IB Econ Global Vocab 2

Factors or production

Factors or production

Resources used in production of goods and services

land, labor, capital, entrepreneurship

Financial account

balance of payments-records inflows and outflows of portfolio and FDI funds

official borrowing and changes in reserve assets

fixed exchange rate

exchange rate system

exchange rate is fixed to value of another currency and maintained with central bank intervention

floating exchange rate

exchange rate system

exchange rate determined solely by market demand and supply or currency in foreign exchange market w/out central bank intervention

foreign aid

flows of grants/loans from developed to developing countries that are non-commercial from view of donor

terms are concessional (interest rate is lower than marker rate/repayment period longer)

foreign direct investment (FDI)

firm establishes a productive facility in a foreign country/controlling interest in an existing foreign firm

foreign sector

In open economy refers to exports and imports

free trade area/agreement

agreement between between two or more countries to eliminate trade barriers between them

members are free to maintain their own trade policy towards non-members

Gender inequality index (GII)

composite indicator measuring gender inequalities in 3 dimensions of human development

reproductive health, empowerment, economic status

Gini coefficient

measure of degree of income inequality of a country, ranging from 0-1 (0=perfect equality)

ratio of area between Lorenz curve and diagonal over area of half-square

government (national) debt

sum of all past budget deficits minus any budget surpluses

total amount the gov owes to domestic/foreign creditors

gross domestic product (GDP)

value of all g/s produced in economy on time period

Growth in production possibilities

when production possibilities of country increase b/c of better resources and/or technology becomes availableindex

shift outwards of the PPC

Happiness Index

index used to measure economic well-being of a population using quality of life dimensions

Happy Planet Index

index combines 4 elements to show how efficiently residents of different countries use environmental resources for long happy lives

well-being, life expectancy, inequality of outcomes, ecological footprint

Human capital

eduction, training, skills, experience, good health in the labor forceindex

Human development Index

index of development reflecting 3 basic goals of development (healthy life, improved edu, decent standard of living)

measured by life expectancy at birth, av yrs of schooling, GNI per capita (PPP US$)

Humanitarian aid

aid given alleviate short-term suffering

food, medical, emergency aid

result of natural catastrophe or war

Imports

value of g/s purchased domestically produced abroad

Import substitution

growth strategy where domestic production is substituted for imports to attempt to shift production away from primary sector and industrialize

requires domestic industry is protected from import competition

Incentive-related policies

Policies than aim at improving economic incentives of individuals and firms

Income

a flow of earnings from using FOP to produce g/s

Wages and salaries are the factor reward to labor and interest is the flow of income for the ownership of capital

Inequality adjusted Human Development Index (IHDI)

composite indicator consisting of an average of a country’s achievements in health, education and income all adjusted for the degree of inequality characterizing each

Infant industry

new industry that should be protected from foreign competition until it is large enough to achieve economies of scale to allow to be internationally competitive

used as argument in favor of trade protection in developing countries

Informal economy

part of the economy where activity is not officially recorded, regulated or taxed

not included in national income figures

Infrastructure

physical capital typically financed by governments

is essential for economic activity to take place

roads, power, telecoms, general significant positive externalities

Interest rate

cost of borrowing money

or reward for saving money

expressed as a percentage

International Monetary Fund (IMF)

international financial institution of 189 countries

objective to improve global monetary cooperation, secure financial stability by monitoring the economy and policies, providing advice and loans if face balance of payment difficulties

International trade

trade involving export/imports of g/s between countries

Labour

one of the FOP

physical and mental contribution of workers to production process

Laissez faire

view that the market forced left alone by gov will have an efficient outcome

Land

one of FOP

natural resources which economy is endowed

gifts of nature

Long-term growth

growth over long period of time

PPC model, outward shifts of PPC

AD/DS model, rightward shifts in LRAS

Lorenz curve

percentage of population owns what percentage of total income/wealth in economy

calculated in cumulative terms

further from the curve is from the line of ab equality, more unequal distribution of income

Managed exchange rate

exchange rate that floats in foreign exchange markets but subject to intervention by domestic monetary authorities

to prevent undesirable movements in exchange rate

Manufactured products

products/goods that have been produced by workers often working with capital goods

Market equilibrium

occurs at the price where quantity of a product is demanded is equal to quantity supplied

market clearing price, no excess demand/supply

Market failure

failure of market to achieve allocative efficiency

market fails to produce output at which marginal social benefits equal marginal social costs

community surplus (consumer surplus + producer surplus) is not maximized

Market mechanism

system where forced of supply and demand determine price of products

price mechanism

Market-oriented approaches

policies based on actions of private decision makers operating in markets w/ a minimum amount of gov intervention

Microfinance

provision of small loans to poor entrepreneurs who lack access to traditional banking

Minimum income standards

measure of poverty

based on beliefs of people regarding what is essential in order to achieve a minimum acceptable standard of living

Mixed economy

economy that has elements of planned/free economies

all are mixed-just degree of mixed varies

Monetary union

two or more countries share same currency and common central bank

Money

anything generally accepted as payments for g/s

usually consists of currency and checking accounts

Moral hazard

type of market failure

asymmetric information where party risks but does not face full costs by changing behavior after a transaction had taken place

common in insurance markets

Multidimensional Poverty Index (MPI)

international measure of poverty covering over 100 of economically least developed countries

complements traditional income based poverty measures by capturing lacks in education, health and living standards

Multilateral development assistance

assistance provided by multilateral organization (world bank) when they lend to developing countries for purpose of helping them in their development objectives

Multilateral trade agreement

agreement between many countries to lower tariffs or protectionist measures

currently carries out in WTO

Gross national income (GNI)

income earned by all national FOP independently of where they are located

equal to GDP plus factor of time earned abroad minus factor of income paid abroad