Key Terms Flashcards
What is meant by absolute advantage?
A country will have an absolute advantage when its output of a product is greater per unit of resource used than any other country.
What is meant by absolute poverty?
Absolute poverty is when someone doesn’t have the income or wealth to meet their basic needs.
What is the accelerator process?
The accelerator process is where any change in demand for goods/services beyond current capacity will lead to a greater percentage increase in the demand for capital goods that firms need to produce these goods/services.
What is meant by aggregate demand?
Aggregate demand is the total demand, or total spending, in an economy at a given price level over a given period of time.
Made up of:
- Consumption
- Investment
- Government Spending
- Net exports
What is the formula for aggregate demand?
AD = C + I + G + (X - M)
- Consumption
- Investment
- Government Spending
- Exports
- Imports
What is meant by aggregate supply?
Aggregate supply is the total amount of goods and services which can be supplied in an economy at a given price level over a given period of time.
What is meant by the term ‘aid’
Aid is the transfer of resources from one country to another.
What is meant by allocative efficiency?
Allocative efficiency is when the price of a good is equal to the price that consumers are happy to pay for it.
What is meant by asymmetric information?
Asymmetric information is when buyers have more information than sellers (or the opposite) in a market.
What is meant by automatic stabilisers?
Automatic stabilisers are parts of fiscal policies that will automatically react to changes in the economic cycle.
e.g.
During recession, G increases due to more unemployment benefits, Reducing problems of the recession.
What is meant by average cost?
Average cost is the cost of production per unit of input
e.g.
A firm’s total cost for a given period of time, divided by the quantity produced.
What is meant by average revenue?
Average revenue is the revenue per unit sold.
e.g.
A firm’s total revenue for a given period of time, divided by the quantity sold.
What is meant by balance of payments?
Balance of payments is a record of a country’s international transactions.
e.g.
Flows of money into and out of a country.
What is meant by bank rate?
Bank rate is the official rate of interest set by the Monetary Policy Committee of the Bank of England.
What is meant by barriers to entry?
Barriers to entry are any potential difficulties that make it hard for a firm to enter a market.
What is meant by barriers to exit?
Barriers to exit are any potential difficulties that make it hard for a firm to leave a market.
What is meant by black market?
A black market is economic activity which occurs without taxation and government regulation.
What is meant by budget deficit?
Budget deficit is when government spending is greater than revenue.
What is meant by budget surplus?
Budget surplus is when government spending is less than revenue.
What is meant by capital account on the balance of payments?
Capital account is a part of the record of a country’s international flows of money.
This includes transfers of non-monetary and fixed assets, such as through emigration and immigration.
What is meant by a cartel?
A cartel is a group of producers that agree to limit production in order to keep the prices of goods or services high.
What is meant by the central bank?
The central bank is the institution responsible for issuing a country’s banknotes, acting as a lender of last resort for other banks, and implementing monetary policy.
What is meant by circular flow of income?
Circular flow of income is the flow of national output, income and expenditure between households and firms
national ouput = national income = national expenditure.
What is a command economy?
A command economy is an economy where governments, not markets, determine how to allocate resources.
What is comparative advantage?
A country has comparative advantage if the opportunity cost of it producing a good is lower than the opportunity cost for other countries.
What is competition policy?
Competition policy is a government policy aimed at reducing monopoly power in order to increase efficiency and ensure fairness for consumers.
What is concentration ratio?
A concentration ratio shows how dominant firms are in a market.
What is conglomerate integration?
Mergers or takeovers between firms which operate in completely different markets.
What is consumer surplus?
Consumer surplus is the difference when a consumer pays less for a good than they were prepared to.
What is consumption?
Consumption is the purchase/use of goods or services
What is contestability?
A market is contestable if it’s easy for new firms to enter the market.
What is cost-push inflation?
Cost-push inflation is inflation caused by the rising costs of inputs to production.
What is creative destruction?
Creative destruction occurs when the innovation and invention of new products and production methods causes the destruction of existing markets and creates new ones.
What is cross elasticity of demand (XED)?
XED is a measure of how the quantity demanded of one good/service responds to a change in the price of another good/service.
What is the current account on the balance of payments?
A part of the record of a country’s international flows of money.
Consists of:
- trade in goods
- trade in services
- international flows of income
(salaries, interest, profit, dividends)
- transfers
