Wednesday, April 9, 2014

List of the Most Important Definitions for Unit 4: Development in the Global Economy (IAL) / Global Economy (GCE) (coming soon)

Dear students/ candidates,

1.    Absolute advantage: It is when a country is able to produce more of a good or service compared to another by using the same amount of resources/ It is when a country is able to produce a good or service by using fewer resources compared to another

2.    Absolute poverty: It is when a person’s income is so low that he/she is unable to get access to basic food, shelter and clothing

3.   Accelerator principle: An economic concept that draws a connection between the national output/ income and capital investment

4. Accelerator effect: It is when an increase in national income results in a larger than proportionate increase in investment

5.    Aid: Economic assistance by one country for another

6.    Appreciation: It is when the value of one currency worth more in terms of another

7.  Average propensity to consume (apc): Percentage or portion of disposable income that is spent rather than saved

8.    Average propensity to save (aps): Percentage of portion of disposable income that is saved rather than spent

9.    Actual growth: Refers to a movement from within the production possibility frontier (PPF) of an economy to a position on the frontier/ an increase in the aggregate demand (AD)

10.  Bilateral aid: Economic assistance that is directly given by one country to another

11.  Bonds: An instrument issued by the governments and private firms with the purpose of raising capital

12.  Budget deficit: Is when the government expenditure exceeds tax revenue

13.  Budget surplus: Is when tax revenue exceeds public sector expenditure

14.  Capital flight: Is the case where foreign investors repatriate capital and money out of a country to another, usually to avoid an economic catastrophe

15.  Capital-intensive: A production process which involves more intense use capital goods than manual workers

16.  Capital expenditure: Refers to spending that will create future benefits such as the construction of roads and bridges, airports, schools and hospitals

17.  Capital gain tax: A charge which is levied by the government upon the gains in the value of assets when they are sold or bequeathed

18.  Current expenditure: Refers to spending onto items that are used up in in the process of providing a good or service such as wages, stationeries, drugs for NHS and others

19.  Common market/ single market: A type of trading bloc which is made up of free trade area, free movement of capital and labour and common policies on product regulation
20.  Common external tariff: A tariff rate which is agreed to by all members of a custom union or common market onto imports from non-members

21.  Comparative advantage: Is when a country is able to produce a good or service at a lower opportunity cost than another

22.  Custom union: A type of trading bloc which is made up of free trade area and where common external tariff is being introduced

23.  Cyclical deficit: It refers to the budget deficit that occurs at the low point of an economic/ business cycle

24.  Debt cancellation/ forgiveness/ relief: It refers to a programme to cancel or reduce the amount of debts owed by country 

25.  Demand deficient/ cyclical unemployment: Joblessness which is often related to the downturn of an economic cycle/ collapse in aggregate demand

26.  Depreciation: It is when the value of one currency appreciates against another

27.  Devaluation: Refers to a deliberate downward adjustment of a country’s currency against another

28.  Dutch disease: Happens when a country is overly depending on the exports of natural resources and hence a rise in domestic currency which subsequently erodes the competitiveness of manufacturing sector

29.  Economic growth: An increase in real output/ potential output

30.  Economic development: An improvement in the well-being/ welfare of the people and this encompasses not just real GDP per capita but also level of literacy, life expectancy, access to clean water supply, the quality of the environment they live in and others

31.  Exchange rate: It is the value of one currency expressed in terms of another

32.  Embargo: A complete ban on imports from a certain country

33.  European Central Bank (ECB): It is the official central bank for all countries that use euro as their official currency

34.  Economic and Monetary Union (EMU): It is the fifth stage of an economic integration within the countries in Europe with features like free trade, freer movements of labour and capital, single monetary policy and harmonisation of fiscal measures

35.  European Union (EU): A group of European countries that participates in the world economy as one unit

36.  Eurozone: countries that officially adopt the euro as their currency

37.  Expenditure-reducing policies: Measures to reduce the consumption of imports through the lowering of income

38.  Expenditure switching policies: Measures to increase the consumption of domestic goods at the expense of imported ones

39.  Exports: The selling of goods and services across border

40.  Fair Trade Foundation: An organisation that seeks to transform the trading structures  in favour of the poor and disadvantaged farmers

41.  Financial aid: Monetary related assistance such as fixed-rate loans and low-interest loans

42.  Fiscal policy: Manipulation of government spending or/ and taxation in order to influence the movement of aggregate demand

43.  Fixed exchange rate: It is when the value of one currency is fixed against another

44.  Floating exchange rate: It is when the value of one currency is allowed to freely float against another

45.  Foreign exchange gap: When the size of current account deficit is greater than the value of capital inflows

46.  Foreign exchange reserves: The reserves of foreign currencies which are held by the central bank on behalf of the government

47.  Free trade: When trade between nations is allowed to take place without any restriction

48.  Free Trade Area (FTA): It is the second stage of economic integration where all member countries agree to further reduce or eliminate trade barriers among themselves

49.  Frictional/ search unemployment: Joblessness that occurs as people are in the midst of looking on for a new job

50.  Full integration: This refers to the final stage of economic integration with features like full monetary union and complete or near complete fiscal harmonisation (such as the USA)

51.  Gini coefficient: It is the ratio of the area under the Lorenz curve to the entire area under the income equality line

52.  Globalisation: The integration of global economies into one market place where goods and services, capital and labour are freer to move about

53.  Gross National Product (GNP): It is the market value of all final goods and services produced by factors of production belonging to a country regardless of where they are

54.  Hidden/ disguised unemployment: Joblessness that is not reflected by the official unemployment statistics because of the way they are compiled

55.  Harrod-Domar model: An economic model which suggests that growth depends on savings and capital-output ratio

56.  Hot money: Flows of money/ capital from one country to another to benefit from high interest rate or/ and exchange rate

1.    Highly Indebted Poor Countries (HIPC): A group of developing countries with high levels of poverty and debt overhang which are eligible for special assistance from both IMF and World Bank

2.    Human Development Index (HDI): A measurement of wellbeing which considers real GDP per capita (PPP), life expectancy at birth and number of years spent in education

3.    Human Poverty Index (HPI): Another measurement of wellbeing that focuses on the extent of deprivation in the three elements which are already reflected by HDI, namely longevity, knowledge and decent standard of living

4.    Imports: The buying of goods and services from another country

5.    Import substitution industrialization (ISI): An economic policy that advocates replacing foreign imports with domestic production

6.    Injection: Inflows of money into the circular flow of income

7.    Income tax: Tax which is directly levied onto a person’s income

8.    Income inequality: A measurement of the distribution of income which highlights the gap between those individuals who make the most with those who make the least

9.    Inheritance tax: Tax which is directly imposed onto a person who inherits money and property from a person who has died

10.  Infant industry/ sunrise industry: An industry which is in the stage of development and therefore is absolutely incapable in competing with established competitors

11.  Infrastructure aid: An economic assistance by a foreign country or firm in the form of infrastructure like roads and bridges, electricity and water supply and others

12.  International Monetary Fund (IMF): An international organisation which aims to reduce trade barriers between countries, stabilise currencies and to lend money to developing nations

13.  International trade: The buying and selling of goods and services across borders

14.  Inward-looking policies: Measures to promote growth and development through the establishment and support of domestic industries

15.  J-curve: A theory which states that a country’s current account deficit will initially worsen soon after its currency depreciates because of the rise in the price of imports in terms of local currency

16.  Labour intensive: A production process which uses more manual workers than capital

17.  Lewis Dual-Sector model: An economic theory that explains how a transition from agricultural to manufacturing sector will aid in growth and development in emerging economies

18.  Lorenz curve: A graphical representation of how income is actually distributed within a country

19.  Managed float: It is an exchange rate system in which the government or the monetary authority will intervene occasionally to influence the direction of its currency

20.  Marshall-Lerner condition: A theory which states that currency devaluation/ depreciation will only lead to an improvement in balance of payments if the sum of both elasticity of demand and supply is greater than one

21.  Marginal propensity to consume (mpc): Proportion of every one dollar increase in disposable income which will be spent on consumption expenditure

22.  Marginal propensity to save (mps): Proportion of every one dollar rise in disposable income which will be saved

23.  Marginal propensity to tax (mpt): Proportion of each extra dollar of income which is taken by the government