Glossary (term list)
NOT ALL OF THEM ARE HERE. I COPIED ONLY THE MOST IMPORTANT ONES> IF YOU ARE CRAZY ENOUGH, CHECK THE DOCUMENT FOR FULL LIST.
Full list of terms
Terms of first-order importance
Actual growth
It occurs when real output (real GDP) increases through time and results from greater or better use of existing resources. The PPC model can be illustrated by moving from a point inside a PPC to another point in the northeast direction.
Aggregate demand (AD)
Planned spending on domestic goods and services at different average price levels per period. Consists of consumption, investment and government expenditures plus net exports.
Aggregate demand curve
A curve shows the planned spending level on domestic output at different average price levels.
Aggregate supply (AS)
The planned level of output domestic firms are willing and able to offer at different average price levels.
Aggregate supply curve
A curve showing the planned level of output that domestic firms are willing and able to offer at different average price levels
Allocative efficiency
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. It is achieved when, for the last unit produced, price (P) is equal to marginal cost (MC) or, more generally, if the marginal social benefit (MSB) is equal to marginal social cost (MSC)
Anti-monopoly regulation
Laws and regulations are intended to restrict the anti-competitive behaviour of firms that are abusing their market power.
Appreciation
When the price of a currency increases in a floating exchange rate system
Average costs
Total costs per unit of output produced
Balance of payments
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 or balance of visible trade
Part of the balance of payments is the value of exports of goods of a country minus the value of imports of goods over a given period.
Balance of trade in services
Part of the balance of payments is the value of exports of services of a country minus the value of imports of services over a given period.
Budget deficit
When government expenditures exceed government (tax) revenues, usually over a year.
Business cycle
The short-term fluctuations of real GDP around its long-term trend (or potential output).
Capital
Physical capital refers to means of production that include machines, tools, equipment and factories; the term may also refer to a country's infrastructure. Human capital refers to the education, training, skills and experience embodied in a country's labour force.
Central bank
An institution charged with conducting monetary and exchange rate policy, regulating the behaviour of commercial banks, and providing banking services to the government and commercial banks
Ceteris paribus
A Latin expression meaning “other things being equal.”
Circular flow of income
A simplified illustration that shows the flows of income and expenditures in an economy.
Common market
When a group of countries agrees not only to the free trade of goods and services but also to the free movement of capital and labour.
Common pool resources
A diverse group of natural resources that are non-excludable, but their use is rivalrous, for example, fisheries.
Complements
Goods that are jointly consumed, for example, coffee and sugar.
Composite indicator
An indicator that comprises an average of more than one economic variable, for example, the HDI.
Consumer confidence
A measure of the degree of optimism that households have about their income and economic prospects.
Consumer price index (CPI)
The average of the prices of the goods and services that the typical consumer buys expressed as an index number. The CPI is used as a measure of the cost of living in a country and to calculate inflation.
Consumer surplus
The difference between how much a consumer is at most willing to pay for a good and how much they actually pay.
Consumption (C)
Spending by households on durable and nondurable goods and on services over a period of time.
Contractionary fiscal policy
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
A policy employed by the central bank involving an increase in interest rates and aimed at decreasing aggregate demand and thus inflationary pressures. Also referred to as tight monetary policy.
Cost-push inflation
Inflation is a result of increased production costs (typically because of rising money wages or rising commodity prices) and is illustrated by a leftward shift of the SRAS curve.
Credit items
Refers to transactions within the balance of payments of a country that lead to an inflow of currency (for example, the export of goods); these transactions enter the account with a plus sign.
Current account
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
Exists when the sum of net exports of goods and services plus net income plus net current transfers is negative (or simply when debits or outflows are greater than credits or inflows).
Current account surplus
Exists when the sum of net exports of goods and services plus net income plus net current transfers is positive (or simply when credits or inflows are greater than debits or inflows).
Current transfers
An entry in the current account that records payments between residents and non-residents of a country without something of economic value being received in return and that affect directly the level of disposable income (for example, workers' remittances, pensions, aid and grants, and so on).
Customs union
An agreement between countries to phase out or eliminate tariffs and other trade barriers and establish a common external barrier toward non-members.
Cyclical (demand-deficient) unemployment
Unemployment that is a result of a decrease in aggregate demand and thus of economic activity; it occurs in a recession.
Debit items
Refers to transactions within the balance of payments of a country that lead to an outflow of currency (for example, the import of services); these transactions enter the account with a minus sign.
Deflation
A sustained decrease in the average price level of a country.
Deflationary/recessionary gap
Arises when the equilibrium level of real output is less than potential output as a result of a decrease in AD.
Demand
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
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
Policies that aim at manipulating aggregate demand through changes in interest rates (monetary policy) or changes in government expenditures and taxation in order to influence growth, employment and inflation.
Demand-pull inflation
Inflation is caused by increases in aggregate demand.
Demand side policies
Refers to economic policies that aim at affecting aggregate demand and thus macroeconomic variables such as growth, inflation and employment; demand-side. policies include fiscal policy and monetary policy.
Demerit goods
Goods or services that not only harm the individuals who consume these but also society at large, and that tend to be overconsumed. Usually, they are due to negative consumption externalities.
Depreciation
A decrease in the value of a currency in terms of another currency in a floating or managed exchange rate system.
Devaluation
A decrease in the value of a currency in a fixed exchange rate system.
Development aid
Aid aimed at assisting developing countries in their development efforts. Includes project aid, program aid and debt relief. It is concessional meaning there are low-interest rates and long repayment periods.
Direct taxes
Taxes on income, profits or wealth are paid directly to the government.
Economically least developed countries (ELDCs)
According to the UN these are low-income countries facing severe structural constraints to sustainable development, with low levels of human assets, highly vulnerable to economic and environmental shocks.
Economic development
A multidimensional concept involving a sustained increase in living standards that implies higher levels of income and thus greater access to goods and services, better education and health, a better environment to live in as well as individual empowerment.
Economic growth
Refers to increases in real GDP over time.
Economic integration
Economic interdependence between countries usually involving agreements between two or more countries to phase-out or eliminate trade and other barriers between them.
Economics
Economics is 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
A multidimensional concept relating to the level of prosperity and quality of living standards in a country.
Efficiency
In general, involves making the best use of scarce resources. This may refer to producing at the lowest possible cost or to allocative efficiency where marginal social costs are equal to marginal social benefits or where social surplus is maximum.
Elasticity
A measure of the responsiveness of an economic variable (such as the quantity demanded of a product) to a change in another economic variable (such as its price or income).
Entrepreneurship
Refers to the ability of certain individuals to organize the other factors of production (land, labour, capital) and their willingness to take risks.
Equilibrium
A state of balance that is self-perpetuating in the absence of any outside disturbance.
Equity
The concept or idea of fairness.
Excess demand
Occurs when quantity demanded at some price is greater than quantity supplied.
Excess supply
Occurs when quantity supplied at some price is greater than quantity demanded.
Exchange rate
The value of one currency expressed in terms of another currency; for example, €1 = US$1.5.
Expansionary fiscal policy
Refers to an increase in government expenditures and/or a decrease in taxes that aim at increasing aggregate demand and thus real output and employment.
Expansionary monetary policy
Monetary policy aiming at increasing aggregate demand through a decrease in interest rates; also referred to as easy monetary policy.
Expenditure approach
One of three analytically equivalent approaches to measuring GDP that adds all the expenditures made on final domestic goods and services over a period of time by households, firms, the government and foreigners.
Exports
Goods and services produced in one country and purchased by consumers in another country.
Export promotion
Growth policies aiming at expansion of export revenues as the vehicle of economic growth; often contrasted to import substitution.
Export revenue
The revenues collected by exporting firms.
Externalities
External costs or benefits to third parties when a good or service is produced or consumed. An externality arises when an economic activity imposes costs or creates benefits on third parties for which they are not compensated or do not pay for respectively.
Factors of production
Resources used in the production of goods and services; include land (natural resources), labour, capital and entrepreneurship.
Financial account
In the balance of payments this records inflows and outflows of portfolio and FDI funds over a period of time, official borrowing and changes in reserve assets.
Fiscal policy
A demand-side policy using changes in government spending and/or direct taxation to influence aggregate demand and thus growth, employment and prices.
Fixed exchange rate
An exchange rate system where the exchange rate is fixed, or pegged, to the value of another currency (or to the average value of a selection of currencies) and maintained there with appropriate central bank intervention.
Floating exchange rate
An exchange rate system where the exchange rate is determined solely by the market demand and market supply of the currency in the foreign exchange market without any central bank intervention.
Foreign aid
Refers to flows of grants or loans from developed to developing countries that are non-commercial from the point of view of the donor and for which the terms are concessional (that is, the interest rate is lower than the market rate and the repayment period longer).
Foreign direct investment (FDI)
When a firm establishes a production facility in a foreign country or acquires controlling interest (at least 10% of the ordinary shares) in an existing foreign firm.
Foreign sector
In an open economy, the term refers to exports and imports.
Free market economy
An economy where the means of production are privately owned and where market forces determine the answers to the fundamental questions (what/how much, how and for whom) that all economies face.
Free trade area/agreement
An agreement between two or more countries to phase-out or eliminate trade barriers between them, members of the agreement are free to maintain their own trade policy towards non-members.
Full employment
A goal of macroeconomic policy that aims at fully utilizing the scarce factor of production labour. Full employment exists when the economy is producing at its potential level of real output and thus there is only natural unemployment (the AD–AS model considers the AD and AS curves together). In the production possibilities curve (PPC model), full employment exists when the economy is producing on the PPC.
Full employment level of output
The level of output that is produced by the economy when there is only natural unemployment.
Gini coefficient
A measure of the degree of income inequality of a country that ranges from zero (perfect income equality) to one (perfect inequality). Diagrammatically it is the ratio of the area between the Lorenz curve and the diagonal over the area of the half-square.
Government (national) debt
The sum of all past budget deficits minus any budget surpluses; the total amount the government owes to domestic and foreign creditors.
Government spending (G)
Refers to all spending by the government that is distinguished into current expenditures, capital expenditures and transfer payments.
Gross domestic product (GDP)
The value of all final goods and services produced within an economy over a period of time, usually a year or a quarter.
Gross national income (GNI)
The income earned by all national factors of production independently of where they are located over a period of time; it is equal to GDP plus factor income earned abroad minus factor income paid abroad.
Growth in production possibilities
When the production possibilities of a country increase because of more/better resources and/or better technology becoming available; illustrated by a shift outwards of the PPC.
Human Development Index (HDI)
A composite index of development that reflects the three basic goals of development, which are a long and healthy life, improved education, and a decent standard of living. The variables measured are life expectancy at birth, mean years of schooling and expected years of schooling, and GNI per capita (PPP US$).
Humanitarian aid
Aid given to alleviate short-term suffering, consisting of food aid, medical aid, and emergency relief aid usually as a result of a natural catastrophe or war.
Import expenditure
The value of imports of goods and services.
Imports
The value of goods and services purchased domestically that are produced abroad.
Import substitution
A growth strategy where domestic production is substituted for imports in an attempt to shift production away from the primary sector and industrialize. This strategy requires that the domestic industry is protected from import competition.
Income
A flow of earnings from using factors of production to produce goods and services. Wages and salaries are the factor reward labour and interest is the flow of income for the ownership of capital.
Income elasticity of demand (YED)
The responsiveness of demand for a good or service to a change in income.
Indirect taxes
Taxes on expenditure to buy goods and services.
Inferior goods
Lower quality goods for which higher quality substitutes exist; if incomes rise, demand for the lower quality goods decreases.
Inflation
A sustained increase in the average level of prices.
Inflationary gap
The case where equilibrium real output exceeds potential output as a result of an increase in AD.
Inflation rate
The percentage change between two periods of the average price level, usually measured through the CPI.
Infrastructure
Physical capital typically financed by governments that is essential for economic activity to take place, including roads, power, telecommunications and sanitation, generating significant positive externalities.
Injections
Within the circular flow model these refer to spending on domestic output that does not originate from households and thus includes investment spending by firms, government expenditures and exports.
Interest rate
The cost of borrowing money or the reward for saving money over a period of time expressed as a percentage.
International Monetary Fund (IMF)
An international financial institution of 189 countries whose objectives include to improve global monetary cooperation and secure financial stability by monitoring the economic and financial policies of its members and providing them with advice and with loans, if they face balance of payments difficulties.
Interventionist supply side policies
A set of policies that aim to increase an economy’s productive capacity that relies on a greater role for the government; these include expenditures on infrastructure, education, health care, research and development, and all industrial policies.
Investment (I)
Spending by firms on capital goods such as machines, tools, equipment and factories.
Keynesian aggregate supply curve
An aggregate supply curve that shows the level of real output produced in an economy in relation to the price level. It consists of three sections: a horizontal section, an upwardsloping section and a vertical section. Changes in real GDP or the price level depend on aggregate demand and how close to capacity the economy is operating.
Land
One of the four factors of production that refers to the natural resources with which an economy is endowed; also referred to as “gifts of nature”.
Law of demand
A law stating that as the price of a good falls, the quantity demanded will increase over a certain period of time, ceteris paribus.
Law of supply
A law stating that as the price of a good rises, the quantity supplied will rise over a certain period of time, ceteris paribus.
Leakages
Income not spent on domestic goods and services. It includes savings, taxes and import expenditure.
Long-run aggregate supply (LRAS)
Aggregate supply that is dependent upon the resources and technology in the economy, thus being independent of the price level. It is vertical at the level of potential output. It can only be increased by improvements in the quantity and/or quality of factors of production as well as improved technology.
Long run in macroeconomics
The period of time when the prices of all factors of production, especially wages, change to match changes in the price level.
Long-term growth
Growth over long periods of time. In the PPC model this is shown by outward shifts of the PPC. When shown in the AD–AS model (the AD–AS model considers the AD and AS curves together), it is shown by rightward shifts in the LRAS curve.
Lorenz curve
A curve showing what percentage of the population owns what percentage of the total income or wealth in the economy. It is calculated in cumulative terms. The further the curve is from the line of absolute equality (along the diagonal), the more unequal the distribution of income.
Luxury goods
Goods that are not considered essential by consumers therefore they have a price elastic demand (PED > 1), or income elastic demand (YED > 1).
Macroeconomics
The study of aggregate economic activity. It investigates how the economy as a whole works.
Marginal benefit
The extra or additional benefit enjoyed by consumers that arises from consuming one more unit of output.
Marginal costs
The extra or additional costs of producing one more unit of output.
Marginal social benefit (MSB)
The extra or additional benefit/utility to society of consuming an additional unit of output, including both the private benefit and the external benefit.
Marginal social cost (MSC)
The extra or additional cost to society of producing an additional unit of output, including both the private cost and the external costs.
Marginal tax rate
The proportion of a person’s extra or additional income that is paid in tax, usually expressed as a percentage.
Market-based supply side policies
A set of policies based on well-functioning competitive markets in order to promote longterm economic growth, shown by increases in long-run aggregate supply.
Market demand
The sum of the individual demand curves for a product of all the consumers in a market.
Market equilibrium
In a market this occurs at the price where the quantity of a product demanded is equal to the quantity supplied. This is the market clearing price since there is no excess demand or excess supply.
Market failure
The failure of markets to achieve allocative efficiency. Markets fail to produce the output at which marginal social benefits are equal to marginal social costs; social or community surplus (consumer surplus + producer surplus) is not maximized.
Market mechanism
The system in which the forces of demand and supply determine the prices of products. Also known as the price mechanism.
Market-oriented approaches
Approaches or policies that are based on the actions of private decision-makers operating in markets with a minimum amount of government intervention.
Market share
The percentage of total sales in a market accounted for by one firm.
Market supply
The horizontal sum of the individual supply curves for a product of all the producers in a market.
Maximum price
A price set by a government or other authority that is below the market equilibrium price of a good or service, also known as a price ceiling.
Merit goods
Goods or services considered to be beneficial for people that are under-provided by the market and so under-consumed, mainly due to positive consumption externalities.
Microeconomics
The study of the behaviour of individual consumers, firms, and markets and the determination of market prices and quantities of goods, services, and factors of production.
Minimum price
A price set by a government or other authority above the market equilibrium price of a good or service, also known as a price floor.
Minimum wage
A type of price floor where the wage rate or the price of labour is set above the market equilibrium wage rate.
Monetary policy
A demand-side policy using changes in the money supply or interest rates to achieve economic objectives relating to output, employment and inflation.
Monetary union
Where two or more countries share the same currency and have a common central bank.
Multilateral development assistance
Assistance provided by multilateral organizations such as the World Bank when they lend to developing countries for the purpose of helping them in their development objectives.
Multilateral trade agreement
An agreement between many countries to lower tariffs or other protectionist measures, currently carried out within the framework of the WTO.
National income
The income earned by the factors of production of an economy, equal to wages plus interest, plus rents, plus profits.
Natural rate of unemployment
The rate of unemployment that occurs when the economy is producing at its potential output or full employment level of output. It is equal to the sum of structural, frictional and seasonal unemployment.
Necessity
The degree to which a good is necessary or essential.
If the increase in demand for a necessity good is less than proportional to the rise in income; then the necessity good is income elastic.
If the change in quantity demanded for a necessity good is less than proportional to a change in price; then the necessity good is price inelastic.
Negative externalities of consumption
Negative effects suffered by a third party whose interests are not considered when a good or service is consumed, so the third party are therefore not compensated.
Negative externalities of production
Negative effects suffered by a third party whose interests are not considered when a good or service is produced, so the third party are therefore not compensated.
Net exports (X - M)
Export revenues minus import expenditure.
Nominal gross domestic product
The total money value of all final goods and services produced in an economy in a given time period, usually one year, at current values (not adjusted for inflation).
Nominal gross national income
The total income earned by all the residents of a country (regardless of where their factors of production are located) in a given time period, usually a year, at current prices (not adjusted for inflation).
Nominal interest rates
Interest rates that have not been adjusted for inflation.
Normal goods
A good where the demand for it increases as income increases.
Official Development Assistance (ODA)
Aid that is provided to a country by another government or multilateral agency. It is the most important part of foreign aid.
Opportunity cost
The next best alternative foregone when an economic decision is made.
Perfectly inelastic supply
Where a change in the price of a good or service leads to no change in the quantity supplied of the good or service. (PES is equal to zero.)
Personal income taxes
Taxes paid by individuals or households on their incomes, regardless of the source of the income, such as wages, salaries, interest income or dividends.
Portfolio investment
The purchase of financial assets such as shares and bonds in order to gain a financial return in the form of interest or dividends. Appears in the financial account of the balance of payments.
Positive externalities of consumption
The beneficial effects that are enjoyed by third parties whose interests are not accounted for when a good or service is consumed, therefore they do not pay for the benefits they receive.
Potential output
Output produced by an economy when it is at full employment equilibrium, or long-run equilibrium according to the monetarist/new classical model.
Price ceiling (maximum price)
A price imposed by an authority and set below the equilibrium price. Prices cannot rise above this price.
Price controls
Prices imposed by an authority, set above or below the equilibrium market price.
(Price) elastic demand
Where a change in the price of a good or service leads to a proportionately larger change in the quantity demanded of the good or service in the opposite direction. (PED is greater than one.)
Price elasticity of demand (PED)
A measure of the responsiveness of the quantity demanded of a good or service to a change in its price.
Price elasticity of supply (PES)
A measure of the responsiveness of the quantity supplied of a good or service to a change in its price.
(Price) elastic supply
Where a change in the price of a good or service leads to a proportionately larger change in the quantity supplied of the good or service in the same direction. (PES is greater than one.)
Price floor (minimum price)
A price imposed by an authority and set above the market price. Prices cannot fall below this price.
(Price) inelastic demand
Where a change in the price of a good or service leads to a proportionately smaller change in the quantity demanded of the good or service in the opposite direction. (PED is less than one.)
(Price) inelastic supply
Where a change in the price of a good or service leads to a proportionately smaller change in the quantity supplied of the good or service in the same direction. (PES is less than one.)
Price mechanism
The system where the forces of demand and supply determine the prices of products. Also known as the market mechanism.
Primary commodities
Raw materials that are produced in the primary sector. Examples include agricultural products, metals and minerals.
Primary sector
Anything derived from the factor of production land. Includes agricultural products, metals and minerals.
Privatization
The sale of public assets to the private sector. May be a type of supply-side policy.
Producer surplus
The benefit enjoyed by producers by receiving a price that is higher than the price they were willing to receive
Production possibilities curve (PPC)
A curve showing the maximum combinations of goods or services that can be produced by an economy in a given time period, if all the resources in the economy are being used fully and efficiently and the state of technology is fixed.
Progressive taxation
Taxation where the fraction of tax paid increases as income increases. The average tax rate increases.
Public goods
Goods or services that have the characteristics of non-rivalry and non-excludability, for example, flood barriers.
Quantity demanded
The quantity of a good or service demanded at a particular price over a given time period, ceteris paribus.
Quantity supplied
The quantity of a good or service supplied at a particular price over a given time period, ceteris paribus.
Quota
An import barrier that set limits on the quantity or value of imports that may be imported into a country.
Real GDP
The total value of all final goods and services produced in an economy in a given time period, usually one year, adjusted for inflation.
Real GDP per person (per capita)
Real GDP divided by the population of the country.
Real GNI per person (per capita)
Real GNI divided by the population of the country.
Real interest rates
Interest rates that have been adjusted for inflation.
Recession
Occurs when real GDP falls for at least two consecutive quarters.
Regressive taxation
Taxation where the fraction of tax paid decreases as income increases. The average tax rate decreases. All indirect taxes are regressive.
Relative poverty
A comparative measure of poverty according to which income levels do not allow people to reach a standard of living that is typical of the society in which they live. It is defined as a percentage of society’s median income.
Remittances
The transfer of money by foreign workers to individuals, often family members, in their home country.
Reserve assets
Foreign currencies and precious metals held by central banks as a result of international trade. Reserves may be used to maintain or influence the exchange rate for the country’s currency. Reserves appear as an item in the financial account of the balance of payments.
Resource allocation
Apportioning available resources or factors of production to particular uses for production purposes.
Revaluation
An increase in the value of a currency in a fixed exchange rate system.
Revenues
Payments received by firms when they sell their output (price multiplied by quantity sold)
Scarcity
The limited availability of economic resources relative to society’s unlimited needs and wants of goods and services.
Shortage
Arises when the quantity demanded of a good or services is more than the quantity supplied at some particular price.
Short-run aggregate supply (SRAS)
The total quantity of real output (real GDP) offered at different possible price levels in the short run (when wages and other resource prices are constant).
Short run in macroeconomics
The period of time when the prices of factors of production, especially wages, are considered fixed.
Short run in microeconomics
The period of time when at least one factor of production is fixed.
Social/community surplus
The sum combination of consumer surplus and producer surplus.
Socially optimum output
This occurs where there is allocative efficiency, or where the marginal social cost of producing a good is equal to the marginal social benefit of the good to society. Alternatively, it occurs where the marginal cost of producing a good (including any external costs) is equal to the price that is charged to consumers (P = MC for the last unit produced).
Structural unemployment
A kind of long-term unemployment that arises from a number of factors including: technological change; changes in the patterns of demand for different labour skills; changes in the geographical location of industries; labour market rigidities.
Subsidies
An amount of money paid by the government to a firm, per unit of output, to encourage production and lower the price to consumers.
Subsidy (international)
An amount of money paid by the government to a firm, per unit of output, to encourage production and provide the firm an advantage over foreign competition.
Substitutes
Goods that can be used in place of each other, as they satisfy a similar need.
Supply
Quantities of a good that firms are willing and able to supply at different possible prices, over a given time period, ceteris paribus.
Supply curve
A curve showing the relationship between the price of a good or service and the quantity supplied, ceteris paribus. It is normally upward sloping.
Supply-side policies
Government policies designed to shift the longrun aggregate supply curve to the right, thus increasing potential output in the economy and achieving economic growth.
Surplus
An excess of something over something else. It occurs:
when quantity supplied is greater than quantity demanded at a particular price
when tax revenues are greater than government spending (budget surplus)
on an account when credits are greater than debits in the balance of payments.
See also “consumer surplus” and “producer surplus”.
Sustainability
Refers to the preserving the environment so that it can continue to satisfy needs and wants into the future. Relates to the concept of “sustainable development”.
Sustainable development
Refers to the degree to which the current generation is able to meet its needs today but still conserve resources for the sake of future generations.
Tariff
A tax that is placed on imports to protect domestic industries from foreign competition and to raise revenue for the government.
Total costs
All the costs of a firm incurred for the use of resources to produce something.
Total revenue
The amount of revenue received by a firm from the sale of a particular quantity of output (equal to price times quantity sold).
Tradable permits
Permits to pollute, issued by a governing body, that sets a maximum amount of pollution allowable. These permits may be traded (bought or sold) in a market for such permits.
Trade protection
Government intervention aiming to limit imports and/or encourage exports by setting up trade barriers that protect from foreign competition.
Trading bloc
A group of countries that have agreed to reduce protectionist measures like tariffs and quotas between them.
Transfer payments
Payments made by the government to vulnerable groups in a society, including older people, low income people, unemployed and many more. The objective is to transfer money from taxpayers to those who cannot work, to prevent them from falling into poverty.
Unemployment
When a person (who is above a specified age and is available to work) is actively looking for work, but is without a job.
Unemployment rate
The number of unemployed workers expressed as a percentage of the total workforce.
Unfair competition
In international trade this refers to practices of countries trying to gain an unfair advantage through such methods as undervalued exchange rates.
Welfare loss
A loss of a part of social surplus (consumer plus producer surplus) that occurs when there is market failure so that marginal social benefits are not equal to marginal private benefits.
World Bank
An international organization that provides loans and advice to economically less developed countries for the purpose of promoting economic development and reducing poverty.
World Trade Organization (WTO)
An international body that sets the rules for global trading and resolves disputes between its member countries. It also hosts negotiations concerning the reduction of trade barriers between its member nations.
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