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Sustainable Development Goals (SDGs)
The UN set out 17 global goals including those that aim to end all forms of poverty, fight inequalities, and tackle climate change.
Allocative efficiency
Achieved when just the right amount of goods and services are produced from society’s point of view so that scarce resources are allocated in the best possible way. It is achieved when, for the last unit produced, price (P) is equal to marginal cost (MC), or more generally, if marginal social benefit (MSB) is equal to marginal social cost (MSC).
Lorenz curve
A curve showing what percentage of the population owns what percentage of the total income or wealth in the economy. It is calculated in cumulative terms. The further the curve is from the line of absolute equality (along the diagonal), the more unequal the distribution of income.
Aggregate supply curve
A curve showing the planned level of output that domestic firms are willing and able to offer at different average price levels.
Productive capacity
The greatest capability of an economy to produce, usually measured by maximum possible output of an economy.
Public goods
Goods or services that have the characteristics of non-rivalry and non-excludability, for example, flood barriers.
Undervalued currency
A currency whose value or exchange rate is lower than its equilibrium exchange rate, usually achieved through central bank intervention; may occur in a pegged or managed exchange rate system.
Weighted price index
A measure of average prices over a period of time that gives a weight to each item according to its relative importance in the consumers’ budgets. It is used to measure changes in the price level.
World Trade Organization (WTO)
An international body that sets the rules for global trading and resolves disputes between its member countries. It also hosts negotiations concerning the reduction of trade barriers between its member nations.
Producer surplus
The benefit enjoyed by producers by receiving a price that is higher than the price they were willing to receive.
Primary sector
Anything derived from the factor of production land. Includes agricultural products, metals and minerals.
Quota
An import barrier that set limits on the quantity or value of imports that may be imported into a country.
Natural rate of unemployment
The rate of unemployment that occurs when the economy is producing at its potential output or full employment level of output. It is equal to the sum of structural, frictional and seasonal unemployment.
Property rights
The exclusive, legal, authority to own property and determine how that property is used, whether it is owned by the government or by private individuals.
Industrial policies
A type of interventionist supply-side policies whereby the government chooses to support specific industries through preferential tax cuts, subsidies, subsidized loans and other means as they are considered pivotal in the growth prospects of the economy.
Transfer payments
Payments made by the government to vulnerable groups in a society, including older people, low income people, unemployed and many more. The objective is to transfer money from taxpayers to those who cannot work, to prevent them from falling into poverty.
Dumping
When a firm sells abroad at a price below average cost or below the domestic price.
Laissez-faire
The view that if market forces are left alone unimpeded by government intervention the outcome will be efficient.
Engel Curve
A curve showing the relationship between consumers’ income and quantity demanded of a good. It indicates whether a good is normal or inferior.
National income
The income earned by the factors of production of an economy, equal to wages plus interest, plus rents, plus profits.
Expenditure-switching policies
Policies aimed at switching expenditures away from imports towards domestically produced goods and services by making imports more expensive in order to narrow a current account deficit. It includes lowering the exchange rate as well as adopting trade protection.
Poverty trap or poverty cycle
Any circular chain of events starting and ending in poverty—for example, low income leads to low savings, leads to low investment, leads to low growth, leads to low income.
Supply-side policies
A set of policies that aim to increase an economy’s productive capacity that relies on a greater role for the government; these include expenditures on infrastructure, education, health care, research and development, and all industrial policies.
Regressive taxation
Taxation where the fraction of tax paid decreases as income increases. The average tax rate decreases. All indirect taxes are regressive.
Stagflation
Persistent high inflation combined with high unemployment and stagnant demand or low economic growth in a country's economy.
Ceteris paribus
A Latin expression meaning “other things being equal.”
