Core Macroeconomics & Economic Concepts

Flashcards for review of macroeconomics, international relations, and financial concepts.

Macroeconomics

The study of the economy as a whole, focusing on aggregate indicators such as GDP, inflation, unemployment, and fiscal balance.

Microeconomics

The study of decision-making by individuals and firms, emphasizing pricing, demand, and resource allocation.

Business Cycle

Periodic fluctuations in economic activity, including growth (expansion) and decline (recession).

GDP (Gross Domestic Product)

The total value of all final goods and services produced within a country during a specific period.

GNP/GNI (Gross National Product/Income)

Measures the income earned by a country's residents, including income from abroad.

Aggregate Demand (AD)

The total demand for goods and services in an economy at a given price level and period.

Inflation

A general and sustained increase in the price level, reducing the purchasing power of money.

Deflation

A decrease in the general price level, which can lead to reduced investment and economic stagnation.

Stagflation

A combination of stagnation (slow growth) and inflation, posing a policy dilemma.

Fiscal Policy

Government use of taxation and public spending to influence the economy.

Monetary Policy

Central bank management of money supply and interest rates to maintain price stability and promote growth.

Money – Unit of Value

Money serves as a unit of account, meaning it provides a consistent measure to value goods, services, and assets.

Finance

Systems and activities for managing capital flows, investment, and risk across time and space.

Banking Crisis

A situation where many banks become insolvent or illiquid, threatening economic stability.

Currency Crisis

A rapid and severe devaluation of a nation’s currency, often triggering inflation and capital flight.

Twin Crises

A simultaneous or sequential occurrence of a banking and currency crisis, common in liberalized economies.

Systemic Risk

The risk that the failure of one financial institution or market leads to widespread instability.

Contagion

The spread of financial shocks across countries or markets due to interconnectedness.

Moral Hazard

When entities take excessive risks because they believe they will be bailed out by governments or institutions.

Too Big to Fail

The concept that certain institutions are so vital that their collapse would cause systemic harm, justifying public rescue.

Stress Test

A simulation to test the resilience of financial institutions under hypothetical adverse conditions.

Capital Adequacy Ratio (CAR)

A measure of a bank's capital as a percentage of its risk-weighted assets; higher ratios signal greater stability.

Basel Accords (I, II, III)

International banking frameworks for capital regulation, risk management, and liquidity standards set by the Basel Committee.

IMF (International Monetary Fund)

Provides loans, policy advice, and surveillance to countries facing balance-of-payments crises.

World Bank

Funds infrastructure and development projects in emerging and low-income countries.

G7 / G20

Forums for major economies to coordinate economic and financial policy responses.

FSB (Financial Stability Board)

Promotes global financial stability through policy recommendations and regulatory standards.

OECD

An intergovernmental organization that promotes sustainable economic growth and trade among developed countries.

BIS (Bank for International Settlements)

The central bank for central banks; fosters international monetary cooperation and financial stability.

FDI (Foreign Direct Investment)

Investment made to establish or acquire lasting interest and control in a foreign enterprise.

MNC (Multinational Corporation)

A company operating in more than one country, with control over production, distribution, and sales abroad.

GVC (Global Value Chain)

The full range of cross-border activities involved in producing a product or service.

Portfolio Investment

Cross-border purchases of financial assets (stocks, bonds) without direct control.

Trade Liberalization

Reducing tariffs and trade barriers to encourage international commerce.

TRIMs (Trade-Related Investment Measures)

WTO rules that prohibit discriminatory trade practices linked to investment.

TRIPS (Trade-Related Aspects of Intellectual Property Rights)

WTO agreement that standardizes and enforces intellectual property rights globally.

GATS (General Agreement on Trade in Services)

A WTO agreement governing the trade of services across borders.

Financial Flows

Movements of capital and investment across countries, including FDI, loans, and portfolio flows.

Capital Controls

Government policies restricting capital inflows or outflows to stabilize exchange rates or prevent crises.

Race to the Bottom

When countries compete for investment by lowering regulatory standards, often at the expense of labor or the environment.

Soft Law

Non-binding rules such as codes of conduct or guidelines that shape behavior without legal force.

Regulatory Arbitrage

The practice of exploiting differences in national regulations to avoid restrictions or reduce costs.

Investor-State Dispute Settlement (ISDS)

A mechanism in investment agreements allowing investors to sue governments over harmful regulatory changes.

Conditionality

Policy conditions (like austerity) that countries must meet to receive loans or aid, often from the IMF.

Lock-In Effect

Once a significant investment is made, governments may hesitate to change regulations that might affect investors.

Transition and Development

The process by which formerly centrally planned or developing economies adopt market institutions, liberalization, and integration into global systems.

Bretton Woods System

The post-WWII international monetary system with fixed exchange rates, led by the US dollar.

Maastricht Criteria

Economic conditions (inflation, deficit, debt) that EU members must meet to adopt the euro.

EMU (Economic and Monetary Union)

Integration process within the EU that includes a shared currency (the euro) and coordinated fiscal policy.

Eurobond

A proposed collective debt instrument for eurozone members to improve fiscal stability and solidarity.

17+1 / China–CEE Cooperation

A China-led initiative to expand trade and infrastructure investment in Central and Eastern Europe.

Guanxi

A Chinese cultural concept emphasizing networks of trust, obligation, and personal connections in business.

Situational Ethics

Ethics that are applied flexibly depending on the context rather than through universal rules.

Sun-Tzu Strategy

An approach to diplomacy and strategy based on adaptability, deception, and long-term planning.

Charm Offensive

Strategic use of soft power (culture, diplomacy, PR) to win influence and foster goodwill.

Divide and Conquer (in diplomacy)

A tactic where a powerful actor builds bilateral ties to undermine unity among smaller or weaker states.

Going Out Strategy

China’s official policy encouraging companies to invest abroad to gain global market share and influence.

Dalai Lama Effect

Economic and political backlash from China (e.g. reduced FDI or trade) against countries that host or support the Dalai Lama, seen as undermining China’s stance on Tibet.