Unit 2-Area of Study 2-Definitions

Question 1

Define:

Development Economics

Answer 1

Uses economic theory to come up with practical strategies and policies designed to increase development and improve the overall living standards of people in low-income nations

Question 2

Define:

Development

Answer 2

Is nowadays seen as the economic, social, political and institutional changes needed in low-income countries to improve material and non-material elements affecting the quality of daily life

Question 3

Define:

Trickle Down Thoery

Answer 3

Believes that the benefits of economic growth and development will not just benefit the rich but, given time, will eventually improve the daily existence of the poor

Question 4

Define:

HDI

Answer 4

The Human Development Index is a measure used to indicate changes in the level of nations’ living standards based on progress across a range of economic and social indicators. Countries are ranked from highest to lowest using a scale where 1.00 equals the highest HDI and 0.00 the lowest level of development

Question 5

Define:

Third World

Answer 5

Refers to a group of nations that have very low subsistence levels of production and income and, hence, high levels of poverty

Question 6

Define:

Infrastructure

Answer 6

Is a key to development and involves the provision (often by governments) of services to allow businesses to operate (e.g. power, water, transport, communications) and services for the community to enjoy reasonable living standards (e.g. water supply, hospitals, schools)

Question 7

Define:

Underemployment

Answer 7

Exists when those working are not employed to their capacity and, for example, could work more hours and produce more output per hour

Question 8

Define:

Democracy

Answer 8

Transparent political system that allows ordinary people to have a free choice, every few years, of who represents them in parliament

Question 9

Define:

Comparative Cost Advantage

Answer 9

May exist when a country specialises or concentrates in areas of production where it is most efficient (i.e. its cost disadvantages are least) relative to other areas of production

Question 10

Define:

Absolute Cost Advantage

Answer 10

Occurs if a country is the cheapest or most efficient producer of a good or service in the world

Question 11

Define:

Composition of International Transactions

Answer 11

Refers to the make-up or types of goods, services and other transactions that take place between Australia and the rest of the world

Question 12

Define:

Direction of International Transactions

Answer 12

Refers to the countries with whom Australia exchanges goods, services and money capital

Question 13

Define:

Balance of Payments

Answer 13

Is an annual record of Australia’s financial transactions with the rest of the world. These transactions are divided into two main types of transactions — current transactions, and capital and financial accounts, each recording credit and debit transaction.

Question 14

Define:

Net Goods

Answer 14

Is a sub-section of the BOP current account that records the value of credits for goods exported minus the value of debits for goods imported from overseas, measured over a period of time

Question 15

Define:

Net Primary Incomes

Answer 15

Is a sub-section of the BOP current account that records the value of credits for primary income received from overseas minus the value of debits for primary income paid to overseas, measured over a period of time

Question 16

Define:

Direct Investment

Answer 16

Or capital movements into and out of Australia, involving the establishment, purchase or expansion of companies and other assets

Question 17

Define:

Portfolio Investment

Answer 17

Has to do with money transactions into and out of Australia involving shares, debt and securities

Question 18

Define:

Goal of External Stability

Answer 18

Means that Australia should ‘live within its means’ and ‘pay its way’ in international financial transactions. Some say this could mean a small CAD of up to 3–4 per cent, when this is expressed as a ratio of GDP (i.e. the CAD:GDP ratio)

Question 19

Define:

Trade Weighted Index

Answer 19

Represents the ‘average’ exchange rate for a basket of foreign currencies each weighted according to its relative importance for Australia’s trade

Question 20

Define:

Foreign Debt

Answer 20

Represents liabilities or what Australians owe people overseas, from whom they have borrowed