key terms Flashcards
absolute advantage
the ability to produce a good more efficiently
absolute poverty
situation of a household whose income is insufficient to allow it to purchase the minimum bundle of goods and services regarded as necessary for survival
appreciation
a rise in the exchange rate within a floating exchange rate system
bank rate
the rate of interest charged by the BoE on short term loans to other banks
BRIC countries
a group of countries (Brazil, Russia, India, China) who went through rapid economic growth and formed a political alliance
buffer stock
a scheme intended to stabilise the price of a commodity by buying excess supply in periods when supply is high, and selling when supply is low
capital account on the balance of payments
account identifying transactions in physical capital between the residents of a country and the rest of the world
central bank
the banker to the government , performing roles such as regulating the financial system
common market
a set of trading arrangements in which a group of countries removes barriers to trade among them, adopt a common set of barriers against external trade, establish common tax rates and laws regulating economic activity, allow free movement of factors of production between members and have common public sector procurement policies.
comparative advantage
the ability to produce a good relatively more efficiently at a lower opportunity cost
current account on the balance of payments
account identifying transactions in goods and services between the residents of a country and the rest of the world, together with income payments and international transfers
customs union
a group of countries that agrees to trade without barriers between them, and with a common tariff barrier against the rest of the world
deindustrialisation
a process whereby the structure of economic activity in a country shifts away from manufacturing activity towards the service sector
depreciation
a fall in the exchange rate within a floating exchange rate system
economic and monetary union
a set of trading arrangements the same as for a common market, but in addition having a common currency and a common monetary policy
emerging economies
economies that have experienced rapid economic growth with some industrialisation and characteristics of developed markets
exchange rate mechanism
a system that was set up by a group of European countries in 1979 with the objective of keeping member countries currencies relatively stable against each other
export led growth
economic growth is achieved through the exploitation of economies of scale, made possible by focusing one exports and so reaching a wider market that would be available within the domestic economy
fair trade schemes
schemes that set out to ensure that small producers in developing countries recieve a fair price for their products
financial account on the balance of payments
account identifying transactions in financial assets between the residents of a country and the rest of the world
fiscal deficit
occurs when government outlays exceeds government receipts
fixed exchange rate
a system in which the government of a country agrees to fix the value of its currency in terms of that of another country
floating exchange rate
a system in which the exchange rate is permitted to find its own level in the market
foreign currency gap
a situation in which a developing country is unable to import the goods that it needs for development because of a shortage of foreign exchange
foreign direct investment (FDI)
investment undertaken in one country by companies based in other countries
free trade area
a group of countries that agrees to trade without barriers between themselves, but having their own individual barriers with countries outside the area.
gini coefficient
a measure of the degree of inequality in a society
globalisation
a process by which the worlds economies are becoming more closely integrated
government budget deficit/surplus
the difference between government expenditure and government revenue
hot money
stocks of funds that are moved around the world from country to country in search of the best return
human development index
a composite indicator of the level of a country’s development, varying between 0 and 1
indirect tax
a tax on expenditure e.g. VAT
industrialisation
a process of transforming an economy by expanding manufacturing and other industrial activity
infant industry
an industry that needs protection from international competition in the short run so that it can learn to become competitive
labour productivity
a measure of output per worker, or output per hour worked
laffer curve
a curve showing the relationship between the tax rate and the amount of revenue raised as a consequence
law of comparative advantage
a theory arguing that there may be gains from trade arising when countries or individuals specialise in the production of goods or services in which they have a comparative advantage
lorenz curve
graph showing the distribution of income within a country
monetary policy committee (MPC)
body within the bank of england responsible for the conduct of monetary policy
monetary stability
a situation in which there is stability in prices relative to the governments inflation target
monetary union
where countries adopt a common currency
national debt
the total amount of government debt, based on accumulated previous deficits and surpluses
non governmental organisations
non profit, charities etc
non-tariff barriers
measures imposed by the government that have the effect of inhibiting international trade
persistent poverty
where a household is currently in relative poverty and has been in this state for at least two of the last 3 years
prebisch singer hypothesis
an observation that the terms of trade for primary products relative to manufacturers will tend to deteriorate in the long run
progressive tax
a tax in which the marginal tax rate rises with income i.e. a tax bearing most heavily on the richer members of society
proportional tax
a tax that is proportional to income, being neither regressive nor progressive
protectionism
measures taken by a country to restrict international trade
quantitative easing
process by which liquidity in the economy is increased when the central bank purchases assets from the commercial banks
quota
a limit on exports
real exchange rate
the nominal exchange rate adjusted for differences in relative inflation rates between countries
regressive tax
a tax bearing more heavily on poorer people
relative poverty
if household income falls below 60% of the median adjusted household disposable income
sunset industry
an industry in decline that needs protection for its displaced workers
tariff
a tax imposed on imported goods
terms of trade
the ratio of export prices to import prices
trade creation
the replacement of more expensive domestic production or imports with cheaper output from a partner within the trading bloc
trade diversion
the replacement of cheaper imported goods by goods from a less efficient trading partner within a bloc
trading bloc
where a group of countries in a region agrees to coooperate in international trade through some sort of free trade area of other form of association
trading possibilities curve
shows the consumption possibilities under conditions of free trade
transnational company (TNC)
a company whos production activities are carried out in a number of countries
unit labour costs
the average cost of labour per unit of output produced
world bank
multilateral organisation that provides financing for long term development projects
world trade organisation
a multilateral body responsible for overseeing the conduct of international trade
