IB Economics Vocab
Terms in this set (87)
An increase in real output for an economy over time. It is measured as an increase in real GDP.
The total spending in an economy consisting of consumption, investment, government expenditure, and net exports.
Aid given directly from one country to another.
Aid provided to a country by another government or governmental organization such as UN or EU.
Aid granted on the condition that it is used to buy goods or services from the donor country.
Government legislation (the imposition of tariff) against the selling of imported goods at a price below their production cost
an increase of the value of the currency, expressed in terms of another currency, in a floating exchange rate system
the periodic fluctuations in real national income/output/GDP around the productive potential or long term trend of the economy. It's stages are slump/trough, recovery/expansion, boom and recession
a group of producers in an industry that join together to regulate supply (or fix or increase prices).
Centrally planned economy
an economic system where resources are allocated by the government or a central planning authority
Spending by households on domestic consumer goods and services over a period of time
Current account (balance)
a record of the revenues earned from the export of goods and services and the expenditure on imports of goods and services
Current account deficit
where the value of total imports is goods and services plus net income flows are greater than the value of total exports of goods and services
Current account surplus
where revenues from the exports of goods and services plus net income flows are greater than the spending on the imports of goods and services
Cross elasticity of demand
the responsiveness of the demand for one good to a change in the price of another good
the quantity of goods and services that consumers are willing, and able to buy at each possible price (over a given period of time)
a fall in the value of one currency against another currency in a floating exchange rate system
Developing countries are characterized by
Low per capita income
High Rates of poverty
Low standard of living
Low HDI ranking/value
the selling of a good in another country at a price below its cost of production
the growth of real output in an economy over time and it is measured by an increase in real GDP
a broader concept than economic growth involving welfare improvements to the standard of living including health, education and shelter
the factor of production involving organizing of the other factors and/or risk taking
the market-clearing price, set where Demand equals Supply
the price of one currency expressed in terms of another, preferably with an example
costs to a third party caused by the production, or consumption of a good (or service) that they occur when MSC is greater than MSB in the market for a good or service
Factors of production
the four types of resources used in the production process: land, labor, capital (and possibly entrepreneurship/management/ enterprise)
the use of government spending and taxation to shift the AD curve
Floating exchange rate
where the exchange rate (price of one currency in terms of another) changes according to the market forces of demand and supply
foreign direct investment
the establishment of production u it's by multinational companies in a foreign country
unlimited in supply and has no opportunity cost
exists where there is trade between different countries without government intervention/regulation
Free trade area
an agreement whereby there is free trade among member countries, but each member can maintain its own trade barriers in trade with non-member countries
GDP or National output
the total value of all final goods and services produced in an economy iba given time period (usually one year)
GDP per capita
a measure of real output/income/expenditure in the economy in one year per head of the population
real GDP or real output
the value of all final domestic goods and services adjusted for inflation
a measure of inequality in the distribution of income
the labor force of a country
Import Substitution polices
designed to encourage the domestic production of goods, rather than importing them. The strategies encourage protectionism
Income elasticity of demand
the measure of the responsiveness of demand of a good of service to a change in income
the amount of money that a country owes to other countries and/or international institutions
an expenditure tax or a tax levied on goods and services and it is imposed by the government
Involves essential facilities and services such as roads, airports, sewage treatment, railways, telecommunications and other utilities typically provided by the government.
A sustained increase in the general or average level of prices.
Inflationary pressure created by the current (or SR) equilibrium being above the full employment (or LR) equilibrium.
Markets in which economic activity is not officially measured or recorded.
The price of capital or the price of borrowed/loaned money, usually expressed as a percentage.
Expenditure by firms on capital equipment and is an injection into the economy.
Managed Exchange Rates
A system where the exchange rate is determined by market forces, but the government/Central Bank intervenes from time to time in order to keep it within a certain "band" (range)
The interaction between buyers and sellers in order to exchange goods or services or buyers and sellers coming together in order to exchange a good or service.
An economy where resource allocation is determined mainly by market forces of supply and demand.
The upper limit imposed by the government below which the price may not fall; usually set below the equilibrium to aid relatively poor consumers.
Goods or services with strong positive externalities that would be under-provided by he market and so under-consumed.
The lower limit imposed by the government below which the price may not fall; usually set above he equilibrium to aid farmers.
A demand side policy with the Central Bank using changes in the money supply or interest rates to affect AD.
A market where there are many buyers and sellers, producing differentiated products, with no barriers to entry.
Companies that have productive units in more than one country
Non governmental organizations that exist to: promote sustainable economic development and/or humanitarian ideals.
The value of an economic variable that has not been adjusted for the effects of inflation.
(Official) foreign (currency) reserves
reserves of foreign currencies held by the Central Bank or the government of a country.
A market where few large firms dominate the industry, with at least one other characteristic such as interdependency of firms, high barriers to entry, homogenous or differentiated product with example, imperfect information.
Where a few firms act together to avoid competition by resorting to agreements to fix prices or output.
The cost of an economic decision in terms of the next best alternative forgone.
Involves low levels of income which led to low savings and low investment which ensure low incomes in the future.
An increase in the potential output of an economy through an increase in the quantity/quality of resources.
Price elasticity of demand
A measure of the responsiveness of quantity demanded to the change in the price of a good.
Where the higher the level of income, the higher the percentage of taxation that is paid (or the higher the average rate of taxation).
Rights that give people a legal right to own property/assets.
Import barriers that set limits on the quantity or value of imports into a country.
the nominal price of a good or service adjusted for inflation
At least two consecutive quarters of negative economic growth.
where the proportion of income paid in tax falls as the income of the taxpayer rises or where the average rate of tax falls as income rises.
concerned with how resources (land, labor, capital and management) are distributed in an economy.
Equal to price times quantity sold or it is the total money received by a firm from the sale of a particular quantity of output.
People of working age (those in the labor force) actively seeking work at the current wage rate but cannot find one.
the number of workers without a job, who are willing and able to work, expressed as a percentage of the workforce.
A payment made by the government to producers in order to reduce the costs of production or to increase output.
the willingness and ability of producers to produce a quantity of a good or service at a given price in a given time period
Supply side policies
policies designed to shift the AS curve to the right. They may include tax cuts, reductions in welfare payments, promotion of training etc.
the development needed to meet the needs of the present generation without compromising the ability of future generations to meet their own needs.
Long term unemployment that occurs when there is a mismatch between the skills of unemployed workers and the jobs available or that exist as a result of rigidities in the labor market.
An indirect tax on imports.
Terms of trade deterioration
where the average price of exports falls relative to the average price of imports, or making it more expensive to buy imports, in terms of exports that need to be sold.
permits to pollute, issued by a governing body, which sets a maximum amount of pollution allowable. Firms may trade these for money.
The payment for labor/working
the payment for labor/working adjusted for inflation
An international organization whose main aims are to provide aid and advice to developing countries, as well as reducing poverty levels.
World Trade Organization (WTO)
An international body that encourages the reduction of trade barriers between its member nations.