AS 1 · Economic concepts and agentsPositive statement
A testable claim about what is or may be.
Learn this term in context →AS 1 · Economic concepts and agentsNormative statement
A claim containing a value judgement about what ought to be.
Learn this term in context →AS 1 · Economic concepts and agentsEconomic agent
A decision-maker participating in economic activity.
Learn this term in context →AS 1 · Economic concepts and agentsFactor market
A market for inputs such as labour or capital.
Learn this term in context →AS 1 · Economic concepts and agentsLand
Natural resources used in production.
Learn this term in context →AS 1 · Economic concepts and agentsLabour
Human physical and mental effort used in production.
Learn this term in context →AS 1 · Economic concepts and agentsCapital good
A produced asset used to make other goods or services.
Learn this term in context →AS 1 · Economic concepts and agentsEnterprise
The function of organising resources, innovating and bearing business uncertainty.
Learn this term in context →AS 1 · Scarcity, choice and production possibility frontiersScarcity
Unlimited wants relative to finite resources.
Learn this term in context →AS 1 · Scarcity, choice and production possibility frontiersOpportunity cost
The next-best alternative forgone.
Learn this term in context →AS 1 · Scarcity, choice and production possibility frontiersProductive efficiency
Producing maximum output from available inputs.
Learn this term in context →AS 1 · Scarcity, choice and production possibility frontiersSpecialisation
Concentrating resources on a narrower range of tasks or output.
Learn this term in context →AS 1 · Scarcity, choice and production possibility frontiersProduction possibility frontier
The boundary showing maximum feasible combinations of two outputs with current resources and technology.
Learn this term in context →AS 1 · Scarcity, choice and production possibility frontiersDivision of labour
Splitting production into specialised tasks.
Learn this term in context →AS 1 · Scarcity, choice and production possibility frontiersMixed economy
An allocation system combining market decisions with government ownership, provision or intervention.
Learn this term in context →AS 1 · Demand, supply and equilibriumDemand
Quantity buyers are willing and able to purchase at each price.
Learn this term in context →AS 1 · Demand, supply and equilibriumSupply
Quantity sellers are willing and able to offer at each price.
Learn this term in context →AS 1 · Demand, supply and equilibriumEquilibrium
A price where planned demand equals planned supply.
Learn this term in context →AS 1 · Demand, supply and equilibriumConsumer surplus
Difference between willingness to pay and the market price.
Learn this term in context →AS 1 · Demand, supply and equilibriumQuantity demanded
The amount buyers plan to purchase at one specified price over a period.
Learn this term in context →AS 1 · Demand, supply and equilibriumQuantity supplied
The amount sellers plan to offer at one specified price over a period.
Learn this term in context →AS 1 · Demand, supply and equilibriumProducer surplus
The difference between market price and the minimum amount suppliers require, represented above supply and below price.
Learn this term in context →AS 1 · Price mechanism and interrelated marketsDerived demand
Demand for an input arising from demand for final output.
Learn this term in context →AS 1 · Price mechanism and interrelated marketsComposite demand
One good demanded for several uses.
Learn this term in context →AS 1 · Price mechanism and interrelated marketsJoint supply
Products generated together from one process.
Learn this term in context →AS 1 · Price mechanism and interrelated marketsRationing function
Price allocates scarce output among competing users.
Learn this term in context →AS 1 · Price mechanism and interrelated marketsSignalling function
The way price communicates changing scarcity and preferences.
Learn this term in context →AS 1 · Price mechanism and interrelated marketsIncentive function
The way price and profit alter rewards for economic behaviour.
Learn this term in context →AS 1 · Price mechanism and interrelated marketsJoint demand
Demand for goods used together.
Learn this term in context →AS 1 · Elasticity of demand and supplyPED
Responsiveness of quantity demanded to a price change.
Learn this term in context →AS 1 · Elasticity of demand and supplyYED
Responsiveness of demand to an income change.
Learn this term in context →AS 1 · Elasticity of demand and supplyXED
Responsiveness of demand for one good to another good's price.
Learn this term in context →AS 1 · Elasticity of demand and supplyPES
Responsiveness of quantity supplied to a price change.
Learn this term in context →AS 1 · Elasticity of demand and supplyPrice elasticity of demand
Percentage change in quantity demanded divided by percentage change in own price.
Learn this term in context →AS 1 · Elasticity of demand and supplyIncome elasticity of demand
Percentage change in demand divided by percentage change in income.
Learn this term in context →AS 1 · Elasticity of demand and supplyCross-price elasticity of demand
Percentage change in demand for one good divided by percentage change in another good's price.
Learn this term in context →AS 1 · Elasticity of demand and supplyPrice elasticity of supply
Percentage change in quantity supplied divided by percentage change in price.
Learn this term in context →AS 1 · Elasticity of demand and supplyUnit elasticity
An elasticity magnitude equal to one.
Learn this term in context →AS 1 · Labour markets and wage determinationDerived demand for labour
Demand for workers arising from demand for their output.
Learn this term in context →AS 1 · Labour markets and wage determinationTransfer earnings
Minimum payment needed to keep a factor in its current use.
Learn this term in context →AS 1 · Labour markets and wage determinationEconomic rent
Payment above transfer earnings.
Learn this term in context →AS 1 · Labour markets and wage determinationMonopsony
A market with a powerful buyer of labour.
Learn this term in context →AS 1 · Labour markets and wage determinationWage differential
A difference in pay between workers, occupations, regions or groups.
Learn this term in context →AS 1 · Labour markets and wage determinationLabour-market flexibility
The ability of wages, hours, skills or worker allocation to adjust to changing conditions.
Learn this term in context →AS 1 · Labour markets and wage determinationCompensating wage differential
Extra pay required to offset undesirable job characteristics.
Learn this term in context →AS 1 · Market failure and welfareExternality
A spillover effect on a third party not reflected in market price.
Learn this term in context →AS 1 · Market failure and welfareSocial cost
Private cost plus external cost.
Learn this term in context →AS 1 · Market failure and welfarePublic good
A non-rival and non-excludable good.
Learn this term in context →AS 1 · Market failure and welfareInformation asymmetry
A transaction where one side has materially better information.
Learn this term in context →AS 1 · Market failure and welfareMarginal social cost
The additional total cost to society from one more unit, including private and external cost.
Learn this term in context →AS 1 · Market failure and welfareMarginal social benefit
The additional total benefit to society from one more unit, including private and external benefit.
Learn this term in context →AS 1 · Market failure and welfareNon-rivalry
One person's consumption does not significantly reduce availability to others.
Learn this term in context →AS 1 · Market failure and welfareNon-excludability
It is difficult or prohibitively costly to prevent non-payers from consuming.
Learn this term in context →AS 1 · Market failure and welfareRelative poverty
Living on resources far below the normal standard in the society, commonly measured against a relative income threshold.
Learn this term in context →AS 1 · Government intervention and government failureIndirect tax
A tax on spending or production.
Learn this term in context →AS 1 · Government intervention and government failureSubsidy
A payment reducing private cost or increasing return.
Learn this term in context →AS 1 · Government intervention and government failureTradable permit
A transferable right to undertake a limited amount of an activity.
Learn this term in context →AS 1 · Government intervention and government failureGovernment failure
Intervention causing a net welfare loss or failing to improve allocation.
Learn this term in context →AS 1 · Government intervention and government failurePigouvian tax
A tax intended to align private marginal cost with marginal social cost.
Learn this term in context →AS 1 · Government intervention and government failureTradable pollution permit
A transferable right to emit a limited quantity within an overall cap.
Learn this term in context →AS 1 · Government intervention and government failureMaximum price
A legal upper limit on price.
Learn this term in context →AS 1 · Government intervention and government failureMinimum price
A legal lower limit on price.
Learn this term in context →AS 2 · Circular flow of incomeInjection
Spending entering the circular flow independently of current domestic income.
Learn this term in context →AS 2 · Circular flow of incomeWithdrawal
Income not passed on as domestic consumption.
Learn this term in context →AS 2 · Circular flow of incomeInvestment
Spending on capital intended to support future production.
Learn this term in context →AS 2 · Circular flow of incomeEquilibrium income
Income where planned injections equal planned withdrawals.
Learn this term in context →AS 2 · Circular flow of incomeStock
A quantity measured at a point in time.
Learn this term in context →AS 2 · Circular flow of incomeMultiplier
The ratio of the eventual change in national income to an initial autonomous-spending change.
Learn this term in context →AS 2 · Measuring national income and living standardsNominal GDP
Output valued at current prices.
Learn this term in context →AS 2 · Measuring national income and living standardsReal GDP
Output adjusted for price change.
Learn this term in context →AS 2 · Measuring national income and living standardsGDP per capita
GDP divided by population.
Learn this term in context →AS 2 · Measuring national income and living standardsPurchasing power parity
Conversion reflecting relative purchasing power rather than market exchange rates alone.
Learn this term in context →AS 2 · Measuring national income and living standardsGross Domestic Product
The value of final output produced within an economy over a period.
Learn this term in context →AS 2 · Measuring national income and living standardsGross National Product
GDP plus net income received from abroad under the specification's national concept.
Learn this term in context →AS 2 · Measuring national income and living standardsValue added
A producer's sales value minus the value of intermediate inputs purchased.
Learn this term in context →AS 2 · Measuring national income and living standardsGDP deflator
A broad price index used to convert nominal GDP into real GDP.
Learn this term in context →AS 2 · Aggregate demandAggregate demand
Total planned expenditure on domestic output at each price level.
Learn this term in context →AS 2 · Aggregate demandMarginal propensity to consume
Share of an additional unit of income spent.
Learn this term in context →AS 2 · Aggregate demandMultiplier
Ratio of the final income change to the initial autonomous-demand change.
Learn this term in context →AS 2 · Aggregate demandNet exports
Exports minus imports.
Learn this term in context →AS 2 · Aggregate demandConsumption
Household spending on goods and services.
Learn this term in context →AS 2 · Aggregate demandInvestment
Spending on capital goods and additions to inventories.
Learn this term in context →AS 2 · Aggregate supplySRAS
Aggregate output firms plan at different price levels with some inputs fixed.
Learn this term in context →AS 2 · Aggregate supplyLRAS
The economy's sustainable productive capacity.
Learn this term in context →AS 2 · Aggregate supplyProductivity
Output per unit of input.
Learn this term in context →AS 2 · Aggregate supplySupply shock
An unexpected event changing economy-wide production conditions.
Learn this term in context →AS 2 · Aggregate supplyShort-run aggregate supply
Planned economy-wide output at different price levels while some input conditions adjust slowly.
Learn this term in context →AS 2 · Aggregate supplyLong-run aggregate supply
The economy's sustainable productive capacity when resources and relevant prices can adjust.
Learn this term in context →AS 2 · Aggregate supplyHysteresis
A temporary downturn causing persistent damage to capacity or employment.
Learn this term in context →AS 2 · Macroeconomic equilibrium and objectivesMacroeconomic equilibrium
Aggregate demand equals aggregate supply.
Learn this term in context →AS 2 · Macroeconomic equilibrium and objectivesOutput gap
Difference between actual and estimated potential output.
Learn this term in context →AS 2 · Macroeconomic equilibrium and objectivesTrade-off
Improving one objective entails a cost to another.
Learn this term in context →AS 2 · Macroeconomic equilibrium and objectivesPolicy objective
A measurable economic outcome government seeks to influence.
Learn this term in context →AS 2 · Macroeconomic equilibrium and objectivesLorenz curve
A curve showing the cumulative share of income or wealth received by cumulative population shares ranked from poorest to richest.
Learn this term in context →AS 2 · Macroeconomic equilibrium and objectivesGini coefficient
A summary measure of inequality based on the Lorenz curve, theoretically from zero to one.
Learn this term in context →AS 2 · Macroeconomic equilibrium and objectivesMacroeconomic trade-off
A situation where improving one objective can worsen another under the prevailing conditions.
Learn this term in context →AS 2 · Inflation and price stabilityInflation
Sustained rise in the general price level.
Learn this term in context →AS 2 · Inflation and price stabilityDisinflation
A fall in the positive inflation rate.
Learn this term in context →AS 2 · Inflation and price stabilityDeflation
A sustained fall in the general price level.
Learn this term in context →AS 2 · Inflation and price stabilityCPI
Weighted index of consumer prices.
Learn this term in context →AS 2 · Inflation and price stabilityDemand-pull inflation
Inflationary pressure caused by aggregate demand growing faster than productive capacity.
Learn this term in context →AS 2 · Inflation and price stabilityCost-push inflation
Inflationary pressure caused by rising unit costs or adverse aggregate-supply conditions.
Learn this term in context →AS 2 · Unemployment and labour-market performanceUnemployment
People without work who are available and actively seeking it.
Learn this term in context →AS 2 · Unemployment and labour-market performanceStructural unemployment
Joblessness caused by a mismatch of skills or location.
Learn this term in context →AS 2 · Unemployment and labour-market performanceCyclical unemployment
Joblessness caused by deficient aggregate demand.
Learn this term in context →AS 2 · Unemployment and labour-market performanceUnderemployment
Workers wanting more hours or working below their skills.
Learn this term in context →AS 2 · Unemployment and labour-market performanceLabour force
People employed plus those unemployed under the active-search and availability definition.
Learn this term in context →AS 2 · Unemployment and labour-market performanceEconomic inactivity
Not being in work and not meeting the active-search or availability criteria for unemployment.
Learn this term in context →AS 2 · Unemployment and labour-market performanceFrictional unemployment
Short-term unemployment arising while workers search between jobs.
Learn this term in context →AS 2 · Economic growth and the business cycleActual growth
Increase in real GDP.
Learn this term in context →AS 2 · Economic growth and the business cyclePotential growth
Increase in sustainable productive capacity.
Learn this term in context →AS 2 · Economic growth and the business cycleRecession
A significant contraction in economic activity.
Learn this term in context →AS 2 · Economic growth and the business cycleProductivity growth
Increase in output produced per unit of input.
Learn this term in context →AS 2 · Economic growth and the business cycleActual economic growth
An increase in real GDP over a period.
Learn this term in context →AS 2 · Economic growth and the business cycleBusiness cycle
Fluctuation in economic activity around its longer-run trend.
Learn this term in context →AS 2 · Economic growth and the business cycleSustainable growth
Growth that can continue without undermining future economic, social or environmental capacity.
Learn this term in context →AS 2 · Fiscal policyFiscal policy
Government decisions on taxation, spending and borrowing.
Learn this term in context →AS 2 · Fiscal policyAutomatic stabiliser
A fiscal flow changing automatically with the economic cycle.
Learn this term in context →AS 2 · Fiscal policyBudget deficit
Government spending exceeds revenue in a period.
Learn this term in context →AS 2 · Fiscal policyPublic debt
Accumulated outstanding government borrowing.
Learn this term in context →AS 2 · Fiscal policyDiscretionary fiscal policy
A deliberate change in taxation or spending decided by government.
Learn this term in context →AS 2 · Fiscal policyCrowding out
A reduction in private activity caused by government borrowing or spending using finance, resources or confidence channels.
Learn this term in context →AS 2 · Fiscal policyCrowding in
An increase in private activity encouraged by public action.
Learn this term in context →AS 2 · Monetary and supply-side policyMonetary policy
Policy affecting interest rates, money or credit conditions.
Learn this term in context →AS 2 · Monetary and supply-side policyTransmission mechanism
Channels through which policy affects economic activity and prices.
Learn this term in context →AS 2 · Monetary and supply-side policySupply-side policy
Policy intended to improve productive potential or market performance.
Learn this term in context →AS 2 · Monetary and supply-side policyPolicy lag
Delay between action and its economic effect.
Learn this term in context →AS 2 · Monetary and supply-side policyBank Rate
The policy interest rate set by the Bank of England's Monetary Policy Committee.
Learn this term in context →AS 2 · Monetary and supply-side policyDeregulation
Removal or simplification of legal restrictions on economic activity.
Learn this term in context →AS 2 · Exchange rates and the domestic economyExchange rate
Price of one currency in terms of another.
Learn this term in context →AS 2 · Exchange rates and the domestic economyAppreciation
Market-driven rise in a currency's value.
Learn this term in context →AS 2 · Exchange rates and the domestic economyDepreciation
Market-driven fall in a currency's value.
Learn this term in context →AS 2 · Exchange rates and the domestic economyEffective exchange rate
Trade-weighted index of a currency against several currencies.
Learn this term in context →AS 2 · Exchange rates and the domestic economyPass-through
The extent to which an exchange-rate or cost change alters final prices.
Learn this term in context →A2 1 · Production, costs and revenueMarginal cost
Change in total cost from one more unit.
Learn this term in context →A2 1 · Production, costs and revenueAverage cost
Total cost per unit of output.
Learn this term in context →A2 1 · Production, costs and revenueDiminishing marginal returns
Eventually smaller extra output from additional variable input with fixed factors.
Learn this term in context →A2 1 · Production, costs and revenueNormal profit
Minimum profit needed to keep enterprise in its current use.
Learn this term in context →A2 1 · Production, costs and revenueMarginal product
The change in total output from one additional unit of a variable input.
Learn this term in context →A2 1 · Production, costs and revenueAverage variable cost
Total variable cost divided by output.
Learn this term in context →A2 1 · Production, costs and revenueMarginal revenue
The change in total revenue generated by selling one additional unit.
Learn this term in context →A2 1 · Production, costs and revenueShutdown point
The short-run output condition where price or AR equals minimum AVC.
Learn this term in context →A2 1 · Production, costs and revenueMinimum efficient scale
The lowest output at which the firm reaches the minimum long-run average cost available to it.
Learn this term in context →A2 1 · Objectives and behaviour of firmsProfit maximisation
Choosing activity intended to produce the greatest profit.
Learn this term in context →A2 1 · Objectives and behaviour of firmsSatisficing
Seeking an acceptable rather than maximum result.
Learn this term in context →A2 1 · Objectives and behaviour of firmsPrincipal-agent problem
Agents' incentives differ from those they represent.
Learn this term in context →A2 1 · Objectives and behaviour of firmsSales maximisation
Pursuing the highest feasible sales volume subject to a constraint.
Learn this term in context →A2 1 · Objectives and behaviour of firmsManagerial utility
Benefits managers derive from decisions, including pay, status, security, discretion or organisational size.
Learn this term in context →A2 1 · Objectives and behaviour of firmsPrincipal–agent problem
A conflict arising when an agent has different incentives and better information than the principal.
Learn this term in context →A2 1 · Growth of firms and economies of scaleEconomy of scale
Long-run average-cost advantage from greater scale.
Learn this term in context →A2 1 · Growth of firms and economies of scaleDiseconomy of scale
Long-run average-cost disadvantage from excessive scale.
Learn this term in context →A2 1 · Growth of firms and economies of scaleHorizontal integration
Combination of firms at the same production stage.
Learn this term in context →A2 1 · Growth of firms and economies of scaleMinimum efficient scale
Lowest output at which major scale economies are achieved.
Learn this term in context →A2 1 · Growth of firms and economies of scaleOrganic growth
Expansion using the firm's own new output, capacity, products or markets.
Learn this term in context →A2 1 · Growth of firms and economies of scaleExternal economy of scale
A unit-cost advantage received because the industry or location grows.
Learn this term in context →A2 1 · Market concentration and barriers to entryConcentration ratio
Combined market share of the largest specified firms.
Learn this term in context →A2 1 · Market concentration and barriers to entryBarrier to entry
Obstacle making entry difficult or costly.
Learn this term in context →A2 1 · Market concentration and barriers to entrySunk cost
Past cost that cannot be recovered on exit.
Learn this term in context →A2 1 · Market concentration and barriers to entryContestability
Competitive pressure created by credible entry and exit.
Learn this term in context →A2 1 · Market concentration and barriers to entryMarket share
A firm's sales as a proportion of total sales in a defined market and period.
Learn this term in context →A2 1 · Perfect competitionPrice taker
A firm unable to influence market price.
Learn this term in context →A2 1 · Perfect competitionSupernormal profit
Profit above the normal return.
Learn this term in context →A2 1 · Perfect competitionAllocative efficiency
Output where price equals marginal cost.
Learn this term in context →A2 1 · Perfect competitionProductive efficiency
Production at minimum average cost.
Learn this term in context →A2 1 · Perfect competitionNormal profit
The minimum economic return needed to keep enterprise in its current use.
Learn this term in context →A2 1 · Monopoly and market powerMonopoly power
Ability to sustain price above marginal cost.
Learn this term in context →A2 1 · Monopoly and market powerPrice discrimination
Charging different prices not explained by cost differences.
Learn this term in context →A2 1 · Monopoly and market powerDeadweight loss
Net welfare lost because mutually beneficial trades do not occur.
Learn this term in context →A2 1 · Monopoly and market powerDynamic efficiency
Efficiency through innovation and investment over time.
Learn this term in context →A2 1 · Monopoly and market powerNatural monopoly
A market where one firm can supply the relevant demand at lower average cost than multiple firms.
Learn this term in context →A2 1 · Monopoly and market powerX-inefficiency
Cost above the attainable minimum because weak pressure allows organisational slack.
Learn this term in context →A2 1 · Monopoly and market powerCreative destruction
Innovation displaces existing products, methods or firms while creating new activity.
Learn this term in context →A2 1 · Monopolistic competitionProduct differentiation
Real or perceived features distinguishing an offer.
Learn this term in context →A2 1 · Monopolistic competitionNon-price competition
Competition through quality, service, brand or innovation.
Learn this term in context →A2 1 · Monopolistic competitionExcess capacity
Output below the level minimising average cost.
Learn this term in context →A2 1 · Monopolistic competitionNormal profit
Minimum return sustaining the firm's participation.
Learn this term in context →A2 1 · Monopolistic competitionMonopolistic competition
A market with many firms, differentiated products and relatively low entry and exit barriers.
Learn this term in context →A2 1 · Monopolistic competitionBrand loyalty
A repeated preference for a brand that reduces willingness to switch.
Learn this term in context →A2 1 · Oligopoly and strategic interdependenceOligopoly
Market dominated by a small number of interdependent firms.
Learn this term in context →A2 1 · Oligopoly and strategic interdependenceCollusion
Co-ordination intended to reduce competition.
Learn this term in context →A2 1 · Oligopoly and strategic interdependenceNash equilibrium
Outcome where no player gains by changing alone given others' choices.
Learn this term in context →A2 1 · Oligopoly and strategic interdependenceKinked demand
Model of asymmetric rival response producing price rigidity.
Learn this term in context →A2 1 · Oligopoly and strategic interdependenceStrategic interdependence
A condition where each firm's best decision depends on expected actions of rivals.
Learn this term in context →A2 1 · Oligopoly and strategic interdependenceTacit collusion
Co-ordinated market behaviour without an explicit agreement.
Learn this term in context →A2 1 · Oligopoly and strategic interdependenceKinked demand curve
An oligopoly model in which rivals are expected to match price cuts but not price rises.
Learn this term in context →A2 1 · Contestable marketsContestable market
Market where credible entry and exit constrain incumbents.
Learn this term in context →A2 1 · Contestable marketsHit-and-run entry
Temporary entry to capture profit before exiting.
Learn this term in context →A2 1 · Contestable marketsSunk cost
Cost unrecoverable on exit.
Learn this term in context →A2 1 · Contestable marketsLimit pricing
Keeping price low enough to deter entry.
Learn this term in context →A2 1 · Contestable marketsContestability
The degree to which credible entry and exit constrain incumbent firms.
Learn this term in context →A2 1 · Contestable marketsPotential competition
Competitive pressure from firms that could enter even if they have not yet done so.
Learn this term in context →A2 1 · Competition policy and regulationAbuse of dominance
Use of market power in conduct prohibited by competition law.
Learn this term in context →A2 1 · Competition policy and regulationMerger remedy
Condition intended to address identified competitive harm.
Learn this term in context →A2 1 · Competition policy and regulationPrice cap
Regulated upper constraint on price or revenue.
Learn this term in context →A2 1 · Competition policy and regulationRegulatory capture
Regulator acts too closely in the regulated industry's interest.
Learn this term in context →A2 1 · Competition policy and regulationStructural remedy
An intervention changing ownership or market structure.
Learn this term in context →A2 1 · Competition policy and regulationBehavioural remedy
A rule constraining how a firm acts after an intervention decision.
Learn this term in context →A2 1 · Competition policy and regulationNationalisation
Transfer of an organisation or industry into public ownership.
Learn this term in context →A2 1 · Competition policy and regulationPrivatisation
Transfer of a publicly owned organisation or asset to private ownership.
Learn this term in context →A2 2 · International trade and comparative advantageComparative advantage
Ability to produce at lower opportunity cost.
Learn this term in context →A2 2 · International trade and comparative advantageAbsolute advantage
Ability to produce more with the same resources.
Learn this term in context →A2 2 · International trade and comparative advantageTerms of trade
Index of export prices relative to import prices.
Learn this term in context →A2 2 · International trade and comparative advantageTrade creation
Replacement of higher-cost domestic output by lower-cost imports.
Learn this term in context →A2 2 · International trade and comparative advantageTrade diversion
Replacement of lower-cost outside imports by higher-cost partner imports because of preferential treatment.
Learn this term in context →A2 2 · Protectionism and trade policyTariff
Tax on imported goods or services.
Learn this term in context →A2 2 · Protectionism and trade policyQuota
Quantitative restriction on imports.
Learn this term in context →A2 2 · Protectionism and trade policyInfant industry
Emerging sector argued to need temporary protection while capability develops.
Learn this term in context →A2 2 · Protectionism and trade policyRetaliation
A trading partner's responsive restriction.
Learn this term in context →A2 2 · Protectionism and trade policyInfant-industry argument
The case for temporary protection while a new domestic industry learns and reaches efficient scale.
Learn this term in context →A2 2 · Protectionism and trade policyNon-tariff barrier
A restriction on trade other than a customs tax.
Learn this term in context →A2 2 · Protectionism and trade policyQuota rent
The gain created when restricted import supply raises domestic price above the import cost.
Learn this term in context →A2 2 · Globalisation and multinational firmsGlobalisation
Increasing cross-border integration of economic activity.
Learn this term in context →A2 2 · Globalisation and multinational firmsForeign direct investment
Cross-border investment giving lasting control or influence.
Learn this term in context →A2 2 · Globalisation and multinational firmsMultinational enterprise
Firm operating and controlling activity in more than one country.
Learn this term in context →A2 2 · Globalisation and multinational firmsValue chain
Linked activities that create and deliver a product.
Learn this term in context →A2 2 · Globalisation and multinational firmsGlobal value chain
The cross-border sequence of activities that creates and delivers a product or service.
Learn this term in context →A2 2 · Globalisation and multinational firmsGreenfield investment
FDI that creates a new overseas operation or facility.
Learn this term in context →A2 2 · Globalisation and multinational firmsProfit repatriation
Transfer of overseas subsidiary profit to the parent company's home economy.
Learn this term in context →A2 2 · Globalisation and multinational firmsSpillover
An indirect effect on other firms or agents not fully captured by the investor.
Learn this term in context →A2 2 · Economic development, poverty and inequalityEconomic development
Broad improvement in material and non-material living standards.
Learn this term in context →A2 2 · Economic development, poverty and inequalityHDI
Composite of income, health and education indicators.
Learn this term in context →A2 2 · Economic development, poverty and inequalityAbsolute poverty
Inability to meet a defined basic-needs threshold.
Learn this term in context →A2 2 · Economic development, poverty and inequalityGini coefficient
Measure of inequality ranging theoretically from zero to one.
Learn this term in context →A2 2 · Economic development, poverty and inequalityPurchasing power parity
A conversion rate designed to equalise the purchasing power of currencies for a comparable basket.
Learn this term in context →A2 2 · Economic development, poverty and inequalityHuman Development Index
A composite index combining income, education and life-expectancy dimensions.
Learn this term in context →A2 2 · Economic development, poverty and inequalityConcessional finance
Funding offered on more favourable terms than ordinary market borrowing.
Learn this term in context →A2 2 · Economic development, poverty and inequalityAid conditionality
Policy or governance requirements attached to assistance.
Learn this term in context →A2 2 · Balance of paymentsCurrent account
Trade in goods/services plus primary and secondary income.
Learn this term in context →A2 2 · Balance of paymentsFinancial account
Cross-border transactions in financial assets and liabilities.
Learn this term in context →A2 2 · Balance of paymentsCurrent-account deficit
Current-account payments exceed receipts.
Learn this term in context →A2 2 · Balance of paymentsExternal sustainability
Ability to maintain external obligations without disruptive adjustment.
Learn this term in context →A2 2 · Balance of paymentsPrimary income
Cross-border income from labour and ownership of productive or financial assets.
Learn this term in context →A2 2 · Balance of paymentsSecondary income
Current transfers where value is provided without a direct economic return.
Learn this term in context →A2 2 · Balance of paymentsExpenditure switching
Policy intended to redirect spending between foreign and domestic output.
Learn this term in context →A2 2 · Balance of paymentsExpenditure reducing
Policy intended to lower aggregate spending and thereby import demand.
Learn this term in context →A2 2 · Exchange-rate systems and policyFixed exchange rate
Currency value maintained around an official target.
Learn this term in context →A2 2 · Exchange-rate systems and policyDevaluation
Official reduction in a fixed currency value.
Learn this term in context →A2 2 · Exchange-rate systems and policyManaged float
Primarily market rate with occasional intervention.
Learn this term in context →A2 2 · Exchange-rate systems and policyForeign reserves
External assets held by a central bank for policy and liquidity.
Learn this term in context →A2 2 · Exchange-rate systems and policyAppreciation
A market-driven rise in a currency's value under a floating system.
Learn this term in context →A2 2 · Exchange-rate systems and policyDepreciation
A market-driven fall in a currency's value under a floating system.
Learn this term in context →A2 2 · Exchange-rate systems and policyMarshall–Lerner condition
The condition that the sum of the absolute price elasticities of export and import demand exceeds one for depreciation to improve the trade balance under standard assumptions.
Learn this term in context →A2 2 · Exchange-rate systems and policyJ-curve effect
A possible path where the trade balance worsens soon after depreciation before improving later.
Learn this term in context →A2 2 · Exchange-rate systems and policyTrade-weighted exchange-rate index
An index combining bilateral exchange rates using trade shares as weights.
Learn this term in context →A2 2 · European economic integrationCustoms union
Members trade freely internally and apply a common external tariff.
Learn this term in context →A2 2 · European economic integrationSingle market
Integrated market seeking free movement and common rules.
Learn this term in context →A2 2 · European economic integrationTrade diversion
Imports shift from a lower-cost outsider to a higher-cost member.
Learn this term in context →A2 2 · European economic integrationMonetary union
Members share a currency and monetary policy.
Learn this term in context →A2 2 · European economic integrationAsymmetric shock
A disturbance affecting member economies differently.
Learn this term in context →A2 2 · European economic integrationOptimum currency area
A framework identifying conditions under which sharing a currency is likely to have lower adjustment costs.
Learn this term in context →A2 2 · Macroeconomic policy in a global economyPolicy mix
Combination of fiscal, monetary and supply-side measures.
Learn this term in context →A2 2 · Macroeconomic policy in a global economyFinancial stability
Resilience of institutions and markets providing financial services.
Learn this term in context →A2 2 · Macroeconomic policy in a global economyExternal shock
Unexpected overseas event materially affecting the domestic economy.
Learn this term in context →A2 2 · Macroeconomic policy in a global economyPolicy co-ordination
Governments or institutions aligning action to manage spillovers.
Learn this term in context →A2 2 · Macroeconomic policy in a global economyQuantitative easing
Central-bank purchases of financial assets financed by newly created reserves to ease monetary conditions.
Learn this term in context →A2 2 · Macroeconomic policy in a global economyMoral hazard
A tendency to take more risk when some adverse consequences are borne by others.
Learn this term in context →A2 2 · Macroeconomic policy in a global economyFiscal deficit
The excess of government expenditure over revenue during a period.
Learn this term in context →A2 2 · Macroeconomic policy in a global economyNational debt
The outstanding stock of government borrowing at a point in time.
Learn this term in context →A2 2 · Macroeconomic policy in a global economyAutomatic stabiliser
A fiscal flow that changes with the economic cycle without a new discretionary decision.
Learn this term in context →A2 2 · Macroeconomic policy in a global economyFisher equation of exchange
The identity MV = PY linking money supply, velocity, price level and real output.
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