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A condition stating when depreciation or devaluation of a country’s currency will lead to an improvement in that country’s balance of trade: the sum of the price elasticities o
Goods that are considered to be undesirable for consumers and are overprovided by the market. Reasons for overprovision may be that the goods have negative externalities, or consum
Some limited economic development is possible in the absence of economic growth, but that over the long term economic growth is usually necessary for economic development (however,
An explanation that it is a type of economic integration that removes (or reduces) trade barriers for certain products to countries that are in the agreement.
An explanation that it is a sustained decrease in the average level of prices in an economy.
Taxation where, as income increases, the fraction of income paid as taxes decreases; there is a decreasing tax rate.
A measure of the amount of unemployment in an economy, expressed as a percentage, calculated by taking the total number of unemployed people in an economy and dividing by the labou
An explanation that they are costs (harmful effects) suffered by a third party as a result of an economic transaction (or when a good or service is produced or consumed).
The sum of inflows minus outflows of funds in the current account of the balance of payments.
to protect jobs it will protect employment in other, connected industries to ensure higher revenues for domestic producers to compensate for the subsidies given to foreign producer
The replacement of higher cost products (imported or domestically produced) by lower cost imports that results when a trading bloc is formed and trade barriers are removed. (To be
An explanation that it is a trade agreement between two countries which aims to lower trade barriers, or to increase trade.
Life expectancy Infant mortality rate Maternal mortality
Any policy based on government intervention in the market. Strengths: provision of infrastructure investment in human capital the provision of a stable macroeconomic economy the pr
Permits that can be issued to firms by a government or an international body, and that can be traded (bought and sold) in a market, the objective being to limit the total amount of
(XED) A measure of the responsiveness of the demand for one good to a change in the price of another good; measured by the percentage change in the quantity of one good demanded di
reforms in regulations trade liberalization privatization reduction in government expenditure reference to the Washington Consensus Leads to a more efficient allocation of resource
MNC’s like to expand to LEDC’s which brings FDI. MNC’s are attracted by low cost factor inputs, a regulatory framework that favours profit repatriation and favourable tax rul
Indicates the various quantities of a good that firms (or a firm) are willing and able to produce and sell at different possible prices during a particular time period,ceteris pari
Any kind of arrangement where buyers and sellers of a particular good, service or resource are linked together to carry out an exchange.
Two main goals:End extreme poverty within a generation and boost shared prosperity.The World Bank focuses on relatively small-scale projects aimed at improving the basic needs of t
Refers to a decrease in the value of a currency in the context of a fixed exchange rate system (to be compared withdepreciation, which is a decrease in currency value in the contex
Investment in technology and increase efficiency and productivity to give countries an absolute advantage
Refers to the possible impacts on real GDP of increased government spending (expansionary fiscal policy) financed by borrowing; if increased government borrowing results in a highe
One of the factors of production, involving a special human skill that includes the ability to innovate by developing new ways of doing things, to take business risks and to seek n
All resources, or inputs (land, labour, capital, entrepreneurship) used to produce goods and services. Can be improved in both quantity and quality
A goal of firms to achieve satisfactory results, rather than pursue a single maximising objective, such as to maximise profits or revenues; based on the argument that large, modern
Refers to the type of oligopoly where firms agree to restrict output or fix the price, in order to limit competition, increase monopoly power and increase profits. See alsocartel.
safety standards health standards environmental standards customs procedures bureaucratic procedures product standards packaging requirements.
The amount of foreign currency and gold that is held by the central bank of a country. Also known as foreign reserves
A maximum price set by the government for a particular good, meaning that the price that can be legally charged by the sellers of the good cannot be higher than the legal maximum p
A new industry which often is not able to compete against established foreign industries and therefore needs to be protected from the competition through subsidies and tariffs
Outflows of money from a country. Counted in balance of payments.
Occurs when the current account balance has a positive value, meaning that credits are larger than debits (there is an excess of credits).
An inability to invest in (physical, human or natural) capital due to low savings, forming a self-perpetuating cycle (which may be illustrated by the use of a poverty cycle diagram
Objectives of policy makers in the macroeconomy; include full employment, low rate of inflation, economic growth, an equitable distribution of income and external balance (balance
Value that is in money terms, measured in terms of prices that prevail at the time of measurement, and that does not account for changes in the price level; to be distinguished fro
Exchange rates that are for the most part free to float to their market levels (i.e. their equilibrium levels) over long periods of time; however, central banks periodically interv
Including lower domestic consumption and investment, as well as the appreciation of the domestic currency and reduced export competitiveness.
An explanation that it is the value (price) of one currency expressed in terms of another currency. An explanation that it is the value (price) of one currency expressed in terms o
An explanation that it occurs when an economy experiences two consecutive quarters of falling output (negative growth).
Payments made by the government to individuals specifically for the purpose of redistributing income, thus transferring income from those who work and pay taxes towards those who c
Goods that are held to be desirable for consumers, but which are underprovided by the market. Reasons for under provision may be that the good has positive externalities, or consum
An explanation that it is related to the expectations of businesses about the future of economic conditions, (which may be optimistic or pessimistic) and affects the level of inves
PED. A measure of the responsiveness of the quantity of a good demanded to changes in its price, given by the percentage change in quantity demanded divided by the percentage chang
Indicates the various quantities of a good that consumers (or a consumer) are willing and able to buy at different possible prices during a particular time period,ceteris paribus(a
An explanation that it is a market in which resource allocation (or price and/or output) is determined by one of the following: demand and supply price mechanism producers and cons
A group of countries that have agreed to reduce tariff and other barriers to trade for the purpose of encouraging the development of free or freer trade and cooperation between the
An explanation that it is a physical limit on the number or value of a good that can be imported into a country.
the protection of domestic jobs national security protection of infant industries the maintenance of health, safety and environmental standards anti-dumping and unfair competition
If a country suspects that a trading partner is practising dumping, it should have the right to impose tariffs or quotas in order to limit imports of the subsidised, or dumped good
An explanation that it is concerned with how resources (land, labour, capital, and management) are distributed in an economy.
The fluctuations in economic activity over time. There are four stages of the business cycle: (1) recession, when economic activity slows down; (2) trough, when the recession is at
Inflows of money to a country. Recorded on balance of payments
Refers to external debt, meaning the total amount of debt (public and private) incurred by borrowing from foreign creditors (i.e. lenders). The global problem of debt involves larg
An explanation that it is (any two of the following is sufficient): large scale public systems (services and facilities) of a country necessary for economic activity an addition to
A clear outline of one of the following: ensure the stability of the international monetary system promote international monetary cooperation lend money to help members in balance
A record of the financial transactions that occur between a country and the rest of the world. There are three separate accounts in the balance of payment account: The current acco
An explanation that it is an increase in the value (price) of a currency plus one of the following:in terms of a another currency in a floating exchange rate system.An explanation
The skills, abilities and knowledge acquired by people, as well as good levels of health, all of which make them more productive; considered to be a kind of ‘capital’ because i
The export by a country or firms of goods at a price that is lower than the cost of production. Is considered to be an unfair trade practice, and is illegal according to in
The part of an economy that is neither taxed, nor monitored by any form of government. Unlike the formal economy, activities of the informal economy are not included in the gross n
The price determined in a market when quantity demanded is equal to quantity supplied, and there is no tendency for the price to change; it is the price that prevails when there is
Taxation where, as income increases, the fraction of income paid as taxes increases; there is an increasing tax rate and creates more equity.
The amount of money received by firms when they sell a good (or service); it is equal to the price (P) of the good times the quantity (Q) of the good sold. Therefore total revenue
A graphical representation of alternative production possibilities facing an economy. A PPC is a graphical illustration of all combination of goods and services that can be produce
Most important sources include increases in quantities of physical capital and human capital, the development and use of new technologies that are appropriate to the conditions of
Large-scale transfer of funds to another country, usually undertaken when residents or businesses of a country are fearful that their wealth or income are threatened (due to the po
it may raise the price to consumers, despite reassurances it may raise the price to producers who buy the imported goods as an input for their final product competition may diminis
A curve that plots the balance of trade (exports minus imports) on the vertical axis and time on the horizontal axis, showing that a country with a devaluing/depreciating currency
An explanation that they are sums of money given by government to firms and one of the following: to lower their costs of production. to increase output of a desired product - to r
The percentage change in quantity demanded/ supplied < the percentage change in price
An international organisation that provides the institutional and legal framework for the trading system that exists between member nations worldwide, responsible for liberalising
An explanation that it is a tax on imports.
An index that shows the value of a country’s average export prices relative to the import prices (the formula would be acceptable,iethe index of export prices divided by the inde
Occurs when the current account balance has a negative value, meaning that debits are larger than credits (there is an excess of debits).
Gini coefficient is the ratio of the area under the Lorenz curve to the area under the 45 degree diagonal (line of perfect equality) on a graph of the Lorenz curve. It is a number
The most important part of foreign aid, referring to foreign aid that is offered by countries or by international organisations composed of a number of countries (it does not inclu
The ratio of real GDP divided by a change in any of the components of aggregate spending (consumptionC, investmentI, government spendingG, or net exportsX−M); alternatively it is
Decreases in the average costs of production that occur as a firm increases its output by varying all its inputs (i.e. in the long run). Economies of scale explain the downward-slo
A measure of the responsiveness of demand to changes in income; measured by the percentage change in quantity demanded divided by the percentage change in price Relatively high res
Refers to a decrease in the value of a currency in the context of a floating (or flexible) exchange rate system or managed exchange rate
Consists of food aid, medical aid and emergency relief aid.
An explanation that it is the total value of all goods and services produced in an economy (in a given time period). OR An explanation that it is the sum of consumption, investment
Equal to the sum of the capital account and financial account balances
An explanation that it is a strategy to increase the variety of goods and services produced in order to avoid (the risks associated with) over- specialisation.
Products from from within the country and consumption of these product may be encouraged to improve macroeconomic objectives.
An explanation that they are taxes (paid to the government) on income (households and firms).
The number of underemployed people, defined as all people above a particular age (i.e. not children) who have part-time jobs when they would prefer to have full-time jobs; or have
A fixed exchange rate is an exchange rate that is set by the government and maintained by the central bank so that the value of the currency in terms of another currency does not c
A development assistance organisation, composed of 185 member countries which are its joint owners, that extends long-term credit (loans) to developing country governments for the
Substitute goods that in some way have been made distinct, often through branding
Absolute poverty occurs when people do not have enough resources to satisfy their basic needs
Special exchange rates between currencies that makes the buying power of each currency equal to the buying power of US$1, and therefore equal to each other. The use of PPP exchange
Bilateral aid is aid given by one country to another country. The aid is given directly to the country.
grants concessional long-term loans project aid programme aid debt cancellation technical assistance humanitarian aid multilateral aid bilateral aid.
The minimum amount of revenue that a firm must receive so that it keeps the business running (as opposed to shutting down); also defined as the amount of revenue needed to cover im
Including expenditure switching policies, expenditure reducing policies and supply-side policies, to increase competitiveness.
When countries give money to international organizations such as the World Bank, the IMF, and UNICEF (United Nations children’s fund). The international organization is then resp
An explanation that it is loan, plus one further descriptor, such as: micro-credit allows poor people to set up a small scale business micro-credit is loaned to borrowers who do no
Increased value of a currency
The policy of liberalising (freeing up) international trade by eliminating trade protection and barriers to trade (i.e. tariffs, quotas, etc.)
Over-specialization on a narrow range of products Price volatility of primary products Inability to access international markets Long-term changes in the terms of trade
exists where government domestic revenue is less than government expenditure.
Also known as import-substituting industrialisation, refers to a growth and trade strategy where a country begins to manufacture simple consumer goods oriented towards the domestic
The practice whereby donors make the recipients of foreign aid spend a portion of the borrowed funds on the purchase of goods and services from the donor country. It occurs only in
A collection of firms that agree to work together to maximize their joint profit. OPEC.
Manipulations by the government of its own expenditures and taxes in order to influence the level of aggregate demand; it is a type ofdemand- side policy
One of the four market structures, with the following characteristics: a single or dominant large firm in the industry; significant control over price; produces and sells a unique
The value of the next best alternative that must be given up or sacrificed in order to obtain something else.
Spending by households (consumers) on goods and services (excludes spending on housing).
The apportioning or distributing of goods among interested users/buyers through means other than price, often necessary when there are price ceilings (maximum prices); may include
An explanation that it is one of the following: the price or cost of borrowed money (credit) the reward for saving the percentage paid on borrowed money.
A payment, per unit of time, to those who provide labour; this includes all wages and salaries, as well as supplements (such as bonuses and commissions).
According to the World Bank’s classification system, includes countries that have a per capita GNI below a particular level (which changes from year to year); some common charact
An explanation that it is when a trading bloc abolishes trade barriers between members, but each member country maintains its own trade barriers towards non-member countries.
Dishonest or fraudulent conduct by those in power, typically involving bribery. Can slow down aid and interventionist policies.
An exchange rate determined entirely by market forces, or the forces of supply and demand. There is no government intervention in the foreign exchange market to influence the value
Capital account captures inflows and outflows of different forms of capitalspecifically capital transfers and transaction in non-produced, non-financial assets.
Allocative efficiency the best or optimal allocation of resources from society’s point of view. It occurs when the market is in equilibrium and social surplus is maximized (where
An explanation that it is a measure of the flow of funds from trade in goods and services (value of exports minus imports), plus net income flows (profits, interest, wages, rents)
An explanation that it is a broad concept involving any two of the following: improvement in standards of living reduction in poverty improved health and education reduction in une
literacy rate primary school enrollment secondary school enrollment
Government intervention in international trade through the imposition of trade restrictions (or barriers) to prevent the free entry of imports into a country and protect the domest
A measure of the total income received by the residents of a country, equal to the value of all final goods and services produced by the factors of production supplied by the count
Occurs when a household, firm, or organization owes money
A type of trading bloc in which countries that have formed a customs union proceed further to eliminate any remaining tariffs in trade between them; they continue to have a common
Low levels of GDP per capita, high levels of poverty, relatively large agricultural sectors, large urban informal sectors and high birth rates
Due to changes in world income levels, changes in productivity within the country and technological developments.
Development which meets the needs of the present without compromising the ability of future generations to meet their own needs’ (according to the Brundtland Commission), which i
An explanation that it involves government intervention in order to restrict trade between countries.
Taxes levied on spending to buy goods and services, called indirect because, whereas payment of some or all of the tax by the consumer is involved, they are paid to the government
An explanation that it is the (net) balance arising from (two of the following): flows of foreign direct investment flows of portfolio investment changes in reserve assets.OR An ex
a misallocation of resources the danger of retaliation and “trade wars” the potential for corruption increased costs of production due to lack of competition higher prices for
An explanation that the government sells state-owned enterprises (assets) to the private sector.
A trade agreement (or agreement to lower international trade barriers) between many countries; at the present time these are mainly carried out within the framework of theWorld Tra
increased employment access to imports import new technologies exploit comparative advantage economies of scale improvements in efficiencies greater choice
One of the four market structures, with the following characteristics: small number of large firms in the industry; firms have significant control over price; firms are interdepend
investment by a multinational corporation long term investment in another country investment in productive capacity in another country investment in another country representing at
Occurs when firms compete with each other on the basis of methods other than price (such as product differentiation, advertising and branding). Non-price competition occurs in olig
overdependence on a narrow range of commodity exports leads to the inability to expand in value-added sectors vulnerability to price fluctuations and economic conditions in other c
The replacement of lower cost products (imported or domestically produced) by higher cost imports that results when a trading bloc is formed and trade barriers are removed. (To be
eradicate extreme poverty and hunger achieve universal primary education promote gender equality and empower women reduce child mortality improve maternal health combat HIV/AIDS, m
Occurs when economic profit is greater than zero, i.e., when total revenue is greater than total cost (explicit and implicit costs). Also known as supernormal profits.
An explanation that it is an increase in output (real GDP) over time.
Non-profit organisations that provide a very wide range of services and humanitarian functions; in developing countries they provide foreign aid, all of which takes the form of gra
due to changes in demand conditions for exports and imports, changes in global supply of key inputs (such as oil), changes in relative inflation rates and changes in relative excha
Occurs when firms produce at the lowest possible cost; is one of the conditions for producing on the production possibilities curve (PPC). The condition for productive efficiency i
These countries differ enormously from each other in terms of a variety of factors, including resource endowments, climate, history (colonial or otherwise), political systems and d
A raw material or primary agricultural product that can be bought and sold, such as copper or coffee.
A composite indicator that includes literacy, life expectancy and GNI per capita which are indicators for health, education and income, all of which are important for economic deve
Aggregate demand the total demand for goods and services in the economy at a given price level in a given period of time
A firm involved in foreign direct investment (FDI); it is a firm that is based in one country (the home country) and that undertakes productive investments in another country (the
A legal price set by the government, which is below the market equilibrium price; this does not allow the price to rise to its equilibrium level determined by a free market; also k
The absence of government intervention of any kind in international trade, so that trade takes place without any restrictions (or barriers) between individuals or firms in differen
Implications of a persistent current account deficit, referring to factors including foreign ownership of domestic assets, exchange rates, interest rates, indebtedness, internation
The practice of selling the same product to different buyers at different prices in order to maximize revenue
An explanation that it is any two of the following: imposed by the government ( or an authority) set above the equilibrium (market) price price cannot fall below this price.
An explanation that it is when a country can produce a product at a lower opportunity cost than another country.
A curve illustrating the degree of equality (or inequality) of income distribution in an economy. It plots the cumulative percentage of income received by cumulative shares of the
The amount of land, labor, capital, and entrepreneurship that a country possesses and can exploit for manufacturing. Leads to comparative advantage.
When a country's imports increase in price, while the value of its exports stays the same, the country'sterms of tradeare said todeteriorate.
The control of the supply of money by the central bank to affect the economy (e.g. changing interest rates, changing reserve requirements buying and selling bonds)
GDP divided by the population of the country
Refers to the ability of a country to produce a good using fewer resources (lower opportunity cost) than another country, or, what is the same thing, the ability of a certain amoun
An explanation that it refers to the situation where: the economy is (in equilibrium) at a level of output that is greater than the full employment level of output or above potenti
Money sent by workers in other countries back to the home country
A variety of policies that focus on aggregate supply, namely factors aiming to shift the long-run aggregate supply (LRAS) curve to the right, in order to achieve long-term economic
An explanation that it is: any addition to the capital stock of the economy OR expenditure/spending by firms on capital. An explanation that it is spending by firms (or the governm
One of the four market structures, with the following characteristics: a large number of firms; substantial control over market price; product differentiation; no barriers to entry
Any product that is produced in theprimary sector, which includes agriculture, forestry, fishing and the extractive industries; also known as ‘commodity’.
Occurs when the market fails to allocate resources efficiently, or to provide the quantity and combination of goods and services mostly wanted by society. Market failure results in
A type of unemployment that occurs as a result of technological changes and changing patterns of demand (causing changes in demand for labour skills), as well as changes in the geo
An explanation that it is any two of the following: the number of people without a job who are actively seeking work who are able and willing to work.
 
A situation in which countries try to damage each other's trade, typically by the imposition of tariffs or quota restrictions
An explanation that it a sustained increase in the average (general) price leve
Gross domestic product (GDP) measured in constant prices, i.e. prices that prevail in one particular year, called a ‘base year’; this is useful for making comparisons of change
Occurs when the outflow of money for imports of goods and services plus investment income and/or transfers is greater than the revenue gained from exports of goods and services plu
An explanation that it is a form of economic integration where member countries agree to liberalize trade (trade freely amongst themselves) and adopt a common external tariff (or c
Arises when low incomes result in low (or zero) savings, permitting only low (or zero) investments in physical, human and natural capital, and therefore low productivity of labour

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