4.4 & 4.5 Theme 4 Global Economy Edexcel A level Economics with correct answers

Globalisation: The process by which the world is becoming a single economy Sustainable Development: Development that meets the needs of current generations without compromising the needs of future generations Transfer Pricing: An account technique used by TNC's for reducing taxes on profits. By buying internally to ensure losses in high tax countries and profits declared in low tax regions. Capital Markets: Financial Markets which provide long-term borrowing and lending Commercial Banks: Banks that provide that provide services to businesses Derivatives: Financial instruments based on values of other financial instruments Equity: In a company it is the value of assets owned by shareholders Financial Market: A place where buyers and sellers can trade monetary services or assets Investment Banks: Banks that engage in foreign exchange, money, capital and derivative markets Money Market: Markets offering short term borrowing and lending - up to 1 year Retail Banks: Banks that provide services to individuals Moral Hazard: The difficulty in writing off debt that countries feel they might not learn the value of money Market Rigging: When some of the companies in a market act together to stop a market working as it should in order to gain an unfair advantage Capital Expenditure: Government spending on long term infrastructure projects includes Property, Plant and Equipment Current Expenditure: Government Expenditure on Wages and Day to Day costs that do not boost AS Transfer Payments: Benefits given where there is no output - not included in AD (GDP) Productivity: Output per unit of input employed Crowding Out: Where the public sector "crowds out" private sector - by extra government spending or cheaper government borrowing, leading to x inefficiency Laffer Curve: Notional curve identifying optimal tax rate to maximise tax revenue Income Distribution: How earned and unearned income is spread across society from the richest to the poorest Regressive Tax A tax where the proportion of income paid in tax rises as taxpayer income falls - Poll Tax Progressive Tax A tax where the proportion of income paid in tax rises as taxpayer income rises Marginal Tax: For every extra £ earned how much is paid in tax Direct Tax: Tax taken at directly on an organisation or individual eg income tax Indirect Tax: Taxes on Goods and Services Automatic Stabilisers: Expenditures that automatically increase when the economy is going into recession - they automatically fall when GDP begins to rise (Tax and Benefits) Discretionary Stabilisers: Deliberate decisions making by government to change rates of tax, introduce new taxes or change levels of government spending Fiscal Deficit: When governments spend more than they receive in a year National Debt: The accumulation of all historic Budget Deficits and Surpluses Structural deficit: the fiscal deficit which occurs when the cyclical deficit is lowest