Sunday, May 23, 2010

Handy Definitions/ Glossary For Unit 4 (Edexcel Economics): Global Economy

Finally, the long awaited list of definitions for those international students who will be sitting for Edexcel A-Levels Economics, Unit 4: Global Economy in late June 2010

1. Absolute advantage: Is when a country can produce more of a good using similar resource as in another country

2. Balance of payment: An account that summarises the financial transaction between one country and the rest of the world

3. Budget deficit: Where government expenditure exceeds tax revenue

4. Budget surplus: Where government tax revenue exceeds public spending

5. Comparative advantage: Is when a country can produce a good with lesser opportunity costs than the other and hence should specialise in the production of that good

6. Current account: An account that measures the flow of money in and out of a country resulting from the visible and invisible trade

7. Capital account: An account that measures the flow of capital in and out of the country

8. Dumping: An act by manufacturer in one country exporting a good to another country at a price below what it charges in home market or even below production costs

9. EMU (Economics and Monetary Union): Refers to the currency union of EU members who have adopted euro as their sole legal tender

10. EU: Is an economic and political union of 27 member countries located primarily in Europe

11. Eurozone: A collective group of countries which use euro as their common currency

12. Economies of scale: Fall in the long the run average costs associated with an increase in output

13. Fiscal policy: Manipulation of government spending and level of taxation to influence movement of AD and overall economic activities

14. Fixed exchange rate: Is when a currency of a country has a set rate against the currency from another country and there will be no fluctuation

15. Floating exchange rate: Is when the exchange rate of a country against another is determined through the forces of demand and supply

15. FDI (Foreign Direct Investment): Refers to investment of foreign assets into domestic structures, equipments or organizations

16. Golden Rule: A guideline for the operation of fiscal policy set by Chancellor Gordon Brown, which mentions that over the economic cycle, government borrowing is only justified if it is meant for investment and not to fund current spending (payment onto pensions, benefits etc)

17. Globalisation: Refers to the freer movement of human, capital, goods and information

18. Hot money: Extremely volatile short term capital that moves on short notice to any countries that provide better return and is usually associated with investment onto stock market in another country

19. Import quotas: Limit onto the amount of goods that can be brought into a country

20. J-curve: The tendency for the fall in value of currency to worsen the balance of trade before improving it

21. Laffer curve: A curve that shows that for any economy, there will be an optimal income tax rate which will help the government to maximize tax revenue

22. Monetary policy: Manipulation of interest rates to influence the movement of AD and overall level of economic activities

23. National debt: Total amount of money a government owes to private sectors and the purchasers of bonds

24. Progressive taxation: Tax rate that increases as the taxable base amount increases and as such is felt more by the rich

25. Protectionism: Steps taken by government to protect local industry from harmful foreign competition

26. Terms of trade: Refers to the average price of exports to the average price of imports and is a measurement of competitiveness

27. Regressive taxation: Tax burden that falls more heavily onto those people with low income such as sales tax and value added tax (VAT) since it tends to take up a bigger percentage of the budget of a person with low income

28. Sustainable investment rule: A rule which requires debt to be kept at prudent level, which is below 40% of GDP in UK

29. Supply side policy: Policies to influence the movement of AS by increasing the productive capacity of an economy

30. Trade creation: Increased trade between member countries of trading bloc usually resulting from economies of scale due to enlargement of market or common external tariff

31. Trade diversion: Decreased in trade with the more efficient non-member countries which is replaced by the increased in trade with less efficient member due to formation of trading bloc

32. Trading bloc: A regional group of economies cooperating together by liberalising trade between one another

33. Tariffs: Taxes onto goods that are brought into a country

34. WTO: An international agency set up to promote freer trade between member countries, administer global trade agreements and resolving trade dispute if they arise

35. Absolute poverty: A level of poverty where only minimum level of food, clothing and shelter can be met

36. Bilateral aid: Aid given by one country directly to another

37. Debt relief: Refers to the partial or total forgiveness of debt or the slowing down of debt growth

38. Development: The process of improving the quality of life within a country

39. Dependency ratio: A measure which shows the number of dependents (those aged 0-14 and above 65) to the number of economically active people (those who are in working age 15-64)
40. Gini coefficient: A measurement of income inequality ranging from 0 (absolute equality) to 1 (absolute inequality)

41. Growth: A sustained increase in real GDP/ increase in potential GDP

42. HDI (Human Development Index): A measurement of development which include real GDP per capita (PPP), life expectancy at birth and combined gross enrolment ratio in primary, secondary and tertiary education

43. HIPCs (Highly Indebted Poor Countries): Countries with extreme poverty and debt overhang which are eligible for special assistance from IMF and World Bank

44. Import-substitution effect: A policy to replace foreign goods with domestically produced one

45. IMF (International Monetary Fund): An organization set up in 1944 to lower trade barriers between countries, to stabilize currencies by monitoring the foreign exchange systems of member countries and lending money to developing nations

46. LDCs (Less Developed Countries): Countries which exhibit the very low HDI rating of all countries in the world

47. MDCs (More Developed Countries): Countries which exhibit very high HDI rating of all countries in the world and are usually referred to the Western economies

48. Multilateral aid: Aid is given to countries through an intermediary organization such as the World Bank, which pools donations from several countries’ government before distributing to recipients

49. MNC (multinational company): A company which has operations in more than one country

50. NICs (Newly Industrialised Countries): Refer to countries whose economies yet to reach the First World status, but have in macroeconomic sense outpaced many other developing counterparts and is usually referring to countries like Brazil, China, India, Malaysia, Thailand and several others

51. Lorenz curve: A graph showing the difference between the country’s actual income distribution and perfect equality of income distribution

52. Relative poverty: Is when income is less than the average income of a nation by certain percentage

53. SAPs (Structural Adjustment Programs): A series of economic policies designed to promote free market and to reduce government intervention

54. World Bank: An international agency set up to assist countries with the process of development by providing loans, research and advice and was founded in 1940s to initially assist Western economies with capital after World War II

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