theme 4

Question 1

absolute advantage

Answer 1

when a country can produce goods more cheaply than another

Question 2

comparative advantage

Answer 2

when a country is able to produce at a lower opportunity cost

Question 3

capital account

Answer 3

part of BOP records inheritance taxes

Question 4

current account

Answer 4

part of BOP records the purchase of the sale of goods

Question 5

financial account

Answer 5

part of BOP records FDI, portfolio investment and transfers of currency reserves

Question 6

capital expenditure

Answer 6

government spending on new goods e.g infrastructure like schools and roads

Question 7

current expenditure

Answer 7

general government spending on wages transfer payments and interest payments

Question 8

gini coefficient

Answer 8

measure of income inequality shown cumilative share of income and cumulative share of incomes by the Lorenz curve uk-0.34

Question 9

globalisation

Answer 9

growing interdependence of countries and the movement toward free trade agreements

Question 10

harrod-domar model

Answer 10

growth in developing countries is limited due to the lack of investment

Question 11

liquidity trap

Answer 11

interest rates are very low but consumer confidence is low and so is spending

Question 12

laffer curve

Answer 12

a rise in tax rates will not necessarily generate higher revenue for government-hump curve

Question 13

microfinance scheme

Answer 13

small financial loans given to households to encourage entrepreneurship in developing countries

Question 14

marshall lerner condition

Answer 14

sum of price elasticities of imports and exports must be higher than 1 if depreciation is to have a positive impact on the trade balance

Question 15

progressive taxation

Answer 15

those who are on a higher wage will pay a higher proportion of tax

Question 16

proportional taxation

Answer 16

the proportion of income paid on tax remains the same for everyone e.g. VAT

Question 17

protectionism

Answer 17

restrict free entry of imports

Question 18

free trade agreements

Answer 18

countries in a region agree to reduce trade barriers on all goods

Question 19

quota

Answer 19

limits placed of amount of imports allowed in a country

Question 20

regressive taxation

Answer 20

those on higher wages spend a lower percentage of income on tax

Question 21

relative poverty

Answer 21

income below average in their country in uk those on 60 percent less than median

Question 22

absolute poverty

Answer 22

not earning enough to survive- less than $1.90 a day

Question 23

tariffs

Answer 23

taxes placed on imported goods

Question 24

terms of trade

Answer 24

the ratio of an index of a countries export prices to import prices- average X price index/ average M price index TIMES 100

Question 25

Trade diversion

Answer 25

country moves from buying goods from a low cost producer to a high one

Question 26

trading bloc

Answer 26

a group of countries that reduce or remove trade barriers between them