Economic Terms and Concepts
Glossary of Economic Terms
Abnormal profit
Definition: This arises when average revenue is greater than average cost (greater than the minimum return required by a firm to remain in a line of business).
Absolute advantage
Definition: A country has an absolute advantage in the production of a good if it can produce more of it with the same resources or, equivalently, if it can produce the same amount using fewer resources compared to another country.
Absolute poverty
Definition: People living below the minimum income necessary to satisfy basic physical needs (food, clothing, and shelter); as of October 2015, the World Bank international poverty line is set at US$1.90 PPP per day.
Abuse of market power
Definition: When a firm acts with the intention to eliminate competitors or to prevent entry of new firms in a market.
Actual growth
Definition: Occurs when real output (real GDP) increases through time and is a result of greater or better use of existing resources.
Illustration: In the PPC model, it can be illustrated by a movement from a point inside a PPC to another point in the northeast direction.
Administrative barriers
Definition: Trade barriers in the form of regulations that aim to limit imports into a country.
Examples: These may take the form of product safety standards, sanitary standards, or pollution standards but also include more stringent than necessary application of customs procedures.
Adverse selection
Definition: A type of market failure involving asymmetric information, where the party with the incomplete information is induced to withdraw from the market.
Example: The buyer of a used car may hesitate to buy without knowing about the quality of the vehicle; the seller of health insurance may hesitate to sell a policy without knowing the health of the buyer.
Aggregate demand (AD)
Definition: Planned spending on domestic goods and services at different average price levels, per period of time.
Components: Consists of consumption, investment, and government expenditures plus net exports.
Aggregate demand curve
Definition: A curve showing the planned level of spending on domestic output at different average price levels.
Aggregate supply (AS)
Definition: The planned level of output domestic firms are willing and able to offer at different average price levels.
Aggregate supply curve
Definition: A curve showing the planned level of output that domestic firms are willing and able to offer at different average price levels.
Allocative efficiency
Definition: Achieved when just the right amount of goods and services are produced from society’s point of view so that scarce resources are allocated in the best possible way.
Condition: It is achieved when, for the last unit produced, price (P) is equal to marginal cost (MC); or more generally, when marginal social benefit (MSB) is equal to marginal social cost (MSC).
Allocative inefficiency
Definition: When either more or less than the socially optimal amount is produced and consumed, leading to misallocation of resources.
Condition: MSB ≠ MSC.
Anchoring
Definition: Refers to situations when people rely on a piece of information that is not necessarily relevant as a reference point when making a decision.
Anti-dumping
Definition: Typically refers to tariffs that aim at raising the artificially low price of a dumped imported good to the level of the higher domestic price.
Definition of dumped good: A dumped good is one that is exported at a price below the cost of producing it.
Anti-monopoly regulation
Definition: Laws and regulations designed to restrict anti-competitive behaviour of firms that are abusing their market power.
Appreciation
Definition: When the price of a currency increases in a floating exchange rate system.
Appropriate technology
Definition: Technology that relies mostly on the relatively abundant factor an economy is endowed with.
Asymmetric information
Definition: A type of market failure where one party in an economic transaction has access to more or better information than the other party.
Automatic stabilizers
Definition: Institutionally built-in features (like unemployment benefits and progressive income taxation) that tend to decrease the short-term fluctuations of the business cycle without the need for governments to intervene.
Average costs
Definition: Total costs per unit of output produced.
Average revenue
Definition: Revenue earned per unit sold; average revenue is equal to the price of the good.
Average tax rate
Definition: The ratio of the tax paid by an individual over their income expressed as a percentage.
Balance of payments
Definition: A record of the value of all transactions of a country with the rest of the world over a period of time.
Balance of trade in goods
Definition: Part of the balance of payments; it is the value of exports of goods of a country minus the value of imports of goods over a given period of time.
Balance of trade in services
Definition: Part of the balance of payments; it is the value of exports of services of a country minus the value of imports of services over a given period of time.
Barriers to entry
Definition: Anything that deters entry of new firms into a market, for example, licenses or patents.
Behavioural economics
Definition: A subdiscipline of economics that relies on elements of cognitive psychology to better understand decision-making by economic agents.
Contrast: Challenges the assumption that economic agents (consumers or firms) will always make rational choices with the aim of maximizing with respect to some objective.
Biases
Definition: Systematic deviations from rational choice decision-making.
Bilateral trade agreement
Definition: An agreement between two countries to phase-out or eliminate trade-related barriers.
Bounded rationality
Definition: A term introduced by Herbert Simon suggesting consumers and businesses have neither the necessary information nor the cognitive abilities required to maximize with respect to some objectives, thus choose to satisfice.
Conclusion: They are rational only within limits.
Bounded self-control
Definition: The idea that individuals, even when they know what they want, may not be able to act in their interests.
Findings: Evidence includes procrastination (e.g., among students and professionals) leading to self-harm, and yielding to temptation (e.g., dieters).
Bounded selfishness
Definition: The idea that people do not always maximize self-interest but also show concern for the well-being of others, illustrated by volunteer work and charity contributions.
Budget deficit
Definition: When government expenditures exceed government (tax) revenues, typically over a year.
Business confidence
Definition: A measure of the degree of optimism that businesses have about the economic future.
Business cycle
Definition: The short-term fluctuations of real GDP around its long-term trend (or potential output).
Business tax
Definition: Tax levied on the income of a business or corporation.
Capital
Types:
Physical capital: Means of production (machines, tools, equipment, factories) and infrastructure of a country.
Human capital: The education, training, skills, and experience embodied in the labour force of a country.
Capital account
Definition: A subaccount of the balance of payments that includes credit and debit entries for non-produced, non-financial assets as well as capital transfers between residents and non-residents.
Capital flight
Definition: Occurs when money and other assets flow out of a country to seek a “safe haven” in another country.
Capital gains tax
Definition: A tax on the profits realized from the sale of financial assets such as stocks or bonds.
Capital transfers
Definition: Include financial or non-financial assets for items such as debt forgiveness, investment, and non-life insurance claims.
Relation: These are part of the capital account of the balance of payments.
Carbon (emissions) taxes
Definition: Taxes levied on the carbon content of fuel; they are a type of Pigouvian tax.
Central bank
Definition: An institution charged with conducting monetary and exchange rate policy, regulating behaviour of commercial banks, and providing banking services to the government and commercial banks.
Ceteris paribus
Definition: A Latin expression meaning “other things being equal.”
Choice architecture
Definition: The design of environments based on the idea that the layout, sequencing, and range of choices available affect the decisions made by consumers.
Circular economy
Definition: An economic system that looks beyond the linear take-make-dispose model and aims to redefine growth, focusing on society-wide benefits.
Principles:
Design out waste.
Keep products and materials in use.
Regenerate natural systems.
Circular flow of income
Definition: A simplified illustration that shows the flows of income and expenditures in an economy.
Collective self-governance
Definition: In the case of a common pool resource, such as a fishery, users solve the problem of overuse by creating rules concerning obligations, monitoring, penalties for abuse, and conflict resolution.
Collusive oligopoly
Definition: A market where firms agree to fix price and/or to engage in other anti-competitive behaviour.
Common market
Definition: When a group of countries agrees not only to free trade of goods and services but also to free movement of capital and labour.
Common pool resources
Definition: A diverse group of natural resources that are non-excludable but their use is rivalrous (e.g., fisheries).
Comparative advantage
Definition: When a country can produce a good at a lower opportunity cost compared to another country.
Competitive market
Definition: A market with many firms acting independently where no firm has the ability to control the price.
Competitive market equilibrium
Definition: Occurs if in a free competitive market, quantity demanded is equal to quantity supplied.
Competitive supply
Definition: When goods that a firm is producing use the same resources in their production process, competing for the same resources.
Complements
Definition: Goods that are jointly consumed (e.g., coffee and sugar).
Composite indicator
Definition: An indicator comprised as an average of more than one economic variable (e.g., the Human Development Index).
Concentration ratios
Definition: The proportion of industry sales accounted for by the largest firms; the greater this proportion, the greater the degree of market power of the firms in the industry.
Consumer confidence
Definition: A measure of the degree of optimism that households have about their income and economic prospects.
Consumer nudges
Definition: Small design changes that include positive reinforcement and indirect suggestions that can influence consumers' behaviour.
Consumer price index (CPI)
Definition: The average of the prices of the goods and services that the typical consumer buys expressed as an index number; used to measure the cost of living in a country and calculate inflation.
Consumer surplus
Definition: The difference between how much a consumer is most willing to pay for a good and how much they actually pay.
Consumption (C)
Definition: Spending by households on durable and non-durable goods and services over a period of time.
Contractionary fiscal policy
Definition: Refers to a decrease in government expenditures and/or an increase in taxes that aim at decreasing aggregate demand and thus reducing inflationary pressures.
Contractionary monetary policy
Definition: A policy employed by the central bank involving an increase in interest rates, aimed at decreasing aggregate demand and thus reducing inflationary pressures (also referred to as tight monetary policy).
Corporate indebtedness
Definition: The sum of what a corporation owes to banks or other holders of its debt.
Corporate social responsibility
Definition: A corporate goal adopted by many firms that aims to create and maintain an ethical and environmentally responsible image.
Cost-push inflation
Definition: Inflation that results from increased production costs (typically due to rising money wages or rising commodity prices), illustrated by a leftward shift of the short-run aggregate supply (SRAS) curve.
Credit items
Definition: Transactions within a country's balance of payments leading to inflows of currency (e.g., export of goods); these transactions enter the account with a plus sign.
Credit rating
Definition: A grade assigned by certain agencies (e.g., Moody’s or Standard and Poor’s) on the borrowing risks presented by a prospective issuer of debt (e.g., bonds).
Crowding out
Definition: The idea that expansionary fiscal policy is not very effective in increasing aggregate demand because increased government borrowing to finance elevated expenditures could lead to increased interest rates, thus reducing private sector investment, consumer spending, and other components of aggregate demand.
Current account
Definition: A subaccount of the balance of payments that records the value of net exports in goods and services, net income, and net current transfers of a country over a period of time.
Current account deficit
Definition: Exists when net exports of goods and services plus net income plus net current transfers are negative (when debits or outflows exceed credits or inflows).
Current account surplus
Definition: Exists when net exports of goods and services plus net income plus net current transfers are positive (when credits or inflows exceed debits or outflows).
Current transfers
Definition: An entry in the current account that records payments between residents and non-residents of a country without receiving something of economic value in return, directly affecting disposable income (e.g., workers' remittances, pensions, aid, and grants).
Customs union
Definition: An agreement between countries to phase out or eliminate tariffs and other trade barriers while establishing a common external barrier towards non-members.
Cyclical (demand-deficient) unemployment
Definition: Unemployment resulting from a decrease in aggregate demand and economic activity; it occurs in a recession.
Debit items
Definition: Transactions within a country's balance of payments leading to outflows of currency (e.g., imports of services); these transactions enter the account with a minus sign.
Debt relief (cancellation)
Definition: A reduction of the debt burden of developing countries organized by the World Bank and the IMF.
Debt servicing
Definition: Refers to the repayment of principal and interest on the debt of a person, firm, or country.
Default choice
Definition: When a choice is made by default, meaning the option selected is the one not acted upon.
Deflation
Definition: A sustained decrease in the average price level of a country.
Deflationary/recessionary gap
Definition: Arises when the equilibrium level of real output is less than potential output as a result of a decrease in aggregate demand.
Demand
Definition: The relationship between possible prices of a good or service and the quantities that individuals are willing and able to buy over some time period, ceteris paribus.
Demand curve
Definition: A curve illustrating the relationship between possible prices of a good or service and the quantities that individuals are willing and able to buy over some time period, ceteris paribus; it is normally downward sloping.
Demand management
Definition: Policies aimed at manipulating aggregate demand through changes in interest rates (monetary policy) or changes in government expenditures and taxation to influence growth, employment, and inflation.
Demand-pull inflation
Definition: Inflation caused by increases in aggregate demand.
Demand side policies
Definition: Economic policies affecting aggregate demand and thus macroeconomic variables (e.g., growth, inflation, employment; includes fiscal policy and monetary policy).
Demerit goods
Definition: Goods or services that harm individuals and society at large, leading to overconsumption usually due to negative consumption externalities.
Depreciation
Definition: A decrease in the value of a currency relative to another currency in a floating or managed exchange rate system.
Deregulation
Definition: Policies that reduce or eliminate regulations related to firms' operations, decreasing production costs and enhancing competition and output levels.
Devaluation
Definition: A decrease in the value of a currency in a fixed exchange rate system.
Development aid
Definition: Aid aimed at assisting developing countries in their development efforts, including project aid, program aid, and debt relief, typically offered under concessional terms.
Direct taxes
Definition: Taxes on income, profits, or wealth paid directly to the government.
Discount rate
Definition: The interest rate that a central bank charges commercial banks for short-term loans (also referred to as the refinancing rate).
Disinflation
Definition: When the average price level continues to rise but at a slower rate, so that the rate of inflation is positive but lower.
Dumping
Definition: When a firm sells abroad at a price below average cost or below the domestic price.
Economically least developed countries (ELDCs)
Definition: According to the UN, these are low-income countries facing severe structural constraints to sustainable development, characterized by low levels of human assets, and high vulnerability to economic and environmental shocks.
Economic development
Definition: A multidimensional concept involving a sustained increase in living standards that implies higher levels of income and greater access to goods and services, better education and health, improved environment, and individual empowerment.
Economic growth
Definition: Refers to increases in real GDP over time.
Economic integration
Definition: Economic interdependence between countries usually involving agreements to eliminate trade and other barriers.
Economics
Definition: The study of how to make the best possible use of scarce or limited resources to satisfy unlimited human needs and wants.
Economic well-being
Definition: A multidimensional concept relating to the level of prosperity and quality of living standards in a country.
Economies of scale
Definition: Falling average costs that a firm experiences when it increases its scale of operations.
Efficiency
Definition: Generally involves making the best use of scarce resources.
Types: May refer to producing at the lowest cost or to allocative efficiency where marginal social costs equal marginal social benefits or where social surplus is maximized.
Elasticity
Definition: A measure of the responsiveness of an economic variable (such as quantity demanded of a product) to a change in another (like its price).
Elasticity of demand for exports
Definition: A measure of the responsiveness of the volume of exports to a change in their price.
Elasticity of demand for imports
Definition: A measure of the responsiveness of the volume of imports to a change in their price.
Engel curve
Definition: A curve showing the relationship between consumers' income and quantity demanded of a good, indicating whether a good is normal or inferior.
Entrepreneurship
Definition: Refers to the ability of certain individuals to organize the other factors of production (land, labour, capital) and their willingness to take risks.
Equilibrium
Definition: A state of balance that is self-perpetuating in the absence of any outside disturbance.
Equity
Definition: The concept or idea of fairness.
Excess demand
Definition: Occurs when the quantity demanded at a certain price is greater than the quantity supplied.
Excess supply
Definition: Occurs when the quantity supplied at a certain price is greater than the quantity demanded.
Exchange rate
Definition: The value of one currency expressed in terms of another currency (e.g., €1 = US$1.5).
Excludable
Definition: A characteristic that most goods have, referring to the ability of producers to charge a price and exclude those who are not willing or able to pay from enjoying it.
Expansionary fiscal policy
Definition: Refers to an increase in government expenditures and/or a decrease in taxes, aiming to increase aggregate demand and thus real output and employment.
Expansionary monetary policy
Definition: Monetary policy aimed at increasing aggregate demand through a decrease in interest rates (also called easy monetary policy).
Expenditure approach
Definition: One of three analytically equivalent approaches to measuring GDP by adding all expenditures on final domestic goods and services over a period by households, firms, government, and foreigners.
Expenditure reducing
Definition: Contractionary demand side policies aiming to decrease national income and thus expenditures on imports to narrow a current account deficit.
Expenditure switching
Definition: Policies aimed at switching expenditures away from imports toward domestically produced goods and services by making imports more expensive to narrow a current account deficit (e.g. lowering the exchange rate, adopting trade protection).
Exports
Definition: Goods and services produced in one country and purchased by consumers in another.
Export promotion
Definition: Growth policies aiming to expand export revenues as the vehicle of economic growth, contrasting with import substitution.
Export revenue
Definition: Revenues collected by exporting firms.
Export subsidy
Definition: Payments made by the government to exporting firms based on the number of units exported.
External balance
Definition: A situation where the value of a country’s exports is balanced by the value of its imports, so that a current account surplus or deficit does not persist over long periods.
Externalities
Definition: External costs or benefits to third parties when a good or service is produced or consumed; arises when an economic activity imposes costs or creates benefits on third parties without compensation.
Factors of production
Definition: Resources used in producing goods and services; include land (natural resources), labour, capital, and entrepreneurship.
Financial account
Definition: In the balance of payments, records inflows and outflows of portfolio and FDI funds over time, official borrowing, and changes in reserve assets.
Firm
Definition: An entity such as a business that uses factors of production to produce and sell goods and services, typically aiming for profits.
Firms
Definition: Productive units transforming inputs into output (goods and services), usually aiming at earning profits.
Fiscal policy
Definition: A demand-side policy using changes in government spending and/or direct taxation to influence aggregate demand, thus affecting growth, employment, and prices.
Fixed exchange rate
Definition: An exchange rate system where the exchange rate is fixed or pegged to another currency's value, maintained through central bank intervention.
Floating exchange rate
Definition: An exchange rate system where the exchange rate is determined solely by market demand and supply in the foreign exchange market, without central bank intervention.
Foreign aid
Definition: Flows of grants or loans from developed to developing countries, non-commercial in nature from the donor’s perspective and concessional (lower interest and longer repayment periods).
Foreign direct investment (FDI)
Definition: When a firm establishes a productive facility in a foreign country or acquires a controlling interest (at least 10% of ordinary shares) in an existing foreign firm.
Foreign sector
Definition: In an open economy, refers to exports and imports.
Framing
Definition: In behavioural economics, the way choices are presented; simplifying the “frame” of a choice can affect the decision made.
Example: Highlighting the positive or negative aspects of the same choice can lead to different decisions.
Free goods
Definition: Goods such as air or sea water that are not considered scarce and thus do not have an opportunity cost.
Free market economy
Definition: An economy where means of production are privately owned, and market forces determine economic answers (what/how much, how, and for whom).
Free rider problem
Definition: Arises when individuals consume a good or service without paying for it because they cannot be excluded from enjoying it.
Free trade
Definition: International trade not subject to any trade barriers, such as tariffs or quotas.
Free trade area/agreement
Definition: An agreement between two or more countries to phase-out or eliminate trade barriers; members maintain their trade policy towards non-members.
Frictional unemployment
Definition: Unemployment of individuals between jobs as they leave to find a better job or relocate.
Full employment
Definition: A macroeconomic policy goal to fully utilize the labour factor of production; exists when the economy is producing at its potential level of output, with only natural unemployment (AD–AS model considers AD and AS curves together).
PPC model: Full employment is indicated when the economy is producing on the PPC.
Full employment level of output
Definition: The output level produced by the economy when only natural unemployment exists.
Game theory
Definition: A branch of mathematics studying the strategic interactions of decision-makers (individuals, firms, countries, etc.).
Gender inequality index (GII)
Definition: A composite index measuring gender inequalities in three dimensions of human development: reproductive health, empowerment, and economic status.
Gini coefficient
Definition: A measure of the degree of income inequality in a country, ranging from zero (perfect equality) to one (perfect inequality); calculated as the ratio of the area between the Lorenz curve and the diagonal over the area of the half-square.
Government (national) debt
Definition: The sum of all past budget deficits less any budget surpluses; total amount the government owes to domestic and foreign creditors.
Government spending (G)
Definition: Refers to all spending by the government, categorized into current expenditures, capital expenditures, and transfer payments.
Gross domestic product (GDP)
Definition: The value of all final goods and services produced within an economy over a specific period, usually a year or a quarter.
Gross national income (GNI)
Definition: The income earned by all national factors of production independently of their location over a specified period; equal to GDP plus factor income earned abroad minus factor income paid abroad.
Growth in production possibilities
Definition: When a country's production possibilities increase due to better or more resources and/or improved technology; represented by a shift outward of the PPC.
Happiness Index
Definition: An index measuring economic well-being of a population using multiple quality of life dimensions.
Happy Planet Index
Definition: An index combining four elements to measure how efficiently countries use environmental resources for happy, long lives: well-being, life expectancy, inequality of outcomes, ecological footprint.
Homogeneous product
Definition: Goods considered identical across firms in consumers' eyes (e.g., primary sector goods like corn, wheat, copper).
Household indebtedness
Definition: The total money that households owe.
Households
Definition: Groups of individuals in the economy who share living accommodations, pooling their income and jointly deciding on goods and services consumption.
Human capital
Definition: The education, training, skills, experience, and health embodied in a country's workforce.
Human Development Index (HDI)
Definition: A composite index reflecting three basic goals of development: a long and healthy life, improved education, and a decent living standard.
Variables measured: Life expectancy at birth, mean years of schooling, expected years of schooling, and GNI per capita (PPP US$).
Humanitarian aid
Definition: Aid given to alleviate short-term suffering, consisting of food aid, medical aid, and emergency relief (often due to natural disasters or war).
Imperfect competition
Definition: A market structure where firms have some degree of market power facing a negatively sloped demand curve, allowing for price-setting.
Imperfect information
Definition: A situation where information about a market or transaction is incomplete.
Import expenditure
Definition: The value of imports of goods and services.
Imports
Definition: The value of goods and services purchased domestically but produced abroad.
Import substitution
Definition: A growth strategy substituting domestic production for imports in an attempt to shift production away from the primary sector and industrialize, protecting the industry from foreign competition.
Incentive-related policies
Definition: Policies aimed at improving economic incentives for individuals and firms.
Incentive role of prices
Definition: Prices give producers and consumers the incentive to respond to price changes; producers adjust quantity supplied according to the law of supply, while consumers adjust quantity demanded based on the law of demand.
Income
Definition: A flow of earnings generated from using factors of production to produce goods and services.
Composition: Consists of wages (for labour), interest (for capital ownership), and other forms of income.
Income approach
Definition: One of three equivalent methods of GDP measurement, summing all incomes produced (wages, profits, interest, and rent) in a timeframe.
Income effect
Explanation: The law of demand is explained by the substitution and income effect; the income effect states that a price increase decreases real income for consumers, typically leading to less quantity purchased—aligning with the substitution effect.
Income elasticity of demand (YED)
Definition: The responsiveness of demand for a good or service to a change in income.
Indirect taxes
Definition: Taxes on expenditures to purchase goods and services.
Industrial policies
Definition: Interventionist supply-side policies where the government supports specific industries through tax cuts, subsidies, and loans believed to be pivotal for economic growth.
Inequality adjusted Human Development Index (IHDI)
Definition: A composite indicator averaging a country's achievements in health, education, and income adjusted for inequality levels.
Infant industry
Definition: A new industry that should be protected from foreign competition until it achieves the scale economies required for international competitiveness; argument supporting trade protection in developing countries.
Inferior goods
Definition: Lower-quality goods for which higher-quality substitutes exist; demand decreases as incomes rise.
Inflation
Definition: A sustained increase in the average price level.
Inflationary gap
Definition: Occurs when equilibrium real output exceeds potential output due to increased aggregate demand.
Inflation rate
Definition: The percentage change in the average price level between two periods, typically measured through the CPI.
Informal economy
Definition: The part of the economy where activity is not officially recorded, regulated, or taxed; not included in national income figures.
Infrastructure
Definition: Physical capital (e.g., roads, power, telecommunications, sanitation) financed by governments, essential for economic activity, generating significant positive externalities.
Injections
Definition: In the circular flow model, these refer to spending on domestic output that originates from sources other than households—includes firm investment, government spending, and exports.
Interest rate
Definition: The cost of borrowing or reward for saving money over a time period, expressed as a percentage.
International Monetary Fund (IMF)
Definition: An international financial institution of 189 countries aiming to improve global monetary cooperation and secure financial stability by monitoring economic policies and providing loans to member countries facing balance of payments issues.
International trade
Definition: Trade involving the exports and imports of goods and services between countries.
Interventionist supply side policies
Definition: Policies aimed at increasing an economy’s productive capacity, requiring greater government involvement; includes investments in infrastructure, education, health care, research and development, and all industrial policies.
Investment (I)
Definition: Spending by firms on capital goods (such as machines, tools, equipment, and factories).
J-curve
Definition: Following devaluation or sharp depreciation, a trade deficit typically widens before improving, tracing the letter “J” over time, as the Marshall-Lerner condition is satisfied after several months post-currency value decrease.
Joint supply
Definition: Goods produced together, e.g., beef and cattle hides; the production of one automatically results in production of the other.
Keynesian aggregate supply curve
Definition: An aggregate supply curve showing levels of real output in relation to price level; consists of three sections: horizontal, upward-sloping, and vertical. Changes in real GDP or price level depend on aggregate demand and economy's capacity.
Keynesian multiplier
Definition: An increase (or change) in any injection will result in a greater increase (or change) in real GDP or national income, as increased spending generates additional income leading to more spending and further income, dependent on the withdrawal size in the circular flow.
Keynesian revolution
Definition: An economic school of thought founded on John Maynard Keynes's works, challenging classical viewpoints and advocating for an interventionist government role in managing aggregate demand to stimulate economic activity.
Labour
Definition: One of the four factors of production referring to the physical and mental contributions of workers in the production process.
Labour market flexibility
Definition: The labour market is considered flexible if it fully and quickly adjusts to changes in labour demand and supply conditions.
Labour union
Definition: An organization of workers aiming to improve working conditions and secure higher compensation for its members; enhances workers' negotiating power with employers.
Laissez faire
Definition: The perspective that market forces should function unhindered by government intervention, resulting in efficient outcomes.
Land
Definition: One of the four factors of production comprising natural resources of an economy; often termed “gifts of nature.”
Land rights
Definition: Legal rights concerning land ownership, including rights to possession, occupancy, and usage of the land.
Law of demand
Definition: A law stating that as the price of a good falls, the quantity demanded will increase over time, ceteris paribus.
Law of diminishing marginal returns
Definition: A short-run production law stating that adding more units of a variable factor (typically labour) to a fixed factor (typically capital) will eventually yield increasing total product at a diminishing rate, or marginal product will decrease.
Law of diminishing marginal utility
Definition: The principle that consuming additional units of a good yields decreasing additional satisfaction.
Law of supply
Definition: A law stating that as the price of a good rises, the quantity supplied will rise over time, ceteris paribus.
Leakages
Definition: Income not spent on domestic goods and services, including savings, taxes, and import expenditure.
Long-run aggregate supply (LRAS)
Definition: Aggregate supply dependent upon the economy's resources and technology; independent of the price level; vertical at potential output; can only increase with improvements in the quantity/quality of production factors and technology.
Long-run Phillips curve
Definition: A curve showing the monetarist view that no trade-off between inflation and unemployment exists in the long run, with a natural rate of unemployment at potential output.
Long run in microeconomics
Definition: The period when all factors of production are variable.
Long run in macroeconomics
Definition: The period when prices of all production factors (particularly wages) adjust to match price level changes.
Long-term growth
Definition: Growth sustained over extended periods, illustrated in the PPC model by outward shifts and in the AD–AS model by rightward shifts in the long-run aggregate supply curve.
Long-term growth trend
Definition: Average growth over extensive periods, represented in the business cycle diagram as the line navigating through short-term fluctuations marking changes in potential output.
Lorenz curve
Definition: A curve illustrating what percentage of the population owns what percentage of total income/wealth; calculated cumulatively. The further it deviates from the line of absolute equality (diagonal), the greater the income inequality.
Loss (economic)
Definition: Occurs when a firm's total costs exceed total revenues; calculated as total cost minus total revenue.
Luxury goods
Definition: Non-essential goods for consumers; price elastic demand (PED > 1) or income elastic demand (YED > 1).
Macroeconomics
Definition: The study of aggregate economic activity, investigating how the economy as a whole operates.
Managed exchange rate
Definition: An exchange rate that floats in international markets but may undergo government intervention to steer it from undesirable fluctuations.
Mandated choices
Definition: Choices made by consumers required to express their participation.
Manufactured products
Definition: Goods produced by workers often using capital goods.
Marginal benefit
Definition: The additional benefit consumers obtain from consuming one more unit of output.
Marginal costs
Definition: The extra cost incurred when producing one additional unit of output.
Marginal propensity to consume (MPC)
Definition: The proportion of extra income that households spend on goods and services.
Marginal propensity to import (MPM)
Definition: The proportion of extra income that households spend on imported goods and services.
Marginal propensity to save (MPS)
Definition: The proportion of extra income that households save.
Marginal propensity to tax (MPT)
Definition: The proportion of extra income that is taxed; also referred to as marginal tax rate.
Marginal revenue
Definition: The extra revenue earned by a firm from selling one more unit of output.
Marginal social benefit (MSB)
Definition: The additional benefit/utility to society from consuming one more unit of output, including both private and external benefits.
Marginal social cost (MSC)
Definition: The additional cost to society for producing one more unit of output, which includes both private costs and external costs.
Marginal tax rate
Definition: The fraction of a person’s extra income that is paid in taxes, typically as a percentage.
Marginal utility
Definition: The additional satisfaction derived from consuming one more unit of a good or service.
Market
Definition: Any arrangement for buyers and sellers to interact and conduct economic transactions.
Market-based supply side policies
Definition: Policies emphasizing well-functioning competitive markets to promote long-term economic growth through increases in long-run aggregate supply.
Market concentration
Definition: The extent to which total sales in a market are accounted for by the largest firms; proximity indicates the degree of market power in the industry, measured by concentration ratio.
Market demand
Definition: The aggregate of the individual demand curves for a product from all consumers in a market.
Market equilibrium
Definition: Occurs in a market when the price at which quantity demanded equals quantity supplied, known as the market clearing price, with no excess demand or supply.
Market failure
Definition: The failure of markets to achieve allocative efficiency where marginal social benefits equal marginal social costs; social/community surplus (consumer surplus + producer surplus) is not maximized.
Market mechanism
Definition: The system through which demand and supply forces dictate product prices, also known as the price mechanism.
Market-oriented approaches
Definition: Approaches based on private decision-makers' market actions with minimal government intervention.
Market power
Definition: The ability of a firm (or group of firms) to elevate and maintain prices above competitive levels (P > MC).
Market share
Definition: The portion of total sales in a market attributed to one firm.
Market supply
Definition: The horizontal sum of individual supply curves for a product from all producers in a market.
Marshall-Lerner condition
Definition: A condition stating that currency depreciation/devaluation will improve the current account balance if the combined price elasticity of demand for exports and imports exceeds one.
Maximum price
Definition: A price imposed by an authority, set below market equilibrium price, known as a price ceiling.
Merit goods
Definition: Goods/services deemed beneficial for consumers but underprovided by the market, leading to underconsumption primarily due to positive consumption externalities.
Microeconomics
Definition: The study of individual consumer, firm, and market behaviour alongside market prices and quantities of goods and services.
Microfinance
Definition: Provision of small loans to poor entrepreneurs lacking access to conventional bank services.
Minimum income standards
Definition: A poverty measure based on societal beliefs regarding the essentials needed to achieve an acceptable standard of living.
Minimum lending rate
Definition: Interest rate charged by a central bank when lending to commercial banks; also known as discount rate or refinancing rate.
Minimum price
Definition: A price imposed by an authority above market equilibrium price, known as a price floor.
Minimum reserve requirements
Definition: Central bank stipulations setting the minimum reserves commercial banks must hold to back their loans.
Minimum wage
Definition: A type of price floor where the wage rate or price of labour is set above market equilibrium wage rate.
Mixed economy
Definition: An economy integrating features of both planned and free market economies; every economy has a unique degree of this mix.
Monetarist/new classical counter revolution
Definition: An economic school arguing that the price mechanism and efficient competitive markets suffice for achieving full employment without government intervention.
Monetary policy
Definition: A demand-side policy involving changes in the money supply or interest rates to achieve desired economic outputs concerning output, employment, and inflation.
Monetary union
Definition: A situation where two or more countries share a currency and maintain a common central bank.
Money
Definition: Any medium widely accepted as payment for goods and services; generally comprises currency and checking accounts.
Money creation
Definition: The process through which commercial banks create new money when extending loans.
Money supply
Definition: Total amount of money available at a particular time, comprising currency plus checking account definitions.
Monopolistic competition
Definition: A market structure where many sellers offer differentiated products with no entry barriers.
Monopoly
Definition: A market structure characterized by a single dominating firm, thus the firm becomes the industry with high barriers to entry.
Moral hazard
Definition: A type of market failure involving asymmetric information where risks are taken, but full costs are not faced, by altering behaviour post-transaction, commonly seen in insurance markets.
Multidimensional Poverty Index (MPI)
Definition: An international poverty measure covering over 100 economically least developed countries, complementing traditional income-based poverty measures by assessing simultaneous deprivations in education, health, and living standards.
Multilateral development assistance
Definition: Assistance from multilateral organizations like the World Bank to support developing countries with development objectives.
Multilateral trade agreement
Definition: An agreement between multiple countries reducing tariffs or other protective measures, typically governed by the WTO.
National income
Definition: The income generated by factors of production in an economy, equating to wages, interest, rents, and profits.
National income accounting
Definition: Statistics provided by a nation's statistical entity to measure national income, output, and other economic activities.
National income statistics
Definition: Statistical data utilized to gauge a nation’s income, output, and for national income accounting.
Natural monopoly
Definition: A monopoly able to produce enough output for market needs while experiencing economies of scale, resulting in lower average costs than multiple firms.
Natural rate of unemployment
Definition: The unemployment rate occurring when the economy operates at potential output/full employment, summing structural, frictional, and seasonal unemployment.
Necessity
Definition: The degree to which a good is essential; if demand for a necessity good increases less than income or if quantity demanded reacts less to price changes, the good is considered income elastic or price inelastic, respectively.
Negative externalities of consumption
Definition: Uncompensated negative effects on third parties resulting from consumption of a good/service.
Negative externalities of production
Definition: Uncompensated negative effects on third parties resulting from production of a good/service.
Net exports (X - M)
Definition: The difference between export revenues and import expenditures.
Nominal gross domestic product
Definition: The total monetary value of all final goods and services produced in an economy in a given timeframe, commonly one year, at current values (unadjusted for inflation).
Nominal gross national income
Definition: Total income earned by a country's residents irrespective of the location of their factors of production, in a given time period, typically one year, at current prices (unadjusted for inflation).
Nominal interest rates
Definition: Interest rates that have not been adjusted for inflation.
Non-collusive oligopoly
Definition: Oligopoly where firms do not agree to fix prices or outputs; competition relies on non-price factors, leading to stable prices.
Non-excludable
Definition: A characteristic of goods/services/resources that cannot be restricted from use by anyone.
Non-governmental organization (NGO)
Definition: Organizations not part of the government promoting economic development, humanitarian ideals, and sustainable development.
Non-price competition
Definition: Competition between firms based on factors other than price, often through product differentiation.
Non-produced, non-financial assets
Definition: A measure of the net international transactions of non-produced assets, including land and intangible assets such as patents and copyrights.
Non-rivalrous
Definition: A good's trait whereby consumption by one individual does not diminish the availability for others; this is typical of public goods.
Normal goods
Definition: Goods for which demand increases as income rises.
Normal profit
Definition: The minimum return necessary for a firm to remain in business; occurs when total revenue equals total costs or when average revenue equals average costs.
Normative economics
Definition: Focuses on areas open to personal opinions and beliefs, thus not open to refutation.
Nudge theory
Definition: The employment of nudges (prompts, hints) to influence consumer choices intended to enhance individual and collective well-being.
OECD Better Life Index
Definition: An index comparing well-being across countries based on various dimensions identified as essential by the OECD, concerning material living conditions and quality of life.
Official borrowing
Definition: International government borrowing often meant to cover a current account deficit.
Official Development Assistance (ODA)
Definition: Aid from one government or multilateral agency to another country; considered the most significant form of foreign aid.
Oligopoly
Definition: A market structure characterized by a small number of large firms dominating the market, with high barriers to entry.
Open market operations
Definition: A monetary policy apparatus involving buying or selling short-term government bonds by the central bank to regulate the money supply and influence interest rates.
Opportunity cost
Definition: The next best alternative forgone when selecting an economic decision.
Output approach
Definition: One of three equivalent methods to measure GDP, by assessing the total value of final goods and services produced in a given timeframe.
Overvalued currency
Definition: A currency with an exchange rate greater than its equilibrium rate, often maintained through central bank intervention, typically occurring in pegged or managed exchange rate environments.
Payoff matrix
Definition: A table presenting all outcomes of decisions made by decision-makers in game theory.
Per capita
Definition: Per person; per capita figures are determined by dividing variables by population size.
Perfect competition
Definition: A market structure with numerous small firms producing identical products, no barriers to entry/exit, and perfect information, where firms are price takers.
Perfect information
Definition: A state where all parties involved in an economic transaction possess the same information.
Perfectly elastic demand
Definition: Occurs with a horizontal demand curve indicating any quantity can be purchased at a particular price (PED is infinite).
Perfectly elastic supply
Definition: Occurs with a horizontal supply curve indicating any quantity can be offered at a particular price (PES is infinite).
Perfectly inelastic demand
Definition: Where a price change leads to no change in quantity demanded (PED is 0).
Perfectly inelastic supply
Definition: Where price changes result in no shift in quantity supplied (PES is 0).
Personal income taxes
Definition: Taxes paid by individuals or households on their incomes, regardless of their sources (wages, salaries, interest income, dividends).
Phillips curve
Definition: A curve representing the relationship between unemployment rate and inflation rate.
Pigouvian taxes
Definition: Indirect taxes imposed to neutralize external costs of production or consumption.
Planned economy
Definition: An economy where the state owns production means (land, capital), deciding what/how much is produced, how, and for whom.
Portfolio investment
Definition: Acquisition of financial assets (shares and bonds) for financial returns through either interest or dividends, featured in the balance of payments' financial account.
Positive economics
Definition: Deals with aspects of economics that can be validated or disproven.
Positive externalities of consumption
Definition: Advantages enjoyed by third parties not accounted for when consuming a good or service; they do not pay for benefits received.
Positive externalities of production
Definition: Benefits enjoyed by third parties not accounted for when producing a good or service; they do not pay for the advantages received.
Potential output
Definition: Output produced by an economy at full employment equilibrium or long-run equilibrium per monetarist/new classical perspectives.
Poverty
Definition: Occurs when a lack of material possessions or money inhibits an individual or family from achieving a minimum satisfactory standard of living.
Poverty line
Definition: A level of income set by government or international bodies (like the World Bank) indicating just enough to meet minimum needs regarding food, clothing, and housing.
Poverty trap/cycle
Definition: A repeating chain of events starting and ending in poverty (e.g., low income leads to low savings, which leads to low investment and subsequently low growth).
Preferential trade agreement
Definition: An agreement granting reduced tariffs for selected products to one or more trading partners.
Price ceiling (maximum price)
Definition: A price set by an authority below the equilibrium price, limiting prices from rising above a certain level.
Price competition
Definition: Rivalry between firms primarily based on price, where a firm reduces prices to capture sales from competitors.
Price controls
Definition: Authorities' imposition of prices set above or below equilibrium market prices.
Price deflator
Definition: A price index that adjusts nominal economic variables, removing the effects of price level changes.
Elastic demand
Definition: A price change results in a proportionally larger change in quantity demanded in the opposite direction (PED > 1).
Price elasticity of demand (PED)
Definition: Expression of the sensitivity of quantity demanded to price changes.
Price elasticity of supply (PES)
Definition: The responsiveness of quantity supplied to price changes.
Elastic supply
Definition: A price change results in a proportionately larger change in quantity supplied in the same direction (PES > 1).
Price expectations
Definition: Forecasts consumers or firms hold regarding future price changes, affecting demand decisions.
Price floor (minimum price)
Definition: Price set by an authority above market equilibrium price; prices cannot fall below this level (price floor).
Inelastic demand
Definition: A price change leads to a proportionately smaller change in quantity demanded (PED < 1).
Inelastic supply
Definition: A price change leads to a proportionately smaller change in quantity supplied (PES < 1).
Price maker
Definition: A firm capable of influencing the price of its products; applicable in various market structures other than perfect competition.
Price mechanism
Definition: The system wherein demand and supply forces dictate product prices, also referred to as the market mechanism.
Price taker
Definition: A firm that cannot influence its product price, thus abiding by market-determined prices includes firms in perfect competition.
Price war
Definition: Occurs when firms continually lower prices to match competitor price cuts, risking reduced profits or losses.
Primary commodities
Definition: Raw materials produced in the primary sector, such as agricultural products, metals, and minerals.
Primary sector
Definition: Economic activities deriving from land (factor of production), including agricultural products, metals, and minerals.
Privatization
Definition: The transfer of public assets to the private sector, potentially representing a form of supply-side policy.
Producer surplus
Definition: The advantage producers gain by receiving a market price exceeding what they were willing to accept.
Product differentiation
Definition: The method firms utilize to make their products distinct from competitors, aiming to elevate sales—divergences may involve quality, appearance, services, etc.
Production possibilities curve (PPC)
Definition: A curve demonstrating the maximum combinations of goods/services an economy can produce if all resources are utilized efficiently at a given technology level.
Productive capacity
Definition: A measure of an economy's maximum production capabilities, usually represented by total achievable output.
Profit maximization
Definition: A firm objective focused on producing output levels maximizing profits where total revenue exceeds total cost or where marginal revenue equals marginal cost.
Progressive taxation
Definition: Taxation where tax fractions increase with income; average tax rates escalate.
Property rights
Definition: Exclusive legal authority to own property and define its usage, applying to both government and private ownership.
Proportional tax
Definition: A taxation system levying a constant rate as income increases.
Public goods
Definition: Goods/services characterized by non-rivalry and non-excludability (e.g., flood barriers).
Purchasing power parity (PPP)
Definition: A methodology for equalizing the purchasing power of different currencies against US$1; PPP exchange rates facilitate income/output comparisons free from price level variance effects.
Quantitative easing
Definition: Expansionary monetary policy where a central bank purchases (long-term) government bonds or financial assets to stimulate the economy and increase the money supply.
Quantity demanded
Definition: Amount of a good/service demanded at a specific price over a designated period, ceteris paribus.
Quantity supplied
Definition: Amount of a good/service supplied at a particular price over a designated period, ceteris paribus.
Quota
Definition: An import barrier limiting the quantity or value of imports allowed into a country.
Rational consumer choice
Definition: Consumer decisions based on consistent preferences and perfect information; aims to maximize utility in product purchases according to standard microeconomic theory.
Rational producer behaviour
Definition: Refers to firms’ pursuit of profit maximization, assumed in standard microeconomic theory.
Rationing
Definition: A method for dividing or distributing goods/services/resources among different interested parties.
Real GDP
Definition: Total value of final goods/services produced in a given time, typically one year, adjusted for inflation.
Real GDP per person (per capita)
Definition: Real GDP divided by a country’s population.
Real GNI per person (per capita)
Definition: Real GNI divided by a country’s population.
Real interest rates
Definition: Interest rates adjusted for inflation.
Recession
Definition: A decline in real GDP for at least two consecutive quarters.
Refutation
Definition: A natural and social sciences method where propositions must undergo empirical testing for disproval or validation; if disproven, the proposition must be dismissed.
Regional trade agreement
Definition: An agreement between a group of countries, typically within a geographical area, to lower or remove trade barriers.
Regressive taxation
Definition: Taxation whereby the fraction of tax paid diminishes as income rises; average tax rates decrease. All indirect taxes are regressive.
Relative poverty
Definition: A comparative poverty measure indicating that individuals lack the income to maintain a standard of living typical of their society, defined as a percentage of the society's median income.
Remittances
Definition: Money transferred by foreign workers to individuals, often relatives, in their home countries.
Reserve assets
Definition: Currencies and precious metals held by central banks from international trade may be utilized to maintain or influence the currency exchange rate.
Reserves
Definition: An item in the financial account of the balance of payments, showing currency stock and precious metals reserves.
Resource allocation
Definition: Assigning available factors of production to specific production uses.
Restricted choices
Definition: When consumer options are limited by the government or other authorities.
Revaluation
Definition: An increase in a currency's value within a fixed exchange rate system.
Revenues
Definition: Payments received by firms when selling their output.
Rivalrous
Definition: Goods/services regarded as rivalrous when consumption by one person or group reduces availability for others.
Rules of thumb
Definition: Mental shortcuts (heuristics) employed for decision-making, helping people to make fast but often imperfect decisions regarding complex selections.
Satisficing
Definition: A business or firm strategy aimed at achieving satisfactory results concerning one or more objectives instead of prioritizing any one goal at others' expense, combining “satisfy” with “suffice.”
Say’s Law
Definition: A proposition that states supply of goods generates its own demand.
Scarcity
Definition: The limited availability of resources relative to society’s unlimited demands for goods and services.
Screening
Definition: In asymmetric information contexts, a participant employs a screening procedure to attain more information about a transaction, thereby mitigating adverse selection.
Seasonal unemployment
Definition: Unemployment occurring when individuals are inactive due to seasonal job conditions (e.g., agricultural workers in winter).
Shortage
Definition: Emerges when quantity demanded for a good/service exceeds quantity supplied at a given price.
Short-run aggregate supply (SRAS)
Definition: Total quantity of real output (real GDP) offered at different possible price levels in the short run, where wages and other resource prices remain constant.
Short run in macroeconomics
Definition: Period during which factors of production prices (especially wages) are regarded as fixed.
Short run in microeconomics
Definition: Period when at least one production factor remains unchanged.
Short-run Phillips curve
Definition: A curve portraying the inverse relationship between unemployment rates and inflation rates, suggesting a trade-off between inflation and unemployment levels.
Short-term fluctuations of economic activity
Definition: Cycles of real GDP growth followed by economic contractions, characterizing the business cycle.
Signalling
Definition: In asymmetrical information contexts, a more-informed participant conveys a signal revealing essential transaction information to less-informed participants to alleviate adverse selection.
Social/community surplus
Definition: The overall combination of consumer surplus and producer surplus.
Social enterprise
Definition: A business devoted to achieving social impacts over profits, operating by offering goods and services in an entrepreneurial and innovative way, utilizing profits primarily for social goals.
Socially optimum output
Definition: Occurs where allocative efficiency is present, with marginal social cost equalling marginal social benefit, or where production's marginal cost (including external costs) aligns with the consumer price (P = MC) for the final produced unit.
Social sciences
Definition: Academic studies examining human societies and interpersonal interactions within those societies.
Specialization
Definition: When a firm or country concentrates on producing one or few goods/services, forming the basis of the comparative advantage theory in international trade.
Speculation
Definition: The act of buying/selling something intending to secure short-term profits; for example, currency speculation involves currency buying/selling to profit from exchange rate changes.
Stakeholder
Definition: An individual/group with an interest or stake in an economic activity or outcome.
Structural unemployment
Definition: Long-term unemployment due to various factors, including technological changes; changes in demand patterns for labor skills; geographic shifts in industries; and labor market inflexibilities.
Subsidies
Definition: Government payments to firms per unit of output, intended to encourage production and reduce prices for consumers.
Subsidy (international)
Definition: Payments made by the government to domestic firms to induce production for international competition advantage.
Substitutes
Definition: Goods that can replace each other, satisfying a similar need or want.
Substitution effect
Definition: When a product's price falls relative to others, leading consumers to purchase more of that product due to its now relatively lower price; foundational in explaining the law of demand.
Supply
Definition: The quantities of a good that firms are prepared to sell at various possible prices over time, ceteris paribus.
Supply curve
Definition: A graph illustrating the relationship between the price of a good/service and the quantity supplied, usually upward sloping.
Supply-side policies
Definition: Government measures aimed at shifting the long-run aggregate supply curve to the right, promoting increased potential output and achievement of economic growth.
Surplus
Definition: An excess of one aspect over another; appears when the quantity supplied surpasses that demanded at a specific price. It also applies to situations where tax revenue exceeds government expenditure (budget surplus) or when credits outpace debits in the balance of payments.
Sustainability
Definition: The capacity to preserve the environment to fulfill current needs while maintaining the potential for future needs.
Sustainable debt
Definition: The level of government debt manageable without compromising interest payment capacity or overall growth objectives.
Sustainable development
Definition: Meeting current generation needs while conserving resources for future generations.
Tariff
Definition: A tax applied to imports designed to fortify domestic industries against foreign competition while generating government revenue.
Total costs
Definition: All expenses incurred by a company for resource utilization in production.
Total revenue
Definition: The income generated by a firm from selling a specified quantity of output (price multiplied by quantity sold).
Tradable permits
Definition: Government-issued permits for pollution rights, setting maximum allowable pollution levels that can be traded (bought or sold) in a market.
Trade creation
Definition: In international trade, it occurs when more expensive imports get replaced by cheaper imports due to trade agreements or blocs.
Trade diversion
Definition: In international trade, it occurs when cheaper imports are replaced by more expensive imports due to trade agreements or blocs.
Trade liberalization
Definition: The process of diminishing trade barriers for international exchange.
Trade protection
Definition: Government initiatives restricting imports or promoting exports through trade barriers that shield domestic industries from foreign competition.
Trading bloc
Definition: A coalition of countries agreeing to reduce protectionist measures like tariffs and quotas amongst themselves.
Tragedy of the commons
Definition: A common pool resource scenario wherein individual users, acting independently in self-interest, deplete or spoil shared resources contrary to the collective benefit.
Transfer payments
Definition: Payments made by governments to disadvantaged societal groups, such as the elderly, low-income individuals, and the unemployed, redistributing taxpayer money to avert poverty.
Undervalued currency
Definition: A currency whose value is below its equilibrium exchange rate, often maintained through central bank intervention, typical in pegged or managed exchange rate situations.
Unemployment
Definition: A state where an individual (above a specified age and available to work) is actively seeking employment but is jobless.
Unemployment benefits
Definition: Payments made by governments to individuals who are unemployed and actively seeking work.
Unemployment rate
Definition: Percentage of the workforce statistically categorized as unemployed.
Unfair competition
Definition: Practices by countries attempting to gain competitive advantages through mechanisms like undervalued exchange rates in international trade.
Unitary elastic demand
Definition: Occurs when a price change results in an equal and opposite proportional change in quantity demanded (PED = 1).
Unitary elastic supply
Definition: Occurs when a price change leads to an equivalent proportional change in quantity supplied (PES = 1).
Universal basic income
Definition: Regular cash payments made to all individuals in an economy, independent of other income sources, intended to lessen poverty and income inequality.
Sustainable development goals (SDGs)
Definition: UN-established 17 goals aimed at eradicating poverty, mitigating inequality, and combating climate change.
Utility
Definition: A measure of satisfaction derived from consuming goods/services.
Wage
Definition: Compensation received for the factor of production labour, quantified per unit of time.
Wealth
Definition: The aggregate value of all assets owned by an individual, firm, community, or nation after deducting liabilities owed to financial institutions.
Weighted price index
Definition: An index reflecting average prices over time, assigning weight to each item according to its relevance in consumer budgets, employed to assess changes in price levels.
Welfare loss
Definition: A decrement in social surplus (consumer and producer surplus) resulting from market failures where marginal social benefits do not equal marginal private benefits.
World Bank
Definition: An international organization offering loans and counsel to economically less developed countries aiming to facilitate economic growth and reduce poverty.
World Trade Organization (WTO)
Definition: An international body creating trading rules and resolving disputes among member countries, also facilitating negotiations to lower trade barriers between them.