Theme 4 Key Terms Flashcards
Absolute advantage
When a country can produce a good more efficiently in absolute terms than another country
Absolute poverty
When household income is insufficient to afford minimum basket of goods necessary to maintain life, currently $2.15 per person per day in 2017 purchasing power prices
Aid
When a country voluntarily transfers resources to another or extends loans on a concessionary basis
Currency appreciation
A rise in the value of currency within a floating exchange rate system
Automatic stabilisers
Mechanisms by which government expenditure and revenue vary with the business cycle, thereby helping to stabilise the economy without discretionary or active intervention from government. For example during economic booms tax revenue increases as workers’ pay increases even as tax rates remain unchanged and government spending on job seekers allowance falls because fewer people are out of work
Bank for International Settlements (BIS)
An institution that acts as bank for central banks and sets standards for regulation of banks that are accepted globally
Balance of Payments
A record of all financial exchanges over a period of time between the economic agents of two countries
Buffer stock scheme
A scheme intended to stabilise the price of a commodity by buying excess supply in periods when supply is high, and selling when supply is low
Bank rate
The rate of interest charged by the Bank of England on short-term loans to other banks
BRICS countries
A group of countries comprising Brazil, Russia, India, China and South Africa, that have made rapid progress in recent years
Broad money (M4)
Measure of money supply that includes cash plus sterling wholesale and retail deposits with monetary financial institutions such as banks and building societies (e.g. certificates of deposit, foreign currencies, money market accounts, marketable securities, and gilts)
Capital account of the balance of payments
Component of the balance of payments identifying transactions in physical capital between the residents of a country and the rest of the world
Capital adequacy ratio
The ratio of a bank’s capital to its current liabilities and risk-weighted assets
Capital expenditure
Government spending on investment goods such as new roads, schools and hospitals, which will be consumed over a year
Capital flight
When large amounts of money are taken out of the country rather than being left to be invested or spent
Central bank
A financial institution that has direct responsibility to control the money supply and monetary policy, to manage gold reserves and foreign currency deposits, and to issue coins and banknotes
Common market
Members agree to remove trade barriers, reduce or eliminate customs duties on mutual trade, allow free movement of capital and labour among members, and impose a common external tariff on imports from non-member countries
Comparative advantage
When a country can produce a good relatively more efficiently than another countries, i.e. at a lower opportunity cost
Credit or money multiplier
A process by which an increase in money supply can have a multiplied effect on the amount of credit in an economy
Crowding in
A process by which a decrease in government expenditure “crowds in” private sector activity by lowering the cost of borrowing
Crowding out
A process by which an increase in government expenditure crowds out private sector activity by raising the cost of borrowing
Current account of the balance of payments
Component of the balance of payments recording payments for the purchase and sale of goods and services, as well as income payments and international transfers
Customs union
Members agree to remove trade barriers, reduce or eliminate customs duties on mutual trade, and impose a common external tariff on imports from non-member countries, but generally does not allow free movement of capital and labour among member countries, e.g. Turkey membership in the EU
Currency depreciation
A fall in the value of currency within a floating exchange rate system
