Economics Review Notes - Vocabulary Flashcards

Vocabulary flashcards covering key economic concepts found in the notes, including national accounts, balance of payments, market structures, inflation, trade, indicators, and environmental/economic development topics.

National Accounts Aggregate

A summary of a country’s production, income and expenditure from which GDP can be calculated by production, income, or expenditure methods.

Production method (Value Added Method)

GDP calculated by summing the value added by each sector; only final goods are counted to avoid double counting.

Double counting

Counting the value of a product more than once (e.g., as an input and as a final product).

GDP at basic prices

GDP measured at basic prices, typically equal to GDP at factor cost plus taxes on production minus subsidies on production.

Taxes on production

Taxes payable on the production and distribution of goods and services.

Subsidies on production

Government payments to producers that lower their production costs.

Expenditure method

GDP measured by adding final expenditures: household consumption, government spending, gross capital formation, and net exports (exports minus imports).

Current account

Part of the balance of payments recording transactions related to production, income and expenditure, including trade, net transfers and income.

Trade balance

Memo item in the current account representing net exports minus net imports of goods.

Capital Transfer Account

Part of the balance of payments recording net lending to or borrowing from the rest of the world.

Financial account

Part of the balance of payments recording net direct investment, net portfolio investment, net financial derivatives, net other investments and reserve assets.

Balance on current account

Result of the current account; positive = surplus, negative = deficit.

Balance of payments (BOP)

A record of a country’s transactions with the rest of the world, including current, capital transfer and financial accounts.

Exchange rate

The price of one country’s currency in terms of another’s currency; affects imports and exports.

Terms of trade

The ratio of export prices to import prices (export index divided by import index, x100). Improvement means more imports can be bought with the same exports.

Nominal GDP

GDP measured at current-year prices.

Real GDP

GDP adjusted for inflation to compare growth over time.

GDP per capita

GDP divided by the population; a measure of average living standards.

Money supply (M1, M2, M3)

M1 = notes/coins + demand deposits; M2 = M1 plus short/medium-term deposits; M3 = M2 plus long-term deposits.

Productivity

Output per unit of input (e.g., labour productivity = output per worker).

Demand-pull inflation

Inflation caused by excessive demand for goods and services.

Headline inflation

Inflation measured by the Consumer Price Index (CPI); focuses on urban prices.

Core inflation

CPI inflation excluding volatile prices (e.g., petrol, electricity, fresh produce).

Administered price inflation

Inflation arising from government-set or regulated prices.

Producer price index (PPI)

Index measuring prices of goods at the factory/producer level; often leads CPI changes.

Inflation targeting

A monetary policy framework that aims for a specified inflation rate range to stabilize expectations.

Tourism

Economic activity involving households, government and businesses in travel, accommodation and related services.

Environmental sustainability

Managing resources to meet present needs without compromising future generations.

Climate change

Long-term changes in climate due to human activities and greenhouse gas emissions.

UNFCCC

United Nations Framework Convention on Climate Change (1992) aiming to stabilise greenhouse gases.

Kyoto Protocol

1997 agreement to reduce greenhouse gas emissions by developed countries.

CITES

Convention on International Trade in Endangered Species; regulates trade via permits and quotas.

Basel Convention

Controls the transboundary movement of hazardous wastes.

Rotterdam Convention

Controls the trade in hazardous chemicals to protect countries with less capacity.

Indigenous knowledge

Knowledge of indigenous peoples used for living and production; protected by rights standards.

Special Economic Zone (SEZ)

Enclosed industrial area with streamlined regulations and incentives to boost exports and growth.

Spatial Development Initiative (SDI)

Policy to promote sustainable industrial development in areas with poverty and unemployment via public–private partnerships.

Parastatal

State-Owned Enterprise; may have exclusive rights and potential for monopolies and inefficiency.

Privatization

Selling state-owned enterprises to the private sector (often >50% shares).

Pareto efficiency

Resources allocated so no one can be made better off without making someone else worse off.

Oligopoly

Market structure with a few dominant firms, mutual interdependence and potential for collusion.

Kinked demand curve

In oligopolies, demand curve with elastic and inelastic segments due to price interdependence.

Price leadership

A form of collusion where one firm sets price and others follow.

Monopoly

Market with a single seller, high barriers to entry, and price-setting ability.

Competition policy (SA, 1998)

Policy framework with the Competition Commission, Tribunal and Appeal Court to promote competition and curb restrictive practices.

Perfect competition

Market with many buyers and sellers; price takers; AR = MR = price; market determines price.

Normal profit

Minimum profit required to keep a firm in business; AR = AC at equilibrium.

Economic profit

Profit in excess of normal profit; TR > TC or AR > AC.

Short-run equilibrium (perfect market)

At least one input fixed; firms maximize profit where MC = MR; consider shut-down conditions.

Demand and supply in perfect market (AR = MR = Price)

Individual firm faces a horizontal demand curve; price is determined by the market.

Trade balance (monetary)

Difference between a country’s exports and imports of goods (merchandise).