ALL IB Economics SL Terms

ALL IB Economics SL Terms Absolute poverty - ANS-The inability of an individual or a family to afford a basic standard of goods and services, where the standard is absolute and unchanging over time. Absolute poverty is defined in relation to a nationally or internationally determined 'poverty line', which determines the minimum income that can sustain a family in terms of its basic needs. Actual output - ANS-The quantity of output actually produced by an economy. Ad Valorem Taxes - ANS-Taxes calculated as a fixed percentage of the price of the good or service; the amount of tax increases as the price of the good or service increases. Administrative barriers (Give *two* examples) - ANS-Trade protection measures taking the form of administrative procedures that countries may use to prevent the free flow of imports into a country. State two: 1. safety standards 2. health standards 3. environmental standards 4. customs procedures 5. bureaucratic procedures 6. product standards 7. packaging requirements. Aggregate demand - ANS-The total quantity of goods and services that all buyers in an economy (Consumers, Firms, the Government, and Foreigners) want to buy over a particular time period, at different possible price levels. Aggregate demand curve - ANS-The curve that shows that relationship between total quantity of goods and services that all buyers in an economy want to buy over a particular time period. Aggregate supply - ANS-The total quantity of goods and services produced in an economy are willing and able to supply over a particular period of time, at different average price levels; ceteris paribus. Allocative efficiency - ANS-An allocation of resources that results in producing the combination and quantity of goods and services mostly preferred by consumers. Marginal Cost = Marginal Benefit Anti-dumping - ANS-An argument that justifies trade protection policies: if a country's trading partner is suspected of practicising dumping, than the country should have the right to impose trade protection measures (tariffs or quotas) to limit quantities of the dumped good. Appreciation - ANS-Refers to an increase in the value of a currency in the context of a floating (flexible) exchange rate system or managed exchange rate system. Appropriate technology - ANS-Technologies that are well-suited to a country's particular economic, geographical, ecological, and climate conditions. A possible disadvantage of economic growth, when appropriate technology is not produced as a result of economic growth. Automatic stabilisers - ANS-Factors that automatically, without any actions by the government, work toward stabilizing the economy by reducing the short term fluctuation of the business cycle. Two important automatic stabilizers are PROGRESSIVE INCOME TAXES and UNEMPLOYMENT BENEFITS. Balance of payments - ANS-A record of all transactions between the residents of a country and the residents of all other countries. It shows all payments received from other countries (credits), and all payments made to other countries (debits). It has CURRENT ACCOUNT, CAPITAL ACCOUNT, FINANCIAL ACCOUNT, and ERRORS&OMISSIONS. Balanced Budget - ANS-Refers to a situation where the government's tax revenues equals the government expenditures. Bilateral trade agreement - ANS-Any trade agreement involving two trading partners. Budget deficit - ANS-It is a situation where the government's tax revenues are less than the government expenditures over a specific period of time. Budget surplus - ANS-It is a situation where the government tax revenues are greater than government expenditures over a specific period of time. Business cycle - ANS-Fluctuations in the growth of real GDP, consisting of alternating periods of expansions and contractions. Cap and Trade Scheme - ANS-A scheme in which a government authority sets a limit or 'cap' on the amount of pollutants that can be legally emitted by a firm, set by an amount of pollution permits (tradable permits) distributed to firms. Capital account (BALANCE OF PAYMENTS) - ANS-Refers to the inflows minus the outflows of funds for capital transfers (including *debt forgiveness* and *non-life insurance claims*) and the *purchase or use of non-produced natural resources* (such as mineral rights, forestry rights, fishing rights, and airspace). Carbon tax - ANS-A tax per unit of carbon emissions of fossil fuels. Central Bank - ANS-A financial institution that is responsible for regulating the country's financial system and commercial banks, and carrying out monetary policies. Ceteris Paribus - ANS-"other things being equal" Circular flow of income model - ANS-A model showing the flow of resources from consumers to firms, and the flow of products from firms to consumers, as well as money flows consisting of consumers' income arising from the sale of their resources and firms' revenues arising from the sale of their products. Basically, it illustrates the equivalence of expenditure flows, value of output flows, and income flows. Clean technology - ANS-Technology that is not polluting, associated with environmental sustainability. Examples: Solar power, wind power, hydropower, and recycling. Closed economy - ANS-An economy that has no international trade. THIS DOES NOT REALLY EXIST IN THE REAL WORLD. Commercial bank - ANS-A financial institution whose main functions are to hold deposits for their customers, to make loans to their customers, to transfer funds by check from one bank to another, and to buy government bonds. Common pool resources - ANS-Resources that are not owned by anyone, do not have a price, and are available for anyone to use without payments. Examples: Lakes, rivers, and fishes in open seas. These resources are a threat to sustainability. Common market - ANS-A type of trading bloc in which countries that have formed a customs union proceed further to eliminate any remaining tariffs in trade between them. Example: European Economic Community. Similar to a customs union, where there are common trade protectionist policies with outside countries. Competitive market - ANS-A market composed of many buyers and sellers acting independently, none of whom has any market power. Competitive supply - ANS-A situation where two goods compete for the same resources. Example: A farmer can produce wheat or corn, but producing more of one means producing less of the other. Competition - ANS-A situation that occurs when there are many buyers and sellers acting independently, so that no one has the ability to influence the price at which the product is sold in the market. Complement goods - ANS-Two or more goods that tend to be used together. If two goods are complements, an increase in the price of one will lead to a decrease in the demand of the other. XED 0 Composite indicator - ANS-A summary measure of more than one indicator. For example: Human Development Indicator includes income, education and health indicators. Concessional Long Term Loans - ANS-A form of aid with very low (below market rate) or no rate of interest with repayments that are stretched over a long time period (25 to 40 years) may include a grace period may be repayable in local currency. Conditional assistance - ANS-Refers to development assistance provided by bilateral or multilateral development organizations, which is extended to countries on condition that they satisfy certain requirements, usually requiring that the country adopts particular policies. Consumer Price Index - ANS-A measure of the cost of living for the typical household. It compares the value of a basket of goods and services in one year with the value of the same basket in a base year. Consumer surplus - ANS-Refers to the difference between the highest prices consumers are willing to pay for a good and the price actually paid. Consumption - ANS-Spending by households (consumers) on goods and services (excludes spending on housing). Contractionary fiscal policy - ANS-A fiscal policy that is usually pursued during an inflationary period. It involves decreasing government spending or increasing taxes. Possibly both methods. Contractionary monetary policy - ANS-A monetary policy usually pursued in an inflationary period. Increasing money supply order to increase the interest rates (to lower investment and consumption spending). Core rate of inflation - ANS-A rate of inflation based on consumer price index that excludes goods with highly volatile (unstable) prices. This is most notable in food and energy prices. Corporate indebtedness - ANS-The degree to which corporations have debts. Continues...