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Economics Revision Hard > Theme 4 definitions > Flashcards

Theme 4 definitions Flashcards

1
Q

absolute advantage

A

when a country produces a good more cheaply in absolute terms than another country

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2
Q

absolute poverty

A

when a person is unable to afford basic economic necessities; according to World Bank earns less than $1.90 a day

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3
Q

Aid

A

when a country voluntarily transfers resources to another or gives loans on a concessionary basis

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4
Q

appreciation

A

an increase in the value of the currency in a free floating exchange system

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5
Q

asymmetric information

A

when one party has more knowledge then the other economic agents, this causes market failure like in the financial sector

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6
Q

automatic stabilisers

A

mechanisms which reduce the impact of changes in the economy on national income
(dampen the fluctuations of the trade cycle)

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7
Q

balance of payments

A

a record of all international transactions between economies; including the financial, capital and current account

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8
Q

buffer stock systems

A

when a maximum and minimum price are imposed together in order to bring about price stability

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9
Q

capital account

A

1/3 of the balance of payments; record of debt forgiveness, inheritance tax, and the transfer of financial assets and sales of assets

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10
Q

capital expenditure

A

government spending on investment goods such as new roads,infrastructure, schools and hospitals which will be consumed in over a year

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11
Q

capital flight

A

when large amounts of money are taken out of the country rather than being left there for people to invest and borrow
(when firms leave an economy)

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12
Q

central banks

A

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

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13
Q

common markets

A

A type of trade bloc, involves all characteristics of FTA, custom union and allows free movement of capital and labour

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14
Q

comparative advantage

A

when a country is able to produce a good at a lower opportunity cost to another economy
(produce the good more cheaply relatively to other goods they produce)

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15
Q

current account

A

1/3 of balance of payments; record payments for the purchase and sales of goods and services as we as incomes and transfers

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16
Q

customs union

A

the removal of all tariff barriers between members (reduced barriers) with an introduction of a common external tariff

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16
Q
A
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17
Q

current expenditure

A

general government final consumption plus transfer payments plus interest payments

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18
Q

cyclical deficit

A

the part of the deficit that occurs because government spending fluctuates around the trade cycle

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19
Q

depreciation

A

a fall in the value of the currency against another, using floating exchange rates

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20
Q

devaluation

A

when the currency has fallen against another in a fixed exchange rate system

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21
Q

developed country

A

countries with high GDP per capital and a high standard of living

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22
Q

developing countries

A

countries with low GDP per capita and a low standard of living

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23
Q

discretionary fiscal policy

A

deliberate manipulation of government expenditure and taxes to influence the economy; via expansionary and contractionary fiscal policies

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24
Q

economic development

A

the improvement in living standards
- growth in social and economic opportunities

25
Q

emerging economies

A

a country that is growing quickly but has some characteristics of a developed country but is not fully there yet

26
Q

exchange rate

A

the value of a currency/ basket of a currencies compared to other currnecies

27
Q

financial account

A

1/3 of the balance of payments; record FDI, investments and the transfer of gold and currency reserves

28
Q

financial market

A

where buyer and sellers can buy and trade a range of services or assets that are fundamentally monetary in nature

29
Q

fiscal deficit

A

when government spends more than it receives

30
Q

fixed exchange rate systems

A

the value of the currency is set against the value of another and that exchange rate does not change
(controlled by the government)
(pegged to another currency)
e.g china’s Yuan to USA dollar

31
Q

foreign currency gap

A

when a country does not export enough to finance the purchase of goods from overseas

32
Q

foreign direct investment (FDI)

A

investment by a private sector firm in one country to another private sector firm in another

33
Q

Free trade

A

trade with no barriers or restrictions

34
Q

free trade agreement

A

when two or more countries in a region agree to reduce or eliminate all protectionism on trade amongst members

35
Q

free floating exchange rate

A

value of the currency is determined purely by market demand and supply of the currency

36
Q

general government and final consumption

A

spending on goods and services which will be consumed within the next year

37
Q

gini coefficient

A

a measure of income inequality

38
Q

globalisation

A

the growing interdependence, integration and interconnectedness of economies

39
Q

Harrod-Domar model

A

Savings in developing countries would lead to investments and growth

40
Q

human capital

A

the economic value of an individuals skills, experience and training

41
Q

HDI

A

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

42
Q

infrastructure

A

facilities required for an economy to function such as road

43
Q

international competitiveness

A

the ability of an economies exports to compete in international markets and become attractive

44
Q

J-curve

A

a current account will worsen before improving following a depreciation of a currency until marshal learning condition is met (PED of X+M >1)

45
Q

laffer curve

A

shows how a rise in tax rates does not necessarily lead to a rise in tax revenue

46
Q

Lewis 2 model

A

A country develops through the transaction from rural agriculture sector to urban industrial sector.
This would lead to workers wages increasing due to producing goods that are more in demand, leading to increased savings and investments

47
Q

lorenz curve

A

cumulative % of population against cumulative % of income
highlights income inequality

48
Q

market bubbles

A

when prices of an asset rises massively and exceeds the value of the asset itself

49
Q

market rigging

A

when a group colludes to fix prices or exchange information that will lead to gains for themselves

50
Q

microfinance schemes

A

used to give loans to poor households and give them access to a range of financial services

51
Q

Marshall learning condition

A

the sum of price elasticities of imports and exports being higher than 1

52
Q

monetary unions

A

Characteristics of common market, all have the same currency and central bank

53
Q

moral hazard

A

when individuals engage in risky behaviour for their interests knowing they can cause market failure and not take responsibility for it

54
Q

national debt

A

the sum of government debt built over many years

55
Q

primary product dependency

A

when a country relies heavily on primary products such as agricultural goods or mining

56
Q

progressive taxation

A

where those on higher incomes pay a higher marginal rate of tax

57
Q

proportional taxation

A

proportion of income paid on the tax remains the same whilst the income of the tax payer changes; everyone pays the same %

58
Q

protectionism

A

any measures by the government to restrict trade e.g tariffs, quotas and subsidies

59
Q

quota

A

physical limit on levels of imports into a country

60
Q
A

Economics Revision Hard (17 decks)

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