Studied by 4 people
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
Note 
Flashcard (90)