the world
173
Firm
Any business that hires factors of production to produce goods and services
174
Fiscal drag
The income of people and firms being pushed into higher tax brackets as a result of inflation
175
Fiscal policy
The use of taxation and government spending to influence aggregate demand
176
Fisher equation
The statement that MV = PT
177
Fixed costs
Costs that are independent of output in the short. run
178
Fixed exchange rate
An exchange rate set by the government and maintained by the central bank
179
Floating exchange rate
An exchange rate that is determined by the market forces of demand and supply
180
Foreign direct investment
The setting up of production units or the purchase of existing production units in other countries
181
Free goods
Goods that are not scarce and have 0 opportunity cost
182
Free rider
Someone who does not pay to use a public good
183
Free trade
International trade not restricted by taxes on important and other policy tools designed to give domestic producers protection from competition from imports
184
Free trade area
A trade bloc where member governments agree to remove trade restrictions among themselves
185
Frictional unemployment
Unemployment that is temporary and arises when workers are in-between jobs
186
Full economic union
A trade bloc where there is free trade between member countries, a common external tariff, common economic policies and the same currency
187
Full employment
The level of employment corresponding to where all who wish to work have found jobs, excluding frictional unemployment
188
Fundamental economic problem
Scarce resources but unlimited wants
189
GDP deflator
The price index of all domestically produced goods and services
190
Geographical mobility of labour
The ability of workers to move to a job in a different location
191
Giffen good
A type of inferior good where the quantity demanded falls as price falls and the quantity demanded inreases when price increases
192
193
Gig economy
A labour market based on short-term contracts
194
Gini coefficient
A numerical measure of income inequality
195
Global warming
A rise in the temperature of the earths atmosphere arising from the emission of greenhouse gases
196
Globalisation
The process by which the world is becoming increasingly interconnected through trade and other links
197
Government failure
Where government intervention to correct market failure leads to a net loss of economic welfare
198
Government macroeconomic failure
Government intervention reducing rather than increasing economic performance
199
Government securities
Bills and bond issued by the government to raise money
200
Government spending
The total of local and national government expenditure on goods and services
201
Greenhouse gases
Carbon dioxide, methane, nitrous oxide
202
GDP
The total output produced in a country
203
Gross investment
Total spending on capital goods
204
Gross national disposable income
GNI plus net transfer of worker's income to their relatives to and from other countries
205
GNI
GDP plus net income from abroad
206
High-income countries
Economies where income per head was $12,376 or more in 2018
207
Homemakers
People who look after the household of their own families
208
Horizontal integration
Where a firm merges or acquires another in the same line of business
209
Hot money flows
Flows of money moved around the world to take advantages of changes in interest rates and exchange rates
210
Human capital
The value of labour to the productive potential of an economy
211
Human development index
A composite measure of living standards that includes GNI per head, education and life expectancy
212
Hyperinflation
A very high rate of inflation which may result in people losing confidence in the economy
213
Hysteresis
Unemployment causing unemployment due to workers becoming deskilled and demotivated when they are out of work for a long time
214
Idle balances
The amount of money held temporarily as the returns from holding financial assets are too low
215
Imbalance
Debit items in the current account not equaling credit items
216
Imperfect competition
Any market structure except for perfect competition
217
Imports
Goods and services purchased form other countries
218
Incentive
Where low or high prices influence consumption and production by encouraging buyers to consume and sellers to produce
219
Incidence
The extent to which the tax burden is borne by the producer or consumer or both
220
Income effect
Where following a price change of a good a consumer has higher real income and will purchase more of this good
221
Income elasticity of demand
Measures the responsiveness of the quantity demanded for a product following a change in income
222
Income method
A way of measuring GDP by totalling all the incomes earned in producing the country's output
223
Increasing returns to scale
Where output increases at a proportionately faster rate than the increase in factor inputs
224
Indifference curve
This shows all of the combinations of two goods that give a consumer equal satisfaction
225
Indirect tax
A tax levied on goods and services such as a general sales tax
226
Induced investment
Investment that is made in response to changes in income
227
Ineslatic
Where the relative change in the quantity demanded is less than the change in price, income or the prices of substitutes or complements
228
Infant industries
New industries that have a low output and a high average cost
229
Infant mortality rate
The number of deaths of children aged under 1 per thousand live births in one year
230
Inferior good
Where the quantity demanded increases as income decreases
231
Inflation
A sustained increase in an economy's price level over a period of time
232
Inflationary gap
The excess of aggregate expenditure over potential output
233
Inflationary noise
Confusion over relative prices caused by inflation
234
Inflation rate
The percentage rise in an economy's price level over a period of time
235
Inflation target
The inflation rate a central bank is set to achieve
236
Informal economy
The mart of the economy that is not regulated, protected or taxed by the government
237
Information failure
A situation where consumers do not have full or complete information when making decisions
238
Infrastructure
Buildings and constructions that support society and economic activity
239
Inheritance tax
A progressive tax on an inheritance or gift
240
Injections
Additions to the circular flow of income
241
Interest rates
The price of borrowing money and the reward for saving
242
International monetary fund
An international organisation that promotes free trade and helps countries in balance of payments difficulties
243
International unemployment
Unemployment arising when a country loses its international competitiveness in producing a product or products
244
Investment
Spending on capital goods
245
Isocosts
Lines of constant relative costs for factors of production
246
Isoquant
A curve showing combinations of labour and capital to produce a given level of output
247
J curve effect
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
Joint demand
When two goods are consumed together
249
Joint supply
When two items are produced together
250
Keynesians
People who agree with the view of economist John Maynard Keynes that government intervention is needed to achieve full employment
251
Kinked demand curve
A traditional model of a firms behaviour in oligopoly
252
Kuznets curve
A curve that shows the relationship between economic growth and income inequality
253
Labour
A factor of production; human resources available in an economy
254
Labour force
The unemployed and the employed
255
Labour force participation rate
The proportion of the population that are of working age and who are either working or actively seeking work
256
Labour force survey measure
A measure of unemployment based on a survey that identifies people who are actively seeking a job
257
Labour mobility
Ability of workers to change where they work and in which occupation
258
Laffer curve
A curve showing tax revenue rising at first as the tax rate is increasing and then falling beyond a certain rate
259
Land
A factor of production; natural resources in an economy
260
Law of diminishing marginal utility
As consumption increases, the satisfaction from consumption decreases
261
Law of diminishing returns
Where the output from an additional unit of input leads to a fall in the marginal product
262
Leakages
Withdrawals from the circular flow of income
263
Level of unemployment
The number of workers who are unemployed
264
Limit pricing
Where firms deliberately lower prices and abandon a policy pr profit maximisation to stop new firms entering a market
265
266
Liquidity
The ability to turn an asset into cash quickly and without loss
267
Liquidity preference
A Keynesian concept that explains why people demand money
268
Liquidity trap
A situation where interest rates cannot be reduced any more in order to stimulate an upturn in economy activity
269
Loan
A sum of money lent at an agreed rate of interest for a specific time period
270
Long run
Time period when all factors of production are variable but with a constant, such as the state of technology
271
Long-run aggregate supply
The total output of a country supplied in the period when prices of factors of production have fully adjusted
272
Long-term unemployment
Those who have been unemployed for a year or longer
273
Lorenz curve
A diagram illustrating the extent of income or wealth inequality
274
Lower middle-income countries
Countries where income per head was between $1026 and $3995 in 2018
275
Low-income countries
Economies where income per head was $1025 or less in 2018
276
Macroeconomic equilibrium
The output and price level achieved where AD equals AS
277
Macroeconomics
The study of an economy or a group of economies
278
Managed system
Where the exchange rate is influenced by state intervention
279
Marginal cost
The addition to total cost when making one extra unit of output
280
Marginal product
The change in output arising from the use of one more unit of a factor of production
281
Marginal propensity to consume
The proportion of extra income that is spent
282
Marginal prosperity to import
The proportion of extra income spent on imports
283
Marginal prosperity to save
The proportion of extra income which is saved
284
Marginal rate of substitution
The rate at which a consumer is willing to substitute one good for another
285
Marginal rate of taxation
The proportion of extra income taken in tax
286
Marginal revenue
The additional or extra revenue gained from the same of one more unit of output
287
Marginal revenue product
The addition to total revenue as a result of employing one more worker
288
Marginal utility
The utility derived from the consumption of one more unit of the good or service
289
Market
Where buyers and sellers get together to trade
290
Market demand
The total amount demanded by consumers
291
Market economy
An economic system where most decisions are taken through the market mechanism
292
Market failure
When the free market does not make the best use of scarce resources
293
Market mechanism
Resource allocation decisions are taken by individual producers and consumer with no government intervention
294
Market prices
Prices paid by consumers; they take into account indirect taxes and subsidies
295
Market structure
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
Marshall-Lerner condition
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
Maximum price
A price that is fixed; the market price must not exceed this price (sometimes called a price ceiling)
298
Means-tested benefits
Benefits that are paid only to those whose incomes fall below a certain level
299
Measurable economics welfare
A composite measure of living standards that adjusts GDP for factors that reduce living standards and factors that improve living standards
300
Menu costs
Costs to firms of having to change prices due to inflation
301
Merit good
A good that is thought to be desirable for consumers but which is underprovided by the market because of information failure
302
Microeconomics
The study of individual markets
303
Middle-income economics
Economies where income per head was between $1026 and $3995 or $3996 and $12375 in 2018
304
Minimum efficient scale
Lowest level of output at which costs are minimised
305
Minimum price
A price that is fixed; the market must not go below this price
306
Minimum wage
The least amount an employer can legally pay one of its workers
307
Mixed economy
An economic system where both market forces and government are involved in resource allocation decisions
308
Model
A simplified view of reality used to explain economic problems and issues
309
Monetarists
Economists who consider that inflation is caused by an excessive growth in the money supply
310
Monetary policy
The use of interest rates, the money supply, credit regulations and the exchange rate to influence aggregate demand
311
Monetary union
A trade bloc which involves member countries operating the same currency, having one exchange rate and the same interest rate
312
Money
An item which is generally acceptable as a means of payment
313
Money supply
The total amount of money in an economy
314
Money values
Values at the prices operating at the time
315
Monopolistic competition
A market structure where there are many firms, differentiated products and few barriers to entry
316
Monopoly
Where one firm dominates the market due to having a large market share
317
Monopsony
Where there is a single buyer in a market
318
Moral hazard
The temptation to take risks when some other party is covering these risks
319
Movement up and down a demand curve
Shows how quantity demanded responds to a change in price
320
Multidimensional poverty index
A composite measure of deprivation in terms of the proportion of households that lack the requirements for a reasonable standard of living
321
Multilateral aid
Aid given by international organisations to a country or countries
322
Multinational companies
Firms that operate in more than one country
323
Multiplier
A numerical estimate of a change in spending in relation to the final change in spending
324
Narrow money
Money that can be spent directly
325
National debt
The total amount of government debt
326
National income
A country's total output
327
National income statistics
Measure of the total output of an economy
328
Nationalisation
When a government takes over a private sector business and transfers it to state ownership
329
Natural increase in population
The number of live births exceeding the number of deaths
330
Natural monopoly
Where with falling long-run average costs, it makes sense to have only one firm providing the good or service
331
Natural rate of unemployent
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
Necessity good
A type of normal good with a YED that is close to 0
333
Needs
Things that are necessary for survival
334
Negative externality
Where the side effects of an action have a negative impact that imposes costs on third parties
335
Negative income tax
Money paid out by the government to those earning below an agreed annual fixed benefit limit
336
Negative output gap
A situation where actual output is below potential output
337
Net domestic product
GDP - depreciation
338
Net errors and omissions
A figure included to ensure the balance of payments balances
339
Net exports
Exports - imports
340
Net investment
Additions to the capital stock
341
Net migration
The difference between immigration and emigration
342
Net migration rate
The number of migrants per thousand of the population in one year
343
Net national imcome
Gross national income - depreciation
344
Net property income from abroad
Receipts of profit, rent and interest earned on the ownership of foreign assets - the payments of profit, rent and interest to non-residents
345
New classical economists
Economists who think that the LRAS curve is vertical and that the economy will move towards full employment without government intervention
346
Nominal GDP
Total output measured in current prices
347
Non-excludable
A situation where it is not possible to stop anyone else from using a good
348
Non-exhaustive government spending
Government spending which allows others to decide how resources are used
349
Non-price competition
When firms use methods other than price to attract consumers from rival producers
350
Non-rival
Where consumption by one person does not reduce consumption by someone else
351
Normal good
Where the quantity demanded increase as income increases
352
Normal profit
A cost of production that is just sufficient for a firm to keep operating in a particular industry
353
Normative statement
A statement that is based on the economist's opinion or value judgement and which cannot be proven
354
Notional demand
Where buyers may want to buy a product but which is not always backed up by the ability to pay
355
Nudge theroy
Influencing choice by nudging individuals towards making more effective decisions
356
Occupational mobility of labour
The ability of workers to move from one occupation to another occupation
357
Oligopoly
A market structure with few firms and high barriers to entry
358
Open economy
An economy that is involved in trade with other economies
359
Opportunity cost
The cost expressed in terms of the next best alternative that is foregone when a choice is made
360
Opportunity cost ratio
The quantity of one product compared to the quantity of another product that has to be sacrificed to produce it
361
Optimum population
The size of population that maximises GDP per head
362
Output gap
A gap between actual and potential output
363
Output method
A way of measuring GDP by calculating the total production of goods and services of the country
364
Overdraft
Permission to spend more than is in a demand deposit account
365
Pareto opitimality
Where it is impossible to make someone better off without making someone else worse off
366
Perfect competition
An ideal market structure that has many buyers and sellers, identical products, no barriers to entry
367
Perfectly elastic
Where all that is produced is sold at a given price
368
Perfectly inelastic
Where a change in price has no effect on the quantity demanded
369
Phillips curve
A curve that shows the relationship between the unemployment rate and the inflation rate over a period of time
370
Physical capital
Factors of production like machinery and infrastructure
371
Planned economy
An economic system where resources are state owned and allocated by a central body
372
Polluter pays principle
A policy that makes those responsible for causing damage to the environment pay for that damage
373
Pollution permit
A form of license given by governments that allows a firm to pollute up to a given level
374
Positive externality
Where the side effects of an action have a positive impact that provides benefits to third parties
375
Positive net migration
More people coming to live in the country than people leaving the country to live elsewhere
376
Positive output gap
A situation where actual output is above potential output
377
Positive statement
A statement that is based on facts or actual evidence
378
Potential economic growth
An increase in the productive capacity of the economy
379
Poverty cycle
The links between for example low income, low savings, low investment and low productivity
380
Poverty trap
Where an individual or a family are better off on means-tested benefits rater than working
381
Precautionary motive
A reason for holding money for unexpected or unforseen events
382
Predatory pricing
Where a firm sells its good below average variable cost to force competitors out of the market
383
Price competition
Where firms compete on price to attract customers
384
Price elastic
When the relative change in the quantity demanded is greater than the change in price of the product
385
Price elasticity of demand
Measure of the responsiveness of the quantity demanded for a product following a change in the price of the product
386
Price elasticity of supply
A numerical measure of the responsiveness of the quantity supplied to a change in the price of the product
387
Price elastic supply
The quantity supplied responds more than proportionately to a change in its price
388
Price index
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
Price inelastic
When the relative change in quantity demanded is less than the change in price of the product
390
Price inelastic supply
The quantity supplied responds less than proportionately to a change in its price
391
Price leadership
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
Price level
The average of all prices in an economy
393
Price maker
A firm that can choose what price to sell its goods in the market
394
Price mechanism
The means of allocating resources in a market economy
395
Price ridigity
Where prices are unchanged despite a change in costs
396
Price stability
A low and stable inflation rate
397
Price taker
A firm that is not able to influence market price
398
Primary sector
Industries involved in farming an extracting natural resources
399
Principal-agent problemt
Where one person makes decisions on behalf of another person
400
Private benefits
The benefits that accrue to the consumer or to the firm that produces a good or service
401
Private costs
Those costs that are incurred by a consumer or by the firm that produces a good or service
402
Private goods
Goods that are consumed by one person and not available to anyone else
403
Private sector
That part of the economy under private ownership
404
Privatisation
Where there is a change in ownership from the public to private sector
405
Producer surplus
The difference between the price a producer is willing to accept and what is actually paid
406
Production function
The maximum possible output from a given set of factor inputs
407
Production possibility curve
A simple representation of the maximum level of output that an economy can achieve, given its current resources and state of technology
408
Production quota
A physical limit on what cam be produced
409
Productive capacity
The maximum output that can be produced when all resources are used fully
410
Productive efficiency
When a firm is producing at the lowest possible costs
411
Productive resources
Resources that are available to be used
412
Profit
The difference between total revenue and total costs
413
Profit maximisation
The assumed objective of a firm; the difference between total cost and total revenue is at a maximum
414
Profit satisficing
A firm's objective to make a reasonable or minimum level of profit
415
Progressive tax
One where the rate of taxation rises more than proportionately to the rise in income
416
Property rights
Where owners have a right to decide how their assets may be used
417
Proportional tax
A tax which takes the same percentage of the income or wealth of all income groups
418
Protectionsim
Protecting domestic producers from foreign competition
419
Provision of information
When governments directly provide information to correct market failure
420
Public good
A good that is non-excludable and non-rival
421
Public sector
That part of an economy under government ownership
422
Purchasing power parity
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
Pure monopoly
Where there is just one seller in the market
424
Pure public good
Good which is both non-excludable and non-rival
425
Quantitative easing
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
Quantity theory of money
The theory that links inflation in an economy to changes in the money supply
427
Quasi-public good
Good that has some but not the full characteristics of a public good
428
Quota
A limit on imports
429
Rationing
Where a producer limits the supply of products in the market to ensure the products remain exclusive
430
Real data
Data adjusted for inflation
431
Real exchange rate
A currency's value in terms of its real purchasing power
432
Real GDP
Total output measured in constant prices
433
Recession
A decline in real GDP over at least two consecutive quarters
434
Regional unemplpyment
Unemployment arising from a decline in job vacancies in a particular area of the country
435
Regressive tax
A tax which takes a larger percentage of the income or wealth of those on low incomes
436
Regulations
A wide range of legal and other restrictions that come from government or regulatory bodies
437
Relative poverty
Where household income in 50% or less than the average income
438
Reserve ratio
The proportion of liquid assets to total liabilities
439
Resources
Input available for the production of goods and services
440
Revaluation
A decision made by the government to raise the international price of the country's currency
441
Revenue maximisation
A firm's objective to maximise total revenue
442
Rivalry
Where consumption by one person of a good or service reduces the availability of the good or service for others
443
Sales maximisation
A firm's objective to maximise the volume of sales
444
Sampling error
The people being surveyed having different characteristics or experiences to the rest of the population
445
Saving
Income - consumption
446
Savings deposit account
A bank account which pays interest and may require notice to be given before money can be withdrawn from it
447
Savings function
The relationship between income and saving
448
Scarcity
A situation in which wants and needs are greater than the resources available
449
Search unemployment
Unemployment that exists when people take time looking for a job they are willing to accept
450
Seasonal unemployment
Unemployment arising at a particular time of the year when demand from the product falls
451
Secondary sector
Industries that manufacture products
452
Self-employed
Those working for themselves
453
Shadow economy
The output of goods and services hidden from the authorities
454
Shadow price
One that is applied where there is no established market price available
455
Shoe leather costs
Costs of moving money around in search of the highest interest rate
456
Short-run aggregate supply
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
Short-run
Time period when a firm can change at least one but not all factor inputs
458
Shut-down price
A firm will stop production when price falls below average variable cost
459
Signalling
Where decisions taken by buyers or sellers are determined by price
460
Sin taxes
Taxes on products considered harmful to consumers
461
Social benefits
The total benefits of a particular action
462
Social costs
The total costs of a particular action
463
Specialisation
The process by which individuals, firms and. economies concentrate on producing those goods and services where they have an advantage over others
464
Specific taxes
Taxes that are charged as a set amount per unit
465
Speculative motive
A reason for holding money with a view to make future gains from buying financial assets
466
Structural budget deficit
A budget deficit caused by an imbalance between government spending and taxation
467
Structural unemployment
Unemployment caused as a result of the changing structure of economic activity
468
Subnormal profit
That which is earned below normal profit
469
Subsidies
Direct payments made by govnerments to the producers of goods and services
470
Substitute
An alternative good
471
Substitution effect
Where, following a price change, a consumer will substitute the cheaper good for the one that is now relatively more expensive
472
Superior good
A good with a YED greater than 1
473
Supernormal profit
That which is earned above normal profit
474
Supply
The quantity of a product that producers are willing and able to sell at different prices within a time period, other things equal
475
Supply chain
All the stages of a products progress from raw materials, production and distribution unit it reaches the consumer
476
Supply curve
A line plotted on a graph that represents the relationship between the quantity supplied and the price of the product
477
Supply schedule
The data from which a supply curve is drawn on a graph
478
Supply-side policy
Government policy tools designed to increase aggregate supply
479
Supply-side shocks
Large and unexpected changes in short-run aggregate supply
480
Sustainable development
Development that ensures that the needs of the present generation can be met without harming the well-being of future generations
481
Sustainable economic growth
Economic growth that des threaten the future generation's ability to experience economic growth
482
Target rate for inflation
The rate a central bank is set to achieve
483
Tariff
A tax imposed on imports (sometimes also exports)
484
Tax avoidance
The legal bending of the rules of the tax system to pay less tax
485
Tax base
The coverage of what is taxed
486
Tex evasion
The illegal non-payment or underpayment of a tax
487
Technological unemployment
Unemployment caused by advances in technology
488
Term of trade
A numerical measure of the relationship between export and import prices
489
Tertiary sector
Industries that produce services
490
Third party
Those not directly involved in the decision-making
491
Tied aid
Aid with conditions attached
492
Total cost
The sum of fixed costs and variable costs
493
Total currency flow
The net amount of money that flows into or out of the country as a result of international transactions
494
Total product
The same as total output
495
Total revenue
A firm's total sales or earning over a given period of time
496
Total utility
The total satisfaction received from consumption
497
Trade bloc
A regional group of countries that have entered into trade agreements
498
Trade creation
Where high0cost domestic production is replaced by more efficiently produced imports from within the customs union
499
Trade diversion
Where trade with a low-cost country outside a customs union ins replaced by higher-cost products supplied from within the customs union
500
Trade-off
What is involved in deciding whether to give up one good for another good
501
Trade union
An organisation of workers that aims to protect an enhance the well-being of its members through collective negotiations with employers and government
502
Trade-weighted exchange rate
The price of one currency against a basket of currencies
503
Trading possibility curve
A diagram showing the effects of a country specialising and trading
504
Transactions motive
The desire to hold money for the day-to-day buying of goods and services
505
Transfer earnings
The amount that is earned by a factor of production in its best alternative use
506
Transfer payment
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
Transmission of preferences
The automatic way in which the market allow the wants of consumers to be made known to producers
508
Underemployment
A situation where people are working fewer hours they would like or working on jobs that they are overqualified for
509
Unemployment
The state of being will and able to work but not having a job
510
Unemployment rate
Unemployed workers as a percentage of the labour force
511
Unit elasticity
Where the change in price is relatively the same as the change in quantity demanded
512
Universal basic income
A regular unconditional cash payment made by the government
513
Universal benefits
Benefits available to all irrespective of income or wealth
514
Untied aid
Aid without conditions attached
515
Utility
The satisfaction received from consumption
516
Value added
The difference between the price at which products are sold and the price of the goos and services used in their production
517
Variable costs
Costs that vary directly with output in the short run
518
Vertical integration
Where a firm grows by producing backwards or forwards in its supply chain
519
Very long run
Time period when all key inputs into production are variable
520
Virtuous circle
The links between, for example, an increase in investment, increase in productivity, increase in income and increase in saving
521
Voluntary export restraint
A limit placed on imports reached with the agreement of the supplying country
522
Voluntary unemployment
Unemployment resulting from the unemployed choosing not to accept jobs at the going wage rate
523
Wage differential
Difference in pay between workers with different skills and responsibilities
524
Wage-price spiral
Higher wages causing prices to rise which, in turn, push up wages and so on
525
Wants
The goods and services that people may like to have but are not always realised
526
X-inefficiency
Where the firms costs are above those experience in a more competitive market
527
Year-on-year method
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
