Th4: Definitions 3

Question 1

Globalisation

Answer 1

the growing interdependence of countries and the rapid rate of change it brings about - movement towards free trade of goods and services, free movement of labour and capital and free interchange of technology and intellectual capital

Question 2

Harrod-Domar model

Answer 2

savings provide the funds that are used for investment whilst growth rates depend on the level of saving and the productivity of investment. therefore, growth in developing countries is limited by the lack of investment

Question 3

Human capital

Answer 3

the economic value of an individual’s skills, experience, training e.t.c

Question 4

Human development index (HDI)

Answer 4

measures an economy’s development based on income, health and education

Question 5

Infrastructure

Answer 5

facilities required for an economy to function, such as roads

Question 6

International competitiveness

Answer 6

the ability of a country to compete effectively and become attractive in international markets

Question 7

J-curve

Answer 7

a current account will worsen before it improves following a depreciation of the currency

Question 8

Laffer curve

Answer 8

shows that a rise in tax rates does not necessarily lead to a rise in tax revenue, due to the impact on incentives and work

Question 9

Lewis 2 model

Answer 9

a model which suggests that countries will develop through industrialisation as labour is moved from the unproductive agriculture sector to the more productive urban sector. this increases wages and leads to more saving and investment

Question 10

Lorenz curve

Answer 10

the cumulative percentage of population plotted against the cumulative percentage of income that those people have

Question 11

Market Bubbles

Answer 11

when the price of an asset rises massively and greatly exceeds the value of the asset itself

Question 12

Market rigging

Answer 12

a group of individuals or institutions collude to fix prices or exchange information that will lead to gains for themselves at the expense of other participants in the market

Question 13

Microfinance schemes

Answer 13

schemes which aim to give poor and near-poor households permanent access to a range of financial services

Question 14

Managed floating exchange rate

Answer 14

value of the currency is determined by demand and supply but the Central Bank intervenes to prevent large changes

Question 15

Marshall-Lerner condition

Answer 15

the sum of the price elasticities of imports and exports must be more than one if a currency depreciation is to have a positive impact on the trade balance