A Level Economics: Macroeconomic Policy, Development, Trade, and Living Standards

Comprehensive vocabulary flashcards covering macro-economic problem relationships, policy effectiveness, international aid, trade, debt, multinational corporations, international organizations, and living standards indicators.

Traditional Phillips Curve

A graph illustrating an inverse relationship between inflation and unemployment, showing that reducing unemployment at low rates causes a significant rise in inflation.

Shifts in the Traditional Phillips Curve

Movements of the Phillips curve to the right (due to reduced productivity raising costs) or to the left (due to technological supply-side measures lowering costs) for a given rate of unemployment.

Expectations-Augmented Phillips Curve

A concept developed by Milton Friedman asserting that demand-side policies create only a short-run trade-off between inflation and unemployment, returning unemployment to its original level in the long run while inflation remains higher.

Cost-push Inflation from Currency Depreciation

Inflation resulting from a fall in the exchange rate, which raises the price of imported raw materials and capital goods for domestic producers.

Demand-pull Inflation from Currency Depreciation

Inflation occurring when a lower exchange rate makes exports cheaper and imports more expensive, leading to increased demand for domestic output.

Crowding Out

The situation where increased government spending financed by borrowing reduces available funds and drives up interest rates, thereby reducing private sector consumption and investment.

Crowding In

The Keynesian proposition that higher government spending increases national income, which subsequently boosts private savings and stimulates further private investment.

Laffer Curve

A curve developed by Arthur Laffer showing the relationship between tax rates and total tax revenue, indicating that raising tax rates past a certain point decreases tax revenue.

Liquidity Trap

A monetary policy state where interest rates are already so low that further cuts fail to stimulate aggregate demand or economic activity.

Market-based Supply-side Policy

Policy tools designed to increase the role of free markets, such as tax cuts, privatization, and labor market deregulation, to increase productive potential.

Interventionist Supply-side Policy

Government measures involving direct state spending on education, infrastructure, training, and technological development to boost economic potential.

Recognition Lag

The time delay between the initial emergence of an economic problem and the moment the government recognizes it.

Implementation Lag

The time required for a government to decide on and execute a policy tool after identifying an economic issue.

Behavioral Lag

The period it takes for households and firms to alter their decisions and economic actions in response to a newly implemented policy.

Sustainable Economic Growth

Growth achieved without causing environmental damage or depleting non-renewable resources, ensuring that the living standards of future generations are preserved.

Economic Development (Todaro)

A multidimensional process described by Michael Todaro involving moving from a widespread unsatisfactory life condition toward a condition generally recognized as better, encompassing higher self-esteem, health, and freedom.

Foreign Aid

Assistance given to developing economies on favorable terms that would not be available through normal market forces.

Dependence

A condition where the economic development of a developing country is restricted or hindered by its relationships with developed economies.

Tied Aid

Foreign aid granted under specific conditions, such as requiring the recipient country to spend the funds on products from the donor nation.

Untied Aid

Foreign assistance provided to a recipient country without any attached conditions or purchasing restrictions.

Bilateral Aid

Foreign aid provided directly by one country's government to another country's government.

Multilateral Aid

Foreign aid provided by multiple donor nations to international organizations (e.g., World Bank or UN agencies) for subsequent distribution to recipient countries.

Import Substitution Policies

Economic strategies aimed at replacing manufactured foreign imports with domestically produced goods to foster local industrial development.

Export-led Growth

An economic growth policy centered on expanding production specifically aimed at international export markets.

Emerging Countries

Nations making rapid progress toward becoming high-income economies, characterized by fast economic growth and expected high investment returns (e.g., BRICS).

Multinational Company (MNC)

A large public limited business organization that owns assets and operates production or service facilities in more than one country.

External Debt

Unrepaid principal loans and overdue interest payments owed by a country to foreign banks, foreign governments, and international organizations.

International Monetary Fund (IMF)

An international organization created in 1944 to promote international monetary cooperation, exchange rate stability, and free trade, while lending to members facing balance of payments difficulties.

World Bank

An international institution established in 1944 to fund development projects in infrastructure, healthcare, and education to decrease poverty and encourage shared prosperity.

World Bank Income Classifications

A categorization system based on GNI per capita: low-income ($1,135$ or less), lower middle-income ($1,136$ to $4,465$), upper middle-income ($4,466$ to $13,845$), and high-income ($13,846$ or more).

Poverty Cycle

A repeating sequence of low incomes leading to low savings, low investment, reduced physical and human capital, low productivity, and continued low growth.

Development Traps

Severe constraints on the growth of developing economies resulting from structural shortages of savings and investment.

Purchasing Power Parity (PPP)

An adjusted currency exchange rate determined by comparing the local currency cost of buying a standardized basket of goods and services relative to foreign currency costs.

Standard of Living (SOL)

The level of overall welfare enjoyed by an individual or population, encompassing both material access to goods and services and non-material conditions.

Shadow Economy

Unrecorded legal or illegal economic transactions omitted from official GDP calculations, often conducted to evade taxation.

Human Development Index (HDI)

A composite index created by the United Nations scored between 0 and 1 that evaluates standard of living using GNI per capita, education (expected and mean schooling years), and health (life expectancy at birth).

Measurable Economic Welfare (MEW)

A measure created by Nordhaus and Tobin that adjusts standard GDP by adding positive welfare factors like leisure time and subtracting negative factors like environmental pollution.

Multidimensional Poverty Index (MPI)

A measure identifying household-level deprivations across living standards ($33\%$ weighting), education ($33\%$ weighting), and health ($33\%$ weighting).

Kuznets Curve

A curve showing that income inequality (measured by the Gini coefficient) initially increases as an economy develops and moves labor into manufacturing, before eventually falling at higher levels of GDP per head.