Th4: Definitions 4 Flashcards
Monetary unions
two or more countries with a single currency
Moral hazard
when individuals act in their own best interests knowing there are potential risks - another cause of financial market failure
National debt
the sum of government debts built up over many years
Primary product dependency
when a country relies heavily on primary products, such as agricultural goods or mining
Progressive taxation
the proportion of income paid on the tax remains the same whilst the income of taxpayer changes - everyone pays the same percentage of their income on tax
Protectionism
when the government enact policies to restrict the free entry of imports into their country, such as tariffs and quotas
Quota
limits placed on the level of imports allowed into a country
Regressive taxation
where the proportion of income paid in tax falls whilst the income of the taxpayer increases - those on lower incomes pay a higher percentage of their income on tax
Relative poverty
when income falls below an average income threshold. in the UK, this is those on less than 60% of median household income
Revaluation
when the currency is increased against the value of another under a fixed system
Speculation
trading financial assets in hope of significant returns
Structural deficit
the deficit which occurs when the cyclical deficit is 0
Tariffs
taxes placed on imported goods in an attempt to prevent people from buying them
Terms of trade
the ratio of an index of a country’s export prices to an index of its import prices
average export price index
—————————————- x 100
average import price index
Theory of comparative advantage
countries will find specialisation mutually advantageous if the opportunity costs of production are different
