Economics key terms > Theme 4 > Flashcards

Theme 4 Flashcards

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1
Q

Absolute advantage

A

Where a country/economy can produce greater output with the same amount of inputs as another

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2
Q

Absolute poverty

A

Where a household earns insufficient income to cover basic necessities/ maintain basic living standards for survival such as food and shelter

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3
Q

Aid

A

process of economically developed countries po=roviding financial support to economically developing countries

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4
Q

BRICS

A

Brazil, Russia, India, China and South Africa

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5
Q

Appreciation

A

An increase in the value of the currency (in a floating EXR)

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6
Q

Asymmetric information

A

When one party has more knowledge than another in a market transaction» market failure

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7
Q

Automatic stabilisers

A

Mechanisms which reduce the impact of changes in the economy on national income

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8
Q

BOP

A

A record of all financial dealings over time between econ. agents of one country and another

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9
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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10
Q

Capital account

A

A part of the BOP: debt forgiveness, inheritance taxes, sales/ transfers of assets

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11
Q

Capital expenditure

A

Govt. spending on investment goods (new roads, schools, hospitals) which will be consumed in over a year

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12
Q

Capital flight

A

when large amounts of money are taken out of the country, rather than being left for people to borrow and invest

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13
Q

Central bank

A

A financial institution with direct responsibility to control the money supply/ monetary policy/manage gold reserves/foreign currency and issue govt. debt

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14
Q

Common market

A

members freely trade in all econ resources (FOP) and impose a common external tariff

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15
Q

Comparative advantage

A

When a country is able to produce a good more cheaply relative to other goods produced; it has a lower opp. cost

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16
Q

Current account

A

Part of the BOP; records the purchase/sale of g/s as well as incomes and transfers

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17
Q

Customs union

A

Removal of all tariff barriers between members and the introduction of a CET(common external tariff)

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18
Q

Current expenditure

A

General govt. final consumption plus transfer payments plus interest payments

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19
Q

Cyclical deficit

A

the deficit that occurs because govt. spending fluctuates around the trade cycle

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20
Q

Depreciation

A

a fall in the value of currency using the floating EXR

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21
Q

Devaluation

A

when the currency is decreased against another under a fixed system

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22
Q

Developing vs Developed countries

A

low/high GDP per capita and SOL

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23
Q

Discretionary fiscal policy

A

deliberate manipulation of govt. expenditure and taxes to influence the economy; expansionary and deflationary fiscal policy

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24
Q

Econ. development

A

Improvements in SOL (increased social or economic welfare)

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25
Emerging economies
A country that is growing quickly with characteristics of a developed econ.
26
EXR
The purchasing power of a currency in terms of what it can buy of other currencies
27
Financial account
Part of BOP; records FDI, portfolio investment, hot money flows and currency reserves transfers
28
Financial markets
Where buyers and sellers can trade a range of services/ assets of fundemental monetary value
29
fiscal deficit
G>T
30
Fixed EXR
the value of the currency is set against the value of anotherand that EXR does not change
31
Foreign currency gap
When a country does not export enough to finance the purchase of goods from overseas
32
FDI
INvestment by a private sector company in one country in another's
33
FTAs
When 2+ countries in a region agree to reduce/ eliminate trade barriers on all goods from member countries
34
Free floating EXR
value of the currency determined purely by market d/s of the currency
35
general govt. final consumption
(all current) expenditures on g/s which will be consumed within the next year
36
Gini coefficient
A measure of income inequality; ratio between the line of perfect equality and the lorenz curve and the total area under 45 degree line. I.e P(A)/P(A +B)
37
Globalisation
growing interdependence of countries and the rapid rate of change it brings about; free movemnet of g/s/ FOP/ tech./intellectual capital
38
Harrod-domar model
Savings provide the funds that are used for investment/growth rates depend on the level of saving/productivity of investment>> growth in (developing) countries limited by savings gap
39
Human capital
The econ. value of an individuals skills/training/experienec
40
J-CURVE
a current account will worsen before it improves following a depreciation of currency
41
Laffer curve
rise in tax rates does not necessarily lead to a rise in tax revenue due to impact on incentives and work
42
Lewis dual sector model
Suggests countries will develop through industrialisation as labour is moved from unproductive agri sector to the more productive urban sector>> increases wages/savings/investment
43
Lorenz curve
cumulative % of income of population plotted against cumulative % of population
44
Market bubbles
When a price of an asset rises massively and greatly exceeds the value of the asset itself (stocks, real estate/cryptocurrencies)
45
Market rigging
A group of individuals/ institutions collude to fix prices or excahnge info. that will lead to gains for themselves at th expense of other market participants
46
Microfinance schemes
Schemes which aim to give poorer households permanent access to a range of financial services
47
Managed floating EXR
Value of the currency is determined by d/s but the central bank intervenes to prevent large changes
48
Marshall-learner condition
The sum of the PED of imports and exports must be >1 if a currency depreciation is to have a positive impact on the trade balance
49
Monetary unions
two or more countries with a single currency
50
moral hazard
when iindividuals act in their own best interest knowing there are potential risk (another cause of market failure)
51
National debt
the sum of govt debts built up over many years
52
PPD
When a country relies heaviliy on primary products, such as agricultural goods/mining
53
progressive taxation
when those on higher incomes pay a higher marginal rate of tax i.e pay a higher % of their incomes on tax
54
Proportional taxation
everyone pays the same % of their income on tax
55
Protectionism
when the govt. enact policies to restrict the free entry of imports into their country, such as tariffs and quotas
56
Quota
limits placed on the level/qty. of M allowed into a country
57
Regressive taxation
those on lower incomes pay a higher % of their income on tax
58
Relative poverty
When incomes fall below an average income threshold (UK: those on less than 60% of median houehold income)
59
Revaluation
When the currency is increased against the value of another under a fixed system
60
speculation
trading financial assets in hope of significant returns
61
Structural deficit
the deficit which occurs when the cyclical deficit is 0
62
Tariffs
Taxes placed on imported goods in an attempt to prevent people from buying them
63
Terms of trade
the ratio of an index of a country's export prices to an index of its import prices: Avg. X price index/ Avg. M price index x 100
64
theory of comparative advantage
countries will find specialisation mutually advantageous if the opportunity costs of production are different
65
trade creation
when a country moves from buying goods from a high cost to a lower cost producer
66
Trade diversion
When a country moves from buying goods from a low cost producer to a high cost producer
67
Trade liberalisation
reduction/removal of protectionist policies
68
Trading bloc
a group of countries that reduce or remove trade barriers between them
69
transfer payments
government spending for which there is no corresponding output, where money is taken from one group and given to another
70
transfer pricing
where firms manipulate the price of their good so that profit is increased in areas of low tax>>Transfer pricing is a technique used by multinational corporations to shift profits out of the countries where they operate and into tax havens (through subsidiaries)
71
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