IB HL Economics ALL DEFINITIONS 1/2
From markschemes 2005 - 2014
Terms in this set (51)
incomes that are at or below a minimum income level which may be defined as a poverty line) needed to secure the basic necessities of life (such as food, shelter, clothing).
government intervention in order to restrict trade between countries examples: safety standards, health standards, environmental standards, customs procedures, bureaucratic procedures, product standards, packaging requirements.
the total spending in an economy consisting of consumption, investment, government expenditure and net exports.
aid given directly from one country to another
aid given to enhance the standard of living and includes grants, concessional long-term loans, project aid, programme aid, debt cancellation, technical assistance, humanitarian aid, multilateral aid, bilateral aid.
aid that is given by countries to international or multilateral institutions which are distributed to countries.
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
where price is equal to marginal cost (or marginal social cost) and resources are allocated in such a way that neither too much nor too little is produced from society's point of view.
government legislation (the imposition of tariff) against the selling of imported goods at a price below their production costs
an increase of the value of the currency, expressed in terms of another currency, in a floating exchange rate system.
total cost divided by the quantity produced.
Balance of payments components
the balance of trade in goods, the balance of trade in services, (investment or factor) income (interest, dividends, profit), and (current or net) transfers. This could be referred to as "exports of goods and services" and "imports of goods and services" but cannot be referred to as simply imports and exports.
when government expenditure exceeds government revenue (taxation).
related to the expectations of businesses about the future of economic conditions, (which may be optimistic or pessimistic) and affects the level of investment.
the periodic fluctuations in real national income/output/GDP around the productive potential or long term trend of the economy. Its stages are slump/trough, recovery/expansion, boom and recession
when foreign currencies (or other financial assets) flow out of a country to seek a "safe haven" in another country
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
a product extracted from (hard commodity) or grown on (soft commodity) the land.
one country is able to produce a good at a lower opportunity cost than another.
Consumption is spending by households on domestic consumer goods and services over a period of time.
the abuse of public office for private gain, the abuse (dishonest use) of power (position). Examples might include activities such as bribery, misuse of contract payments, and embezzlement.
Cross elasticity of demand (XED)
the responsiveness of the demand for one good to a change in the price of another good.
is a situation where the government spends more (government expenditure) than it receives in revenue (mainly taxation), and needs to borrow money, forcing up interest rates thereby reducing investment and consumption
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
the value of total imports of goods and services plus net income flows are greater than the value of total exports of goods and services
current account surplus
revenues from the exports of goods and services plus net income flows are greater than the spending on the imports of goods and services.
quantity of goods and services that consumers are willing, and able to buy at each possible price over a given period of time.
fall in the value of one currency against another currency in a floating exchange rate system.
reduction in the value of a currency, conducted by the central bank, in a fixed exchange rate system.
Developing countries are characterized by
• low per capita income
• high rates of poverty
• low standard of living
• low HDI ranking/value
strategy to increase the variety of goods and services produced in order to avoid (the risks associated with) overspecialisation.
selling of a good in another country at a price below its cost of production.
a broader concept than economic growth involving welfare improvements to the standard of living including health, education and shelter.
Economic growth is
growth of real output in an economy over time and it is measured by an increase in real GDP
an increase in real output for an economy over time. It is measured as an increase in real GDP.
an increase in the potential output of an economy through an increase in the quantity/quality of resources.
Economies of scale
a fall in long run unit costs that comes about as a result of a firm increasing its scale of operations.
factor of production involving organizing of the other factors and/or risk taking.
market clearing price, set where Demand equals Supply.
the price of one currency expressed in terms of another, preferably with an example.
spillover costs to a third party caused by the production, or consumption of a good or service or that they occur when MSC is greater than MSB in the market for a good or service.
Factors of production (resources)
the four types of resources used in the production process: land, labor, capital (and possibly entrepreneurship / management / enterprise).
is the use of government spending and taxation to to shift the AD curve.
Floating exchange rate
is where the exchange rate (i.e. price of one currency in terms of another) changes according to the market forces of demand and supply.
Foreign direct investment (FDI) is
the establishment of production units by multinational companies in a foreign country.
Free good is
unlimited in supply and has no opportunity cost
Free market (economy) is
a market in which resource allocation (or price and/or output) is determined by demand and supply or a price mechanism or producers and consumers or where the means of production are privately held by individuals and firms, or where demand and supply determine how much to produce, how to produce, and for whom to produce.
Free trade exists where there is
trade between different countries without government intervention/regulation.
Free trade area is 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
Gross Domestic Product (GDP) or national output is the
total value of all final goods and services produced in an economy in a given time period (usually one year).