Th4: Definitions 1 Flashcards
Absolute advantage
when a country can produce a good more cheaply in absolute terms than another country
Absolute poverty
when people are unable to afford sufficient necessities to maintain life - those on less $1.90 a day
Aid
when a country voluntarily transfers resources to another or gives loans on a concessionary basis
Appreciation
an increase in the value of the currency using floating exchange rates
Asymmetric information
when one party has more knowledge than another - this causes market failure in financial section
Automatic stabilisers
mechanisms which reduce the impact of changes in the economy on national income
Balance of payments
a record of all financial dealings over a period of time between economic agents of one country and another
Buffer stock systems
when a maximum and minimum price are imposed together in order to bring about price stability
Capital account
a part of the balance of payments - records debt forgiveness, inheritances taxes, transfers to financial assets and sales of assets
Capital expenditure
government spending on investment goods such as new roads, schools and hospitals, which will be consumed in over a year
Capital flight
when large amounts of money are taken out of the country, rather than being left there for people to borrow and invest
Central banks
a financial institution that has direct responsibility to control the money supply and monetary policy to manage gold reserves and foreign currency and to issue government debt
Common market
members trade freely in all economic resources and impose a common external tariff
Comparative advantage
when a country is able to produce a good more cheaply relative to other goods produced - it has a lower opportunity cost
Current account
a part of the balance of payments - records payments for the purchase and sale of goods and services, as well as incomes and transfers
