Economics Glossary Preparation

A comprehensive set of vocabulary flashcards covering key economic terms and definitions from the lecture notes.

Absolute advantage

The ability of a country to produce more output than other countries using the same input.

Absolute poverty

Measured in terms of basic needs for survival, indicating the income needed to live.

Property rights

The property rights definition pertains to both the theoretical and legal ownership of an object, piece of property, or another tangible or intangible object

Actual growth

Occurs when previously unemployed factors of production are utilized, represented by a movement towards the PPC.

Adverse selection

Occurs when buyer and seller have unequal information, resulting in transactions based on uneven terms.

Aggregate demand

Total spending in an economy, including consumption, investment, government expenditure, and net exports.

Aggregate demand curve

A curve showing the relationship between the average price level and real GDP.

Aggregate supply (AS)

Total amount of domestic goods and services supplied by businesses and the government.

Allocative efficiency

The level of output where marginal cost equals average revenue, resulting in optimal social benefit.

Allocative inefficiency

Occurs when the marginal social cost of a good is not equal to its marginal social benefit.

Anchoring

Mental reference points that influence decision-making, leading to automatic behaviors based on previous values.

Anti-monopoly regulation

Policies intended to regulate the market share of individual companies to enforce competition.

Appreciation

Increase in the value of one currency in relation to another currency.

Asymmetric information

When one party in an economic transaction has more or better information than the other.

Automatic stabilizers

Features of government fiscal policy that automatically counteract fluctuations in economic activity.

Average tax rate

The proportion of an individual's income paid in tax, typically expressed as a percentage.

Balance of payments

A record of all transactions between a country's residents and other countries over a time period.

Balance of trade in goods

Revenue from exports of tangible goods minus expenditure on imports of tangible goods.

Balance of trade in services

Revenue from exports of services minus expenditure on imports of services.

Behavioral economics

A branch of economics that incorporates psychology to understand decision-making beyond traditional models.

Bounded rationality

The idea that consumers and businesses do not have sufficient information to make fully-informed decisions.

Bounded self-control

When consumers do not control their consumption sensibly and continue despite lower marginal utility.

Bounded selfishness

Concern for the well-being of others in economic decision-making.

Budget deficit

Exists when planned government spending exceeds planned government revenue.

Business confidence

An economic indicator of optimism that business managers feel regarding the economy's state.

Business cycle

A diagram showing cyclical fluctuations in economic activity, including phases like recovery and recession.

Capital

A factor of production originating from investments in physical and human capital.

Capital account

Measure of buying and selling of assets between countries.

Capital flight

Flow of money and assets out of a country to seek safety in another country.

Carbon (emissions) taxes

Taxes levied based on the carbon content of fuels.

Central bank

The government's bank responsible for overseeing an economy's monetary policy.

Ceteris paribus

A Latin phrase meaning 'other things being equal'.

Choice architecture

The way choices are presented affects decision-making.

Circular economy

An economic system focused on reusing materials and minimizing waste.

Circular flow of income

A simplified model showing the flow of money within the economy.

Coase theorem

States that parties can negotiate efficiently without costs when dealing with externalities.

Collusive oligopoly

A market structure where few large firms ‘collude’ by agreeing to either fix prices high at the same level or low to maximize profit and minimize competition in the long run.

Common access resources

Natural resources with no established private ownership, which are non-excludable and rivalrous.

Common market

A customs union with common policies and free movement of goods and labor.

Comparative advantage

Ability to produce a good at a lower opportunity cost than another country.

Competitive supply

When different products use the same factors of production and thus compete for resources.

Complements

Goods used together, such as cameras and memory cards.

Concentration ratios

Measures the market share held by the largest firms in an industry.

Consumer confidence

A measure of consumers' optimism about the economy and their financial situation.

Consumer nudges

Positive reinforcements used to influence consumer decisions.

Consumer price index (CPI)

A measure of inflation based on price changes in the average basket of consumer goods.

Consumer surplus

The additional benefit received by consumers paying less than their willingness to pay.

Consumption (C)

Household spending on consumer goods and services.

Contractionary monetary policy

Policy designed to decrease aggregate demand and economic activity.

Corporate social responsibility

A firm's efforts to produce ethically and positively impact society.

Cost-push inflation

Inflation resulting from an increase in production costs.

Credit creation

The capacity of banks to increase the money supply by lending.

Crowding out

When government borrowing increases interest rates and reduces private investment.

Current account

A measure of funds generated from trade in goods and services and net income flows.

Current account deficit

When export revenues and income are less than import expenditures in a year.

Current account surplus

When export revenues and income exceed import expenditures in a year.

Current transfers

Transactions recorded in the balance of payments without reciprocal exchanges.

Customs union

An agreement between countries regarding free trade among themselves and common external barriers.

Cyclical (demand-deficient) unemployment

Unemployment caused by insufficient aggregate demand in the economy.

Debt relief (cancellation)

Eliminating debt owed by a developing country to help achieve development goals.

Default choices

Automatic enrollment in a program if no action is taken by the consumer.

Deflation

A persistent decline in average price levels in an economy.

Deflationary/recessionary gap

When aggregate demand is below full employment output, leading to unemployment.

Demand

The willingness and ability of consumers to buy goods or services.

Demand curve

Graph showing the relationship between the price of a good and the quantity demanded.

Demand management

Keynesian policy focused on influencing aggregate demand via government intervention.

Demand-pull inflation

Inflation caused by increasing aggregate demand.

Demerit goods

Goods considered harmful and over-provided by the market.

Depreciation

A decline in currency value relative to another currency.

Deregulation

A supply-side policy reducing regulations for businesses.

Devaluation

A reduction in the value of a currency in a fixed exchange rate system.

Development aid

Aid consisting of grants and concessional loans to foster development.

Disinflation

A decrease in the rate of inflation.

Disposable income

Income available for spending or saving after taxes.

Dumping

Selling goods in another country at prices below their production costs.

Economic development

Improvement in living standards and reductions in poverty.

Economic growth

Increase in the real value of output over time, typically measured as growth in real GDP.

Economic well-being

A multi-dimensional concept of prosperity and quality of living standards.

Economically least developed countries (ELDCs)

Countries classified as low-income with severe development impediments.

Economics

The study of human behavior in relation to scarce resources with alternative uses.

Economies of scale

Cost advantages gained by increasing production scale.

Efficiency

A measure of output compared to total input used.

Elasticity

Responsiveness of a variable to changes in another variable.

Elasticity of demand for exports

Responsiveness of exports demanded to changes in export prices.

Elasticity of demand for imports

Responsiveness of imports demanded to changes in import prices.

Engel curve

Relationship between income level and quantity demanded.

Entrepreneurship

The factor of production related to organizing and taking risks.

Equilibrium

A stable state of the economy without outside disturbances.

Equity

The principle of fairness in economics.

Excess demand

When quantity demanded exceeds quantity supplied at a given price.

Excess supply

When quantity supplied exceeds quantity demanded at a given price.

Exchange rate

The value of one currency expressed in terms of another currency.

Expansionary monetary policy

Policy designed to increase aggregate demand.

Expenditure reducing policies

Policies aimed at decreasing overall spending in an economy.

Expenditure switching policies

Policies encouraging spending on domestic goods instead of imports.

Export promotion

Strategies aimed at increasing exports and related revenue.

Export revenue

Value earned from exported goods and services.

Exports

Goods and services produced domestically and sold internationally.

External balance

Difference between export value and import value.

Externalities

Costs or benefits imposed on third parties during production or consumption.