ECON 211 Test2

Backward Linkage

relationship of industry with its supply chain

BOP -

creates supply for country's currency

SDR Allocation

distribute SDR by importance of their economy + share of world trade

The Quiet Coup

powerful elites overreached in good time + took too many risks creating crisis

M1

monopsonist pays each worker M1

Center (Reformist)

emphasize both commutative + distributive justice

Kuznets Progressive View

↑Gini fixed by gov policies of redistribution

Import-Substituting Industrialization (ISI)

↓ country's dependence on foreign imports by ↑ domestic production

ISI Goal

inward oriented economic growth internally driven by domestic industrial production

ISI Implementation

fiscal/monetary/regulatory policies

ISI Outcome

SR- countries grew quickly from developed countries capital/tech

Petrodollar Recycling

OPEC earning more than can invest, put into first world financial markets

Declining Terms of Trade

export $↓ compared to imports

Forward Linkage

relationship of an industry with other industries that sells its output

Overvalued Exchange Rates

country $↑ exports and $↓ imports

Mercosur

economies + political bloc in LA

Balance of Payments

summary record of all transaction between one country and the rest of the world over a time period

BOP Current Account

spending + earning $ internationally

BOP Private Sector

inflows + outflows of capital

BOP Public Sector

△gov reserves

Overall BOP

1 + 2 + 3 = 0

Official Settlements Balance

1 + 2

BOP +

creates demand for country's currency

Special Drawing Rights

form of international money created by IMF

Paper Gold

accept SDR like they would gold

SDR Rationale

World trade in 60s + 70s grew faster than supply of US dollar. IMF neutral unit of account.

SDR Value

weighted market basket of 5 major currencies, revisited every 5 years

IMF

created after ww2 to help countries with BOP issues

CA↓

recession

CA+

depression

Fallacy of Composition

if policy is good for individual, then it must be good for the whole

Fiscal Policy

Tax + Gov spending

Fiscal Deficit

annual amount gov spending exceeds revenue

Fiscal Debt

all gov debt overtime

Monetary Policy

creation of money + interest rates

CA Deficit

annual amount imports exceeds exports + transfer payments

OSB Deficit

- sum of CA + capital accounts

BOP Crisis

highly - OSB (1 + 2 < 0)

OSB Deficit SR

use reserves + borrow IMF reserves

OSB Deficit LR

Reduce fiscal deficits, ↓spending ↑taxes

Structural Adjustment

systematic reform of an economy (away from ↑gov spending)

SLP Model

stabilization/liberalization/privatization

Stabilization

↓spending + subsidies

Liberalization

eliminate gov control in markets

Privatization

privatize state-owned enterprises

Rent Seeking

people seeking unearned gains at the expense of others

SLP Model Critics

regressive initially, ↓employment + economy

BOP External Shocks

exogenous and falling terms of trade

BOP Internal Shocks

endogenous and capital flight from macro policies

Petrodollars

dollar earned by OPEC

Direct Foreign Investment

country buys an asset that will be directly controlled by the buyer in a different country

Portfolio Investments

Saver in one country buys a financial asset issues by another country

Global Savings Glut

desired savings exceeds desired investments

Africa Take-off

2000-2014 ↑commodity $ fueled by growth in China

Equatorial Paradox

countries near equator have lower incomes per capita than countries with cooler + seasonal climates

Equatorial Paradox Supply Side Explanation

low income based on low productivity

Equatorial Paradox Demand Side Explanation

different biochemistries to maintain homeostatic equilibrium

Cultural Heterogeneity

Economics of scale is reduced in diverse countries

Cultural Absolutism

some cultures are "better" than others

Timur Kuran

Islam held back Middle East by discouraging commerce + innovation

Monopoly

A market with one seller (↓Q, ↑P)

Monopsony

A market with one buyer (↓Q, ↑P)

Africa raise gov revenue

with export taxes and forced exporters to sell to a gov run marketing board

Total Wage Expense (TE)

wage (W) * # of workers hired (L)

Marginal Expense (ME)

dTE / dL

Marginal Revenue Product (MRP)

Marginal Physical Product (MPP) * Marginal Revenue (MR)

M

monopsonist earns M extra revenue

E

perfectly competitive equilibrium

Exploitation

M - M1

Deadweight Loss

1/2 (M-M1) (E-M1)

Commutative Justice

creating + enforcing fair rules (process oriented) trickle down

Right (Neo-classical)

emphasize commutative justice

Non-Interventionist View

Tax cut for rich, benefits trickle down to poor (neo-classical)

Distributive Justice

creating fair outcomes (results oriented)

Left (Socialist)

emphasize distributive justice

General Justice

obligations of an individual to the community

Interventionist View

invest in health + education now, shift up PF later

Capuchin Monkeys

fairness may be hard wired through evolution

Meritocratic Society

people who work hard succeed, regardless of initial income + wealth

Intergenerational Earnings Elasticity

% child's income differential / % parent's income distribution

Income

flow variable earned over a time period

Wealth

stock variable assets worth at one point in time

Absolute Income

total money earned

Relative Income

total money earned compared to others in society

Income Ratios

Bottom 40% / Top 20%

Lorenz Curve

graph of relative distribution to line of equality

Gini Cofficient

Area of inequality / Area OBC triangle

Kuznets Curve

graph of inequality and per capita income in early/late industrialization

Kuznets Neoclassical View

↑Gini fixed by natural market forces

Schumacher

development happens from the bottom-up with decentralized decision making