Economics unit 4 definitions

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Globalisation
Refers to the growing integration of national economies in terms of trade, financial flows, ideas, information and technology, and the movement of people
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The Theory of Comparative Advantage
explains how world output can be increased if countries specialise in the goods and services in which they have a comparative advantage
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Global Imbalances
Some parts of the world are running huge current account surpluses and have a glut of savings, whilst other parts of the world have huge current account deficits and excess debt
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Tariffs
A tax on imports - they can be specific or ad valorem
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Quotas
a physical limit on to the amount of an imported good that may be sold in a country in a given period
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Dumping
occurs when a good is sold abroad at a price below the price in the domestic market
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The WTO
a multi-lateral organisation with156 countries. It helps to promote free trade by persuading countries to lower their import tariffs and other barriers to open markets
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Trading Block
A group of countries that agree to reduce or eliminate trade barriers between themselves. The number of trading blocks has increased significantly over the last 50yrs
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Trade creation
involves a shift in domestic consumer spending from a higher cost domestic source to a lower cost partner source
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Trade diversion
involves a shift in domestic consumer spending from a lower cost world source to a higher cost partner source
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balance of payments
a record of all the financial transactions between the UK and the rest of the world
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The Marshall Learner Condition
a devaluation will improve the current account position only if the combined elasticities of demand for exports and imports are greater than 1
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Monetary Union
occurs when at least 2 countries share the same currency. The most important monetary union is the EMU
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Competitiveness
the measure of your ability to sell your goods and services to the rest of the world
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Income
a flow of money
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wealth
a stock concept
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absolute poverty
measures the number of people living below a certain income threshold, or the number of households unable to afford certain basic goods and services. living on less then $1.25 per day
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relative poverty
measures the extent to which a household's financial resources fall below an average level of income. The most commonly used threshold of low income in the EU is 60% of median household income after deducting housing costs.
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the Gini Coefficient
a commonly used measure of income inequality that condenses the entire income distribution for a country into a single number between 0 and 1. the higher the number the greater the inequality
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Economic growth
an increase in real GDP
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Economic development
an increase in living standards
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HDI
a composite measure consisting of GNI per capita, life expectancy and literacy rates
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the multiplier effect
any increase in autonomous expenditure (GIX) will lead to a greater increase in income as the money is passed around the circular flow many times, each time decreasing slightly due to leakages
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sharecropping
a system in which the landlord and tenant share the rewards of the crop
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terms of trade
the ratio of export prices to import prices
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primary product dependency
when a country is reliant on one product for more then a third of its GDP
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millennium development goals
goals set for each LDC reflecting a range of development objectives to be monitored each year to evaluate progress.
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Harrod-Domar Model
a model of economic growth that emphasises the importance of savings and investment
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Foreign Exchange Gap
a situation in which an LDC is unable to import the goods that it needs for development because of a shortage of foreign exchange
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Rostow model of economic growth
a process described by Rostow, which set out 5 stages through which he claimed that all developing countries would pass
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Industrialisation
a process of transforming an economy by expanding manufacturing and other industrial activity
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Lewis model
LDC's have 2 sectors; Traditional and Modern. Labour can be transferred from the traditional to the modern sector in order to bring about growth and development
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Dependency theory
the countries of the world can be divided into CORE and PERIPHERY, and that countries in the core developed by exploiting those in the periphery
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FDI
investment undertaken in oner country by firms based in other countries
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Aid
the voluntary transfer of resources from one country to another, or to give loans on concessionary terms. Aid may also be given for emergency relief
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Micro finance
schemes that provide finance for small - scale projects
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Fair Trade Schemes
schemes that set out to ensure that small producers in LDC"s receive a fair price for their products
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Cyclical/demand deficient unemployment
when an economy goes into a recession unemployment rises because there is an insufficient demand within the economy
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classical unemplyment
exists when the real wage rate is above that need to clear the labour market even when the economy is doing well
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the phillips curve
shows the relationship between the rate of change of money wages and employment
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Fiscal policy
involves the use of government spending, taxation and borrowing to affect the level and growth of AD, output and jobs
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discretionary fiscal changes
deliberate changes in direct and indirect taxation and gov spending
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automatic stabilisers
changes in tax revenues and government spending that come about automatically as an economy moves through the business cycle
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budget deficit
in a given year, total government spending exceeds total tax revenue
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monetary policy
influences the level of activity in the economy and hence inflation by manipulating the price and quantity of money available in the economy
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Other cards in this set

Card 2

Front

explains how world output can be increased if countries specialise in the goods and services in which they have a comparative advantage

Back

The Theory of Comparative Advantage

Card 3

Front

Some parts of the world are running huge current account surpluses and have a glut of savings, whilst other parts of the world have huge current account deficits and excess debt

Back

Preview of the back of card 3

Card 4

Front

A tax on imports - they can be specific or ad valorem

Back

Preview of the back of card 4

Card 5

Front

a physical limit on to the amount of an imported good that may be sold in a country in a given period

Back

Preview of the back of card 5
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