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Abnormal Profit
When a firm makes above the min amount of profit to stay in business. (Profit > 0 )
Absolute Advantage
When a country can produce more output with the same or fewer resources.
Accounting Cost
Explicit costs. Do not take into account opportunity cost.
Actual and Potential Growth
Actual - when there is an increase in output (real GDP). Potential - when there is an increase in the quantity and quality of the factors of production. (Shift outwards in PPC)
Ad Valorem Tax
An indirect tax that is a percentage of the price , set by the government.
Administrative Trade Barriers
Regulations or requirements that lower the level of imports into a country.
Adverse Selection
When the seller has more information about the product than the buyer due to asymmetric information in the market.
Aggregate Demand (AD)
The total spending of a good or services at a given price level in a given time period.
Aggregate Supply
The total production of goods and services at a given price level in a given time period.
Aid
The flow of capital (grants or loans) from a developed country to a developing country.
Allocative Efficiency
The optimum level of output produced that society deems efficient.
Anti-monopoly regulations
Regulations that aim to limit the power of a monopoly in the market.
Appreciation
The increase in the exchange rate in a floating exchange rate system.
Average Fixed Cost
Fixed Costs divided by the level of output.
Balance of Payments
The record of the economy's transactions with the rest of the world.
Balance of Trade
Revenue of net exports. Value of exports - value of imports.
Balanced Budget
When government spending (G) is equal to income earned by government (tax).
Barrier to Entry
Anything that prevents a firm from entering the market.
Bilateral Agreements
Trade agreements between two countries
Bilateral Aid
Non-reimbursable aid from on government to another
Break-even Output
The amount of output for which the total revenue is equal to total costs. (profit = 0 )
Budget Deficit
When government spending (G) is greater than government revenue (Tax).
Budget Surplus
When government revenue exceeds government spending.
Business Cycle
The short-run fluctuations in real GDP along the long-run trend. (series of economic expansions and contractions).
Cap and Trade Schemes
Market for pollution permits aimed a reducing pollution externalities.
Capital Account
The part of BOP that records transfers of capital between countries. (Transfers of non-produced and non-financial assets).
Capital Flows
The movement of investments into and out of the country in a given period of time. (Portfolio and FDI).
Common Access Resources
Non-excludable but rivalrous goods. It is difficult to exclude people from benefiting out of them.
Comparative Advantage
When a country can produce a good with less opportunity costs than another country.
Complementary Goods
Goods that are consumed together.
Concessional Loans
'soft loans' - longer repayment period and lower interest rates than the market rate.
Contractionary Fiscal Policy
Aims at decreasing AD by decreasing government spending or increasing taxes.
Contractionary Monetary Policy
Aims at decreasing AD by increasing interest rates.
Cost-push Inflation
Inflation that is caused by an decrease in AS. (Less output therefore higher prices).
Current Account
The sum of balance of trade, net income from abroad and net transfers.
Deflation
The persistent decrease in the average price levels in the economy.
Demand-pull Inflation
Inflation caused by an increase in AD.
Depreciation
The decrease in the exchange rate in a floating exchange rate system.
Direct Taxation
Taxation on income.
Disinflation
Prices continue to rise but a a decreasing rate.
Economic Development
The sustainable increase in living standards. (increase in income, education and health and environmental protection).
Economic Loss
When the firm is not making enough revenue to cover all the costs. (negative economic profits)
Abnormal Profit
When revenue is greater than costs.
Economies of Scale
As the firm increases in size the average total costs will decrease.
Equity
Fairness in the distribution of income.
Exchange Rate
The price of a currency expressed in terms of another.
Externalities
When the production or consumption of a good or service creates costs or benefits onto a third party.
Financial Account
Part of BOP that records the portfolio and FDI that goes in and out of the country over a period of time.
Fiscal Policy
The manipulation of government spending and taxes in order to increase or decrease AD.
Foreign Direct Investment (FDI)
The investment of a foreign company to a domestic firm which allows them to gain control over the firm they invested in.
Gini Coefficient
Measure of income inequality.
Gross Domestic Product (GDP)
The value of all final goods produced within an economy over a period of time.
Human Development Index
Measure of development that focuses on education, health and income.
Tax Burden
Who ends up paying the indirect tax. Producers or consumers.
Income, Expenditure and Output Method
Used to measure GDP
Indirect Tax
Expenditure tax imposed by the government that can be used to decrease the consumption of demerit goods.
Inflation
The persistent increase in the average price levels in an economy.
Inflationary Gap
When the economy is temporarily producing above the full employment level of output causing inflation.
Informal Market
Injections and Leakages
Interest Rate
The price or cost of borrowing money expressed as a percentage.
Marginal Benefit/cost
Market Failure
When the market forces fail to allocate resources efficiently. Over/under production/consumption of a good or service.
Marshall-Lerner Condition
Condition that states the devaluation will improve trade deficit if the sum of PED for exports and imports exceeds unity.
Price Floor/Ceiling
Price Floor - min amount producer can sell at. Price ceiling - max amount producer can sell at.
Microcredit schemes
Small loans given to the very poor in developing countries to help them start small businesses in order to meet their emergency expenses.
Monetary Policy
Manipulation of interest rates and money supply in order to increase or decrease AD.
NGOs
Organizations working independently from the government which aim at implementing development
Opportunity Cost
The next best alternative foregone when making an economic decision.
Poverty
Privatization
The transfer of state owned firms to the private sector.
Productive Efficiency
The level where the max amount of output is produced for the min. cost.
Profit Maximization
Profit Repatriation
When multinational companies send money back to their home country.
Progressive, Proportional and Regressive Taxation
Public Goods
Goods that are non-rivalrous and non-excludable
Quota
A limit on the volume or imports allowed into the country.
Tariff
A tax set by the government on imports in order to protect domestic firms from international competition.
Recession
When the economy is undergoing a decrease in real GDP over a period of time.
Relative Poverty
Resource Allocation
Specialization
When a factor or production is employed in making only one good. Leads to increased efficiency.
Specific Tax
An indirect tax that is set as a fixed amount.
Stagflation
Period of rising inflation and falling output.
Subsidy
An amount of money given by the government to firm to help them with the costs in order to encourage the production and consumption of the good.
Tacit Collusions
Terms of Trade
The ratio of export prices to import prices.
Tied Aid
Transfer Payments
Payments by the government to individuals who do not contribute to the production. (unemployment benefits)
Tragedy of the Commons
Unemployment
People who are in the labour force that are actively searching for a job but are currently unemployed.
Protectionism
Set of policies set by the government in order to protect domestic firms from outside competition.
Welfare/ dead-weight loss
Loss in producer or consumer surplus.
