Macroecon Part 1

Absolute poverty

A situation of being unable to meet the minimum levels of income, food, clothing, health care, shelter, and other essentials.

Subsistence economy

An economy in which production is mainly for personal consumption and the standard of living yields little more than basic necessities of life—food, shelter, and clothing

Development

The process of improving the quality of all human lives and capabilities by raising people’s levels of living, self-esteem, and freedom.

Developing countries

Countries of Asia, Africa, the Middle East, Latin America,
eastern Europe, and the former Soviet Union that are presently characterized by low levels of living and other development deficits. Used in the development literature as a synonym for less developed countries

Traditional economics

An approach to economics that
emphasizes utility, profit maximization, market efficiency, and determination of equilibrium.

Political economy

The attempt to merge economic analysis with practical politics to view economic activity in its political context.

Development economics

The study of how economies are transformed from stagnation to growth and from low income to high-income status, and overcome problems of absolute poverty.

More developed countries (MDCs)

The now economically advanced capitalist countries of western Europe, North America, Australia, New Zealand, and Japan.

Less developed countries

synonym for developing countries

Globalization

The increasing integration of national economies into expanding international markets.

Social system

The organizational and institutional structure of a society, including its values, attitudes, power structure, and traditions.

values

Principles, standards, or qualities that a society or groups within it considers worthwhile or desirable

Attitude

The states of mind or feelings of an individual, group, or society regarding issues such as material gain, hard work, saving for the future, and sharing wealth.

Institutions

Norms, rules of conduct, and generally accepted ways of doing things. Economic institutions are humanly devised
constraints that shape human interactions, including both
informal and formal “rules of the game” of economic life in
the widely used framework of Douglass North.

Income per capita

Total gross national income of a country divided by its total
population.

Gross national income (GNI)

The total domestic and foreign output claimed by residents of a country. It comprises gross domestic product (GDP)plus factor incomes accruing to residents from abroad, less the income earned in the domestic economy accruing to persons abroad.

Gross domestic product (GDP)

The total final output of goods and services produced by the country’s economy, within the country’s territory, by residents and nonresidents, regardless of its allocation between domestic and foreign claims.

Functionings

What people do or can do with the commodities of given characteristics that they come to possess or control.

Capabilities

The freedoms that people have, given their personal features and their command over commodities.

Sustenance

The basic goods and services, such as food, clothing, and shelter, that are necessary to sustain an average human being at the bare minimum level of living

Self-esteem

The feeling of worthiness that a society enjoys when its social, political, and economic systems and institutions promote human values
such as respect, dignity, integrity, and self-determination.

Freedom

A situation in which a society has at its disposal a variety of alternatives from which to satisfy its wants and individuals enjoy real choices according to their preferences.

Millennium Development Goals (MDGs)

A set of eight goals adopted by the United Nations in 2000: to eradicate extreme poverty and hunger; achieve universal primary education; promote gender equality and empower women; reduce child mortality; improve maternal health; combat HIV/AIDS, malaria, and other diseases; ensure environmental sustainability, and develop a global partnership for development. The goals are assigned specific targets to be achieved by 2015.

Sector

A subset (part) of an economy, with four usages in economic development: technology (modern and traditional sectors); activity
(industry or product sectors); trade (export sector); and sphere (private and public sectors)

World Bank

An organization known as an “international financial institution” that provides development funds to developing countries in the form of interest-bearing loans, grants, and technical assistance.

Low-income countries (LICs)

In the World Bank classification, countries with a GNI per capita of less than $1,025 in 2011.

Middle-income countries

In the World Bank classification, countries with a GNI per capita between $1,025 and $12,475 in 2011

Newly industrializing countries (NICs)

Countries at a relatively advanced level of economic development with a substantial and dynamic industrial sector and with close links to the international trade, finance, and investment system.

Least developed countries

A UN designation of countries with low income, low human capital, and high economic vulnerability.

Human capital

Productive investments in people, such as skills, values, and health resulting from expenditures on education, on-the-job training programs, and medical care.

Gross national income (GNI)

The total domestic and foreign output claimed by residents of a country, consisting of gross domestic product (GDP) plus factor incomes earned by foreign residents, minus income earned in the domestic economy by nonresidents.

Value added

The portion of a product’s final value that is added at each stage of production.

Depreciation (of the capital stock)

The wearing out of equipment, buildings, infrastructure, and other forms of capital, reflected in write-offs to the value of the capital stock.

Capital stock

The total amount of physical goods existing at a particular time that have been produced for use in the production of other goods and services.

Gross domestic product (GDP)

The total final output of goods and services produced by the country’s economy within the country’s territory by residents and nonresidents, regardless of its allocation between domestic and foreign claims.

Purchasing power parity (PPP)

Calculation of GNI using a common set of international prices for all goods and services, to provide more accurate comparisons of living standards.

Human Development Index (HDI)

An index measuring national socioeconomic development, based on combining measures of education, health, and adjusted real income per capita

Diminishing marginal utility

The concept that the subjective value of additional consumption lessens as total consumption becomes higher

Crude birth rate

The number of children born alive each year per 1,000 population.

Dependency burden

The proportion of the total population aged 0 to 15 and 65+, which is considered economically unproductive and therefore not counted in the labor force.

Fractionalization Significant

ethnic, linguistic, and other social divisions within a country.

Resource endowment

A nation’s supply of usable factors of production, including mineral deposits, raw materials, and labor.

Infrastructure Facilities

that enable economic activity and markets, such as transportation, communication and distribution networks, utilities, water, sewer, and energy supply

Imperfect market

A market in which the theoretical assumptions of perfect competition are violated by the existence of, for example, a small number of buyers and sellers, barriers to entry, and incomplete information.

Incomplete information

The absence of information that producers and consumers need to make efficient decisions resulting in underperforming markets.

Property rights

The acknowledged right to use and benefit from a tangible (e.g., land) or intangible (e.g., intellectual) entity that may include owning, using, deriving income from, selling, and disposing.

Brain drain

The emigration of highly educated and skilled professionals and technicians from the developing countries to the developed world.

Free trade

Trade in which goods can be imported and exported without any barriers in the forms of tariffs, quotas, or other restrictions.

Terms of trade

The ratio of a country’s average export price to its average import price.

Research and development (R&D)

Scientific investigation with a view toward improving the existing quality of human life, products, profits, factors of production, or knowledge.

Divergence

A tendency for per capita income (or output) to grow faster in higher-income countries than in lower-income countries so that the income gap widens across countries over time (as was seen in the two centuries after industrialization began).

Convergence

The tendency for per capita income (or output) to grow faster in lower-income countries than in higher-income countries so that lower-income countries are “catching up” over time. When countries are hypothesized to converge not in all cases but other things being equal (particularly savings rates, labor force growth, and production technologies), then the term conditional convergence is used.

Economic Institutions

“Humanly devised” constraints that shape interactions (or “rules of the game”) in an economy, including formal rules embodied in constitutions, laws, contracts, and market regulations, plus informal rules reflected in norms of behavior and conduct, values, customs, and generally accepted ways of doing things.