IB Economics SL Glossary

Question 1

Absolute Poverty

Answer 1

The inability of an individual or a family to afford a basic standard of goods and services, where this standard is absolute and unchanging over time.
Absolute poverty is defined in
relation to a nationally or internationally
determined ‘poverty line’, which
determines the minimum income that can sustain a family in terms of its basic needs.

Question 2

DESCRIBE / DRAW - The circular flow of income model (with leakages and injections)

Answer 2

A model showing the flow of resources from consumers (households) to firms, and the flow of products from firms to consumers, as well as money flows consisting of consumers’ income arising from the sale of their resources and firms’ revenues arising from the sale of their products.
It illustrates the equivalence of expenditure flows, value of output flows, and income flows.

Question 3

Leakages and injections (One versus the other?)

Answer 3

• If leakages are greater than injections, the size of the circular flow becomes smaller —> this results in fewer services purchased, firms cutting back on their output and unemployment
• If injections are larger than leakages, the opposite happens

Question 4

Leakages

Answer 4

In the circular flow of income
model, refer to the withdrawal from the
income flow of funds corresponding to
savings, taxes or imports; also known as
‘withdrawals’.

Question 5

Injections

Answer 5

In the circular flow of income
model, refer to the entry into income flow of funds corresponding to investment, government spending or exports.

Question 6

Measures of economic activity and calculations

Answer 6

• National income accounting
• National output

[Knowing these two values allows to
—> assess an economy’s performance over time
—> compare income and output performance with others
—> have a basis for making policies to meet economic objectives]

• GDP

Question 7

National income

Answer 7

The total income of an
economy, often used interchangeably with the value of aggregate output, particularly in the context of macroeconomic models
(such as the AD-AS model).

Answer 8

Statistical
data used to measure an economy’s
national income and output as well as
other measures of economic performance.