Concepts and Vocabulary Themes

Central Bank

Central Bank

The state institution that controls how much money is flowing through the economy, as well as how much it costs to borrow money in that economy.

Comparative Advantage

The ability of one country to produce a particular good or service more efficiently relative to other countries’ efficiently in producing the same good or service.

Deflation

A period of falling prices and values for goods, services, investments, and wages.

Economic Liberalization

Changes consistent with liberalism that aim to limit the power of the state and increase the power of the market and private property in an economy.

Gini Index

A statistical formula that measures the amount of inequality in a society; its scale ranges from 0 to 100, where 0 corresponds to perfect equality and 100 to perfect inequality.

Gross Domestic Product (GDP)

The total market value of all goods and services produced by a country over a period of one year.

Human Development Index (HDI)

A statistical tool that attempts to evaluate the overall wealth, health, and knowledge of a country’s people.

Hyperinflation

Inflation of more than 50 percent a month for more than two months in a row.

Inflation

An outstripping of supply by demand, resulting in an increase in the general price level of goods and services and the resulting loss of value in a country’s currency.

Laissez-Faire

The principle that the economy should be “allowed to do” what it wishes; a liberal system of minimal state interference in the economy.

Market

The interaction between the forces of supply and demand that allocates resources.

Mercantilism

A political-economic system in which national economic power is paramount and the domestic economy is viewed as an instrument that exists primarily to serve the needs of the state.

Monopoly

A single producer that is able to dominate the market for a good or service without effective competition.

Non-Tariff Regulatory Barriers

Policies and regulations used to limit imports through methods other than taxation.

Political-Economic System

The relationship between political and economic institutions in a particular country and the policies and outcomes they create.

Political Economy

The study of the interaction between states and markets.

Quota

A nontariff barrier that limits the quantity of a good that may be imported into a country.

Regulation

A rule or an order that sets the boundaries of a given procedure.

Social Expenditures

State provision of public benefits, such as education, health care, and transportation.

Tariff

A tax on imported goods.