Th4: Definitions 2 Flashcards
Cyclical deficit
the part of the deficit that occurs because government spending fluctuates around the trade cycle
Depreciation
a fall in the value of the currency using floating exchange rates
Devaluation
when the currency is decreased against another under a fixed system
Developed country
countries with a high GDP per capita and a high standard of living
Developing country
countries with a low GDP per capita and a low standard of living
Discretionary fiscal policy
deliberate manipulation of government expenditure and taxes to influence the economy - expansionary and deflationary fiscal policy
Economic development
improvements in living standards
Emerging economies
a country that is growing quickly and has some characteristics of a developed country but is not fully there yet
Exchange rate
the purchasing power of a currency in terms of what it can buy of other currencies
Financial account
a part of the balance of payments - records FDI, portfolio investment and the transfer of gold and currency reserves
Financial markets
when buyers and sellers can buy and trade a range of services or assets that are fundamentally monetary in nature
Fiscal deficit
when the government spends more money than it receives in a year
Fixed exchange rate
the value of the currency is set against the value of another and that exchange rate does not change
Foreign currency gap
when a country does not export enough to finance the purchase of goods from overseas
Foreign direct investment
investment by one private sector company in one country into another private sector company in another
Free trade
trade with no barriers or restrictions
Free trade agreements
when two or more countries in a region agree to reduce/eliminate trade barriers on all goods from member countries
Free floating exchange rate
value of the currency is determined purely by market demand and supply of the currency
General government final consumption
spending on goods and services which will be consumed within the next year
Gini coefficient
a measure of income inequality - the ratio of the area between the 45 degree line (the line of perfect equity) and the Lorenz curve and the whole area under the 45 degree line
