Concise Dictionary Of Economics E-Book

• Herausgeber: V&S Publishers
• Kategorie: Bildung
• Sprache: Englisch
• Veröffentlichungsjahr: 2018

Seitenzahl: 453

Beschreibung

Terms frequently used in Economics and their accurate explanation

Leseprobe

CONCISE

DICTIONARY OF

ECONOMICS

A Perfect Reference for Aspirants of Civil Services, all Competitive Examinations, and Intersted Reders

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© Copyright: ISBN 978-93-505741-1-9

DISCLAIMER

While every attempt has been made to provide accurate and timely information in this book, neither the author nor the publisher assumes any responsibility for errors, unintended omissions or commissions detected therein. The author and publisher make no representation or warranty with respect to the comprehensiveness or completeness of the contents provided.

All matters included have been simplified under professional guidance for general information only without any warranty for applicability on an individual. Any mention of an organization or a website in the book by way of citation or as a source of additional information doesn't imply the endorsement of the content either by the author or the publisher. It is possible that websites cited may have changed or removed between the time of editing and publishing the book.

Results from using the expert opinion in this book will be totally dependent on individual circumstances and factors beyond the control of the author and the publisher.

It makes sense to elicit advice from well informed sources before implementing the ideas given in the book. The reader assumes full responsibility for the consequences arising out from reading this book. For proper guidance, it is advisable to read the book under the watchful eyes of parents/guardian. The purchaser of this book assumes all responsibility for the use of given materials and information. The copyright of the entire content of this book rests with the author/publisher. Any infringement / transmission of the cover design, text or illustrations, in any form, by any means, by any entity will invite legal action and be responsible for consequences thereon.

Contents

Publisher’s Note

Introduction

1. A

2. B

3. C

4. D

5. E

6. F

7. G

8. H

9. I

10. J

11. K

12. L

13. M

14. N

15. O

16. P

17. Q

18. R

19. S

20. T

21. U

22. V

23. W

24. X

25. Y

26. Z

Appendix -1

Appendix - II

Appendix - III

Appendix - IV

Appendix - V

Appendix - VI

Appendix - VII

Appendix - VIII

Appendix - IX

Appendix - X

Appendix - XI

Appendix - XII

Appendix - XIII

Appendix - XIV

Appendix - XV

Appendix - XVI

Publisher’s Note

Innumerable books are available in the market on economics and allied sciences, both as a textbook and reference manual. Written for different age-groups and class, quite a number of these books come replete with jargon-filled terms; and just fail to connect with readers’ inclination and curiosity level. On top of that, new words keep finding their way into the books every other day. Every new addition contributes to difficulty in comprehending the matter.

An average reader is interested only in knowing what a specific word means without getting lost with heavy sounding inputs.

Following an open-ended discussion with a cross-section of students and average readers we realized that many currently available books on economic subjects take readers’ understanding for granted; and make short passing references while alluding to the term in the text. Presentations of this nature just don’t assist students and other readers in understanding the subject properly. This is the principal reason why V&S Publishers thought of bringing out a dictionary in economics to give readers an idea of the essential terms needed to understand this all important vibrant subject that keeps changing with the times.

V&S Publishers has so far come out with five dictionaries of terms; in science, physics, chemistry, biology and mathematics. Dictionaries of other sought-after subjects are in the works awaiting completion and publication. All these books have been written to help readers grasp the meaning of popular terms, notations and applications. And so is this dictionary of economic terms. For easy reference terms have been arranged alphabetically. Terms that have come into the reckoning even in the late 2012 have been incorporated; and suitably explained such that an average school and college student can grasp them easily. Clear images, illustrations and examples, where appropriate, have been added. For all readers, who have not made a special study of economics as a subject, terms have been suitably explained for ease in comprehension along with appropriate appendices at the end of the book.

Economics is undergoing a ‘revolution, albeit one that is difficult to get clear perspective on. The author has been selective in choosing entries so that the balance of the book is maintained at the target audience.

Some may think, the book has omitted some important entries while others may see it as having included a number of frivolous ones. To this end, all criticism and suggestions for improvement are welcome.

Introduction

Economics is the prime mover of human welfare. One way or the other, directly or indirectly every satisfaction originates out of some quantifiable activity. Read any newspaper. You would find a surfeit of topics related to material welfare occupying prominent place among news covered. New news broadcasting channels are coming up on TV exclusively devoted to economics. This growth in channels appears surprising in the face of the fact that many readers, including students consider it a dry and one of the difficult-to-understand subjects. Despite this, there is a growing tribe of interested readers trying to fathom the intricacies of ‘what in essence constitutes the study of economics’. Have you noticed the clamour for ‘economics’ as a subject among students during the time of college and university admissions? Demand keeps increasing each passing year. Articles in newspapers and magazines these days include a good number of economic terms and if you are not at least perfunctorily aware, so to say, with them you would feel ashamed inside yourself. You would literally be forced to remain ‘statue’ with mouth shut. Quite an embarrassing situation! Wouldn’t that be if you are the one at the receiving end? This is the principal reason why V&S Publishers thought of bringing out a dictionary in economics to prevent you from getting caught on the wrong foot.

Economics, in essence, is the science that deals with the production, distribution and consumption of wealth. It studies the various problems of land, labour, capital, interest, taxation, etc. and tries to find a solution or the best possible way to tackle these problems on the ground. The subject not only deals with the present and future growth of a country’s economy at the micro level, like the consumption of a household or an individual but also studies the same at a bigger and more complex level or the macro level, like the national income or the production of an industry. GDP is one of the most important components of macroeconomics. It reflects the health of the nation and its citizens. International lending institutions sanction loans and grants according to the per capita GDP. What all factors are taken into account while calculating gross domestic product or gross national product? Where does foreign national’s contribution included? Different types of employment and influence of inflation are core elements in the study of economics. The general budget shows the income and expenditure of the nation. The manner in which direct and indirect taxes are collected and distributed are major constituents of budgetary policy. International trade rules and agreements influence nations’ policies. The job of the economists is to identify the economic problems of a country’s economy and find solutions for the same, thereby promoting a healthy and smooth economic growth.

There are two schools of thoughts in economics, viz. the Classical and the Modern. The economists belonging to these two schools have contributed a lot in the field of economics through a number of theories. But, as the human wants are endless, so are the economic problems and therefore, economists are continuously working towards finding solutions for these new problems.

While economists explain economic activities in a language ordinarily understood by students and practitioners, there are many students who fail to comprehend as well as other interested readers who have not studied the subject are also left behind. This group needs help. And such help is made through this dictionary of economics.

The dictionary covers all that the traditional study aims at. It is made with the intent of providing the readers with a handy referral for the terminology used in the subject. The dictionary covers almost all the terms that form a part and parcel of economics in simple and easily comprehensible language. In order to enhance the readers’ knowledge and bring about more relevance, many examples and graphs have been used along with the definitions of the terms.

The dictionary has been arranged alphabetically A-Z. Attempt has been made to include terms that have come into frequent use. A number of entries contain cross reference except where the word or phrase is self contained and complete in itself. To simplify understanding, graphs accompany the entry wherever considered necessary.

While every attempt has been made to keep the dictionary simple and straight forward, we go by the understanding that even the best of the books have scope for improvement. If you feel that some matter needs modification or addition to text or even deletion, please inform us of the action to be taken. We would be grateful for your contribution.

A

Ability-To-Pay Principle

A principle of taxation in which taxes are based on the income or resource- ownership of people to pay the tax. The income tax is one of the most common taxes that seeks to abide by the ability- to-pay principle. In theory, the income tax system is set up such that people with greater income pay more taxes. Proportional and progressive taxes follow this ability-to-pay principle, while regressive taxes, such as sales taxes and social security taxes, don’t. The logic behind the ability-to-pay principle is that taxes are collected by the government to finance public goods that provide benefits to all members of society. And because taxes are a diversion of resources from the household to the government sector, it makes sense to tax, or divert income away from, the people who actually have the income.

Above The Line

In balance of payments accounting, this refers to those transactions that are included in calculating the balance of payments whether surplus or deficit. Transactions below the line, typically are official reserve transactions and sometimes short term capital flows, are not included.

Absolute Cost Advantage

The ability to produce a good at lower cost, in terms of real resources, than another country. In a Ricardian model,

cost is in terms of only labour. Absolute advantage is neither necessary nor sufficient for a country to export a good. See comparative advantage.

Absolute Advantage Trade Policy

The idea, advocated by opponents of globalization, that a country should import only goods in which other countries have an absolute advantage, particularly goods that the importing country cannot (or cannot “reasonably”) produce itself.

Absorption

1. Total demand for final goods and services by all residents (consumers, producers, and government) of a country (as opposed to total demand for that country’s output). The term was introduced as part of the Absorption Approach.

2. Roll-up.

Absorption Approach

A way of understanding the determinants of the balance of trade, noting that it is equal to income minus absorption.

Abundance

A term that applies when individuals can obtain all the goods they want without cost. If a good is abundant, it is free.

Abundant

Available in large supply. Usually meaningful only in relative terms, compared to demand and/or to supply at another place or time.

Abundant Factor

The factor in a country’s endowment with which it is best endowed, relative to other factors, compared to other countries. May be defined by quantity or by price.

Academic Consortium On International Trade

A group of academic economists and lawyers who are specialized in international trade policy and international economic law. ACIT’s purpose is to prepare and circulate policy statements and papers that deal with important, current issues of international trade policy.

Accelerator

The causal relationship between changes in consumption and changes in investment.

Accelerator Principle

In macroeconomic models the accelerator principle relates to changes in the rate of real output growth to the level of desired investment spending (investment demand) in the economy. A decline in the rate of real GDP growth, for example, will cause the amount of investment demand to decrease (the investment demand curve will shift to the left).

Accession

The process of adding a country to an international agreement, such as the GATT, WTO, EU, or NAFTA.

Accession Country

A country that is waiting to become a member of any international agreement.

Accommodating Transaction

In the balance of payments, a transaction that is a result of actions taken officially to manage international payments; in contrast with autonomous transaction. Thus official reserve transactions are accommodating, as may be short-term capital flows that respond to expectations of intervention.

Accumulation

The acquisition of an increasing quantity of something. The accumulation of factors, especially capital, is a primary mechanism for economic growth.

Acid Rain

The precipitation of dilute solutions of strong mineral acids, formed by the mixing in the atmosphere of various industrial pollutants primarily sulphur dioxide and nitrogen oxides with naturally occurring oxygen and water vapour.

ACP Countries

A group of African, Caribbean, and Pacific less developed countries that were included in the Lome Convention and now the Cotonou Agreement. As of June 2011, the group included 79 countries.

Acquired Endowments

Resources a country builds for itself, like a network of roads or an educated population.

Actionable Subsidy

A subsidy that is not prohibited by the WTO but that member countries are permitted to levy countervailing duties.

ACTPN

Advisory Committee on Trade Policy and Negotiations

Ad Valorem

Per unit of value (i.e., divided by the price).

Ad Valorem Duties

Defined as those duties that are established as a certain percentage of the price of the product.

Ad Valorem Equivalent

The ad valorem tariff that would be equivalent, in terms of its effects on trade, price, or some other measure, to a non tariff barrier.

Ad Valorem Tariff

Tariff defined as a percentage of the value of an imported good.

Ad Valorem Tax

A tax based on the value (or assessed value) of property. Ad valorem tax can also be levied on imported items.

Adaptive Expectations

Adaptive expectations means that people form their expectations about what will happen in the future based on what has happened in the past. For example, if inflation has been higher than expected in the past, people would revise expectations for the future.

ADB

1. African Development Bank Group.

2. Asian Development Bank

ADD

Anti-dumping duty.

Adding-Up Problem

The concern that if several developing countries expand their exports of the same good simultaneously, then the

price of that good in world markets will fall worsening their terms of trade, perhaps lowering their export revenues and real incomes as a result.

Adjustable Peg

An exchange rate that is pegged, but for which it is understood that the par value will be changed occasionally. This system can be subject to extreme speculative attack and financial crisis, since speculators may easily anticipate these changes.

Adjusted For Inflation

Corrected for price changes to yield an equivalent in terms of goods and services. The adjustment divides nominal amounts for different years by price indices for those years e.g. the CPI or the implicit price deflator and multiplies by 100. This converts to real values, i.e. valued at the prices of the base year for the price index.

Adjusted R-Squared

A goodness-of-fit measure in multiple regression analysis that penalises additional explanatory variables by using a degrees of freedom adjustment in estimating the error variance.

Adjustment Assistance

Government programme to assist those workers and/or firms whose industry has declined, either due to competition from imports (trade adjustment assistance) or from other causes. Such programmes usually have two (conflicting) goals: to lessen hardship for those affected, and to help them change their behaviour - what, how, or where they produce.

Adjustment Cost

The cost - temporary but sometimes severe - incurred by a person or firm in moving from one equilibrium

to another. Many of the costs associated with trade liberalization are adjustment costs and are not accounted for in the usual measures of gains from trade.

Adjustment Mechanism

The theoretical process by which a market changes in disequilibrium, moving toward equilibrium if the process is stable. .

Administered Price

A price for a good or service that is set and maintained by government, usually requiring accompanying restrictions on trade if the administered price differs from the world price.

Administered Protection

Protection (tariff or NTB) resulting from the application of any one of several statutes that respond to specified market circumstances or events, usually determined by an administrative agency. Several such statutes are permitted under the GATT, including anti-dumping duties, countervailing duties, and safeguards protection.

Administrative Agency

A unit of government charged with the administration of particular laws. In the United States, those most important for administering laws related to international trade are the ITC and ITA.

Administrative Entry Procedure

Formalities required to bring a product into a country. If these are unnecessarily difficult or time consuming, they constitute a nontariff barrier.

Administrative Guidance

In the context of trade policy, this usually refers to an informal system of Japanese industrial policy, called gyosei-shido, where official pronouncements serve as guidelines for domestic businesses.

Advance Deposit Requirement

A requirement that some proportion of the value of imports, or of import duties, be deposited prior to payment, without competitive interest being paid.

Advanced Country

A developed country or “more developed country” (MDC), is a sovereign state that has a highly developed economy and advanced technological infrastructure relative to other less developed nations. Most commonly the criteria for evaluating the degree of economic development is gross domestic product (GDP), the per capita income, level of industrialization, amount of widespread infrastructure and general standard of living. Which criteria are to be used and which countries can be classified as being developed are subjects of debate.

Advantage

Usually refers to a cost advantage, though it could refer to a strategic advantage (such as first mover advantage) or to a superiority of technology or quality.

Adverse Selection

principle that says that those who most want to buy insurance tend to be those most at risk, but charging a high price for insurance (to cover the high risk) will discourage those at less risk from buying insurance at all. Adverse selection arises when a negotiation between two people with asymmetric information restricts the quality of the good traded. This typically happens because the person with more

information can negotiate a favourable exchange. This is frequently referred to as the “market for lemons.”.

Adverse Terms Of Trade

A terms of trade that is considered unfavourable relative to some benchmark or to past experience. Developing countries specialized in primary products are sometimes said to suffer from adverse or declining terms of trade.

Advisory Committee On Trade Policy and Negotiations

The highest-level of several committees that advise USTR on trade policy and trade negotiations. This one includes representatives of private-sector businesses, trade associations, unions, state and local governments, and other organizations.

AEC

1. African Economic Community.

2. ASEAN Economic Community

African Development Bank Group

A multinational development bank for Africa.

African Economic Community

An organization of African countries that aims to promote economic, cultural and social development among the African economies. Among other things, it intends to promote the formation of FTAs and customs unions among regional groups within Africa that will eventually merge into an African Common Market.

African Growth And Opportunity Act

It is a U.S. legislation enacted May 2000 providing tariff preferences, as well as trade facilitation and technical assistance to African producers, to

African countries that qualify. As of August 2012, 41 countries had been declared eligible.

AG

Comparable to “Inc” in the U.S. and Ltd in the U.K., this abbreviation for the GermanAktiengesellschaft indicates a limited-liability corporation.

Agenda 21

A plan of action adopted at the Rio Summit to promote sustainable development.

Agent

1. An entity within the economy that makes economic decisions and engages on economic activity. Used to refer to individual consumers, households, and firms.

2. One who acts on behalf of someone else.

3. In Principal-Agent Theory, the person whose job it is to act to the benefit of someone else (the principal), but who may require some incentive to do so.

Agglomeration

The phenomenon of economic activity congregating in or close to a single location, rather than being spread out uniformly over space.

Agglomeration Economy

Any benefit that accrues to economic agents as a result of having large numbers of other agents geographically close to them, thus tending to lead to agglomeration. This is a basic feature of the New Economic Geography.

Aggregate

As an adjective or noun (with stress on the first syllable), this refers to the sum or total of multiple items. As a verb (with stress on the last syllable),

this means to combine such items or add them up.

Aggregate Demand

Aggregate demand is the total spending on goods and services in the economy.

The aggregate demand curve is made up of a series of separate curves giving the level of consumption, investment, government expenditure and the net level of exports. This Keynesian aggregate demand curve is upward sloping as the level of expenditure will tend to increase as income increases. How much this happens depends on the marginal propensity to consume.

Aggregate Demand Curve

In macroeconomic theory the aggregate demand curve relates to the level of real national income (GDP) demanded (the total quantity of goods and services demanded) to the price level (as measured by the GDP deflator).

Aggregate Expenditure

In macroeconomic theory aggregate expenditure is the total amount of desired spending by consumers, governments, private investors and foreign buyers (net of spending on imports) at each level of real national income (GDP).

Aggregate Expenditures Schedule

A curve that traces out the relationship between expenditures-the sum of consumption, investment, government expenditures, and net exports-and the national income, at a fixed price level.

Aggregate Measure Of Support

The measurement of subsidy to agriculture used by the WTO as the basis for commitments to reduce the subsidization of agricultural products. It includes the value of price supports and direct subsidies to specific products, as well as payments that are not product specific.

Aggregate Production Possibility Frontier

The production possibility frontier, or curve obtained by adding the production possibilities of two or more countries or regions.

Aggregate Supply

The total supply of a country’s output, usually assumed to be an increasing function of its price level in the short run but independent of the price level in the long run.

Aggregate Supply Curve

In macroeconomic theory the short run aggregate supply curve relates to the total quantity of goods and services supplied and the price level (as measured by the GDP deflator). The long run aggregate supply curve is a vertical line at the full employment (capacity output) level of real national income (GDP).

Aggregate Transformation Curve

Aggregate production possibility frontier.

Aggregation

The combining of two or more kinds of an economic entity into a single category. Data on international trade necessarily aggregate goods and services into manageable groups. For macroeconomic purposes, all goods and services are usually aggregated into just one.

Agrarian Reform

Change in the policies affecting agriculture, usually including redistribution of land and sometimes also changes in other policies related to the inputs and outputs of agriculture. Agreement On Textiles And Clothing is a 10-year transitional programme of the WTO to phase out the quotas on textiles and apparel of the MFA.

Agreement On Trade In Civil Aircraft

A plurilateral agreement within the WTO eliminating duties on aircraft (except military) and aircraft parts. It includes disciplines on government procurement and inducements to purchase. As of August 2012 it had 31 signatories.

Agricultural Good

A good that is produced by agriculture.

Agricultural Terms of Trade

The prices of agricultural outputs relative to the prices of agricultural inputs. If agricultural output prices rise relative to input prices, we say that there is a positive agricultural terms of trade effect.

Agriculture

Production that relies essentially on the growth and nurturing of plants and animals, especially for food, usually with land as an important input; farming.

Agriculture Agreement

The agreement within the WTO that commits member governments to improve market accessand reduce trade-distorting subsidies in agriculture, starting with the process of tariffication.

Aid

Assistance provided by countries and by international institutions such as the World Bank todeveloping countries in the form of monetary grants, loans at low interest rates, in kind, or a combination of these.

Aid For Trade

The strategy of promoting economic development by helping countries to create or improve infrastructure needed to facilitate international trade. This was one of the intended components of the Doha Round negotiations, and was institutionalized in a WTO work programme on Aid-for-Trade in the Hong Kong Ministerial Conclave.

Airbus

Airbus, a subsidiary of EADS, is a company producing aircraft in Europe. It was originally backed by a consortium of four companies from four countries (France, Germany, Spain, and the U.K.) and their governments. That backing has been one of the subjects of the Boeing- Airbus Dispute.

Alchian-Allen Theorem

The proposition, due to Alchian and Allen (1964), that when the same absolute cost (as for transportation) is added to the prices of a low-price, low-quality good and a high-price, high-quality good, the relative demand for the latter will increase, since it’s relative price falls. Summarized as “shipping the good apples out,” the result has been confirmed in international trade by Hummels and Skiba (2004).

Allocation

An assignment of economic resources to uses. Thus, in general equilibrium, an assignment off actors to industries producing goods and services, together with the assignment of resulting final goods and services to consumers, within a country or throughout the world economy.

Allocative Efficiency

Refers to whether or not an allocation is efficient. A change from an allocation that is not efficient, to one that is, may be termed an “increase” in allocative efficiency.

Alternative Cost

The value of the product that particular resources could have produced had they been used in the best alternative way; also called opportunity cost.

Alternative Hypothesis

The hypothesis against which the null hypothesis is tested.

Alternative Minimum Tax

An IRS mechanism created to ensure that high-income individuals, corporations, trusts, and estates pay at least some minimum amount of tax, regardless of deductions, credits or exemptions. Alternative minimum tax operates by adding certain tax- preference items back into adjusted gross income. While it was once only important for a small number of high- income individuals who made extensive use of tax shelters and deductions, more and more people are being affected by it. The AMT is triggered when there are large numbers of personal exemptions on state and local taxes paid, large numbers of miscellaneous itemized

deductions or medical expenses, or by Incentive Stock Option (ISO) plans.

Alternative Trade Adjustment Assistance

An addition to the US programme of trade adjustment assistance, enacted in 2002, that provides wage insurance for a limited group of older workers.

Alternatives

Options among which to make choices.

Amber Box

The category of subsidies in the WTO the total value of which is to be reduced. The term is used primarily in the Agriculture Agreement and includes most domestic support measures that distort production and trade. Also called orange box.

Ambient Charge

A form of tax on non uniformly mixed pollutants. It is calculated to be the same in terms of the emission’s impact on ambient environmental quality at some receptor site. As a result, an ambient charge to a firm closer to the receptor site will normally be higher per kg than that charged to firms further away.

American Enterprise Institute

American Enterprise Institute for Public Policy Research is a think tank doing research and writing on “issues of government, politics, economics, and social welfare,” including international economics. Politically, it is somewhat right-of-centre, providing a home for US Republicans when not in government. Contrasts with the Brookings Institution.

Amicus Brief

A document filed in a legal proceeding by an interested party who is not directly part of the case. In the WTO an issue has been whether to permit dispute settlement panels to accept such submissions, especially from NGOs.

Amortization

The deduction of an expense in installments over a period of time, rather than all at once.

Amplitude

The extent of the up and down movements of a fluctuating economic variable; that is, the difference between the highest and lowest values of the variable.

AMS

Aggregate measure of support.

Ancerta

Australia-New Zealand Closer Economic Relations Trade Agreement. Also ANZCERTA and just CER.

Andean Community

An organization currently of four Andean countries - Bolivia, Colombia, Ecuador, and Peru, - formed in 1997 out of the Andean Pact (Venezuela ceased membership in 2006). It provides for economic and social integration, including regional trade liberalization and a common external tariff, as well as harmonization of other policies.

Andean Pact

The Cartagena Agreement of 1969, which provided for economic cooperation among a group of five Andean countries; predecessor to the Andean Community.

Andean Trade Promotion And Drug Eradication Act

US legislation enacted in 2002 authorizing the U.S. president to provide tariff preferences to countries in the Andean region in connection with the effort to curtail production of illegal drugs.

Annecy Round

The second (1949) of the trade rounds conducted under the auspices of the GATT.

Annuity

A fixed amount paid once a year or at interval of a stipulated period.

Ante Date

To give a date prior to that on which it is written, to any cheque, bill or any other document.

Anti-Competitive

Contributing to market power and associated behaviour, especially including prices above those that would occur with perfect competition. Anti-Counterfeiting Trade Agreement is a plurilateral agreement signed October 1, 2011, to combat the “proliferation of commercial-scale counterfeiting and piracy” in the realm of intellectual property.

Anti-Dumping Duty

Tariff levied on dumped imports. The threat of an anti-dumping duty can deter imports, even when it has not been used, and anti-dumping law is therefore a form of nontariff barrier.

Anti-Dumping Suit

A complaint by a domestic producer that imports are being dumped, and the resulting investigation if dumping and injury are found, the country can impose anti-dumping duty.

Anti-Trust Laws

Designed to promote open markets by limiting practices that reduce competition.

Anti-Trust Policy

U.S. term for competition policy, motivated by it’s initial purpose of breaking up trusts.

Apparel

Clothing. The apparel sector is important for trade because, as a very labour intensive sector, it is a likely source of comparative advantage for developing countries. See textiles and apparel.

Apparent Consumption

Production plus imports minus exports, sometimes also adjusted for changes in inventories. The intention here is not to distinguish different uses for a good within the country, but only to infer the total that is used there for any purpose.

Appellate Body

The standing committee of the WTO that reviews decisions of dispute settlement panels.

Appellation Of Origin

A geographical indication.

Applied Tariff Rate

The actual tariff rate in effect at a country’s border.

Appreciation

A rise in the value of a country’s currency on the exchange market, relative either to a particular currency or to a weighted average of other currencies. The currency is said to appreciate. Opposite of “depreciation.”

Appreciation Of Money

It is a rise in the value of money caused by a fall in the general price fall.

Appropriate Level Of Protection

In the SPS Agreement of the WTO, the acceptable level of risk to health that WTO members are entitled to pursue through SPS measures.

Appropriation Bill

It is a bill that authorizes payment and appropriation of expenses from the Consolidated Fund. This bill is introduced only after the general discussion on budget proposals and the completion of voting on grants. The procedure to pass the bill in parliament is like other money bills.

Aquifer

An aquifer is an underground layer of water-bearing permeable rock or unconsolidated materials (gravel, sand, or silt) from which groundwater can be extracted using a water well. The study of water flow in aquifers and the characterization of aquifers is called hydrogeology. Related terms include aquitard, which is a bed of low permeability along an aquifer, and aquiclude (or aquifuge), which is a solid, impermeable area underlying or overlying an aquifer. If the impermeable area overlies the aquifer, pressure could cause it to become a confined aquifer.

AR(L) Serial Correlation

The errors in a time series regression model follow an AR(L) model.

Arab League

Informal name of the League of Arab States.

Arbitrage

A combination of transactions designed to profit from an existing discrepancy among prices, exchange rates, and/or interest rates on different markets without risk of these changing. Simplest is simultaneous purchase and sale of the same thing in different markets, but more complex forms include triangular arbitrage and covered interest arbitrage.

Arbitration

A method for solving disputes, generally of an industrial nature, between the employer and his employees.

Arc Elasticity Of Demand

If Pl and Ql are the first values of price and quantity demanded, and PZ and QZ are the second values, then arc elasticity equals - [(Q1 - Q2)/(Qi + Qz)]/ [(P1 - P2)l(P1 + P2)].

Argument For Protection

A reason given (not necessarily a good one) for restricting imports by tariffs and/or NTBs.

Armington Assumption

The assumption that internationally traded products are differentiated by country of origin. Due to Armington (1969) in an international macroeconomic context, but now a standard assumption of international CGE models, used to generate smaller and more realistic responses of trade to price changes than implied by homogeneous products.

Armington Elasticity

The elasticity of substitution between products of different countries.

Arm’s Length Price

The of a product in a transaction between unrelated buyer and seller. Contrasts with transfer price.

Arrangement On Export Credits

A “gentlemen’s agreement” among governments of the OECD to limit the generosity of the terms and conditions of export credits that they provide.

Article

A specific section of a negotiated agreement.

Article XIX

The Safeguards Clause of the GATT.

Article XXIV

The article of the GATT that permits countries to form free trade areas and customs unions as exceptions to the MFN principle.

As-Ad

The model and/or diagram that determines the level of aggregate economic activity through the interaction of aggregate supply and aggregate demand.

Asean Economic Community

The goal of ASEAN to become fully integrated economically by 2015, achieving a single market and other objectives.

Asean Free Trade Area

A free trade area announced in 1992 among the ASEAN countries that is in the process of being implemented. It does not quite meet the the normal definition of an FTA, however, in that tariffs on imports from members are not necessarily zero, but rather given by the common effective preferential tariff.

Asean Plus Six

The group of countries included in ASEAN include China, Japan, South Korea, India, Australia, and New Zealand. This group has met occasionally to pursue cooperation.

Asean Plus Three

The group of countries included in ASEAN include China, Japan, and South Korea. Since 1997, this group has met periodically to pursue many areas of cooperation.

Asian Crisis

A major financial crisis that began in Thailand in July 1997 and quickly spread to other East Asian countries.

Asian Development Bank

A multilateral institution based in Manila, Philippines, that provides financing for development needs in countries of the Asia-Pacific region. As of August 2012, ADB reported having 67 member countries, of which 48 were within Asia.

Asia-Pacific Economic Cooperation

An organization of countries in the Asia-Pacific region, launched in 1989 and devoted to promoting open trade and practical economic cooperation. As of August 2012, APEC had 21 member countries.

Asset

Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on).

Asset Approach

A theory of determination of the exchange rate that focuses on its role as the price of an asset. With high capital mobility, equilibrium requires that expected returns on comparable domestic and foreign assets be the same.

Assets

Assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset. Simply stated, assets represent value of ownership that can be converted into cash

(although cash itself is also considered an asset).

Assimilative Capacity

The extent to which the environment can accommodate or tolerate pollutants.

Assist

A service or other input to production provided by an importer to the foreign exporter, the value of which must be added to the invoice price in calculating its value for customs purposes.

Assistance In Kind

public assistance that provides particular goods and services, like food or medical care, rather than cash.

Association Agreement

Early predecessor to the Europe Agreements but excluding provision for political dialogue.

Association Of Caribbean States

A group of 25 countries of the Caribbean that signed a convention in 1994 to foster “consultation, cooperation and concerted action.”

Association Of Natural Rubber Producing Countries

An inter-governmental organization, formed by natural rubber producing countries to promote the overall interests of the commodity.

Association Of Southeast Asian Nations

An organization of countries in southeast Asia, the purpose of which is to promote economic, social, and cultural development as well as peace and stability in the region. Starting with five member countries in 1967, it had expanded to ten members as of August 2012.

ASWP

Any safe world port. Meaning that the product offered with this designation will be delivered to essentially anywhere in the world.

Asymmetric Information

a situation in which the parties to a transaction have different information, as when the seller or a used car has more information about its quality then the buyer. The economics of information search tells us that everyone falls short of having perfect information. It suggests that everyone will have different information about different things. For example, if you aren’t a plumber (nor have any desire to become one), then you aren’t likely to seek information about the wages paid to plumbers in Boise, Idaho. In contrast, this information could be quite beneficial to plumbers in Pocatello, Idaho. Asymmetric Information for the market occurs when buyers and sellers have different information about a good. Sellers often have better information about a good than buyers because they are more familiar with it. They know more about it’s quality, durability, and other features. Buyers, in contrast, have limited contact with the commodity and thus have less information. For example, if you sell a car that you’ve owned for several years, you know how well it’s been maintained, whether or not it needs frequent repairs, and what causes that strange “clanking” sound. A buyer who test drives the car for only a few miles is likely to be unaware of these facts. Another common example of asymmetric Information is in the labour market. Workers are knowledgeable about their skills, industriousness, and productivity. Employers, in contrast, have limited information about the quality of prospective workers.

Asymmetric Shock

An exogenous change in macroeconomic conditions affecting differently the different parts of a country, or different countries of a region. Often mentioned as a source of difficulty for countries sharing a common currency, such as the Euro Zone.

At Par

At equality. Two currencies are said to be “at par” if they are trading one-for- one. The significance is more psychological then economic, but the long decline of the Canadian dollar “below par” with the U.S. dollar, and the more recent variation of the euro between above and below par, also with the U.S. dollar, has been cause for concern.

Atlantic Council

An organization based in Washington, DC, that seeks to promote leadership and engagement in international affairs.

Atlas Method

The method used by the World Bank for comparison of national incomes (GNI or GNP) across countries. It essentially uses nominal exchange rates averaged over three years with adjustment for inflation at home and abroad.

Attenuation Bias

Bias in an estimator that is always toward zero; thus, the expected value of an estimator with attenuation bias is less in magnitude than the absolute value of the parameter.

Attrition

The decline in employment in a firm or industry that occurs naturally due to workers’ quitting or retiring. The pain of shrinking an industry due, say, to trade liberalization is minimized if it can be accomplished through attrition. In the UK, attrition is called natural wastage.

Auction Quota

An import quota that is allocated by selling the rights to the highest bidder. The auction pricethen provides a market-determined measure of the quota’s ad valorem equivalent.

Australia-New Zealand Closer Economic Relations Trade Agreement

A free trade agreement formed in 1983 between Australia and New Zealand. Said to be one of the most comprehensive bilateral free trade agreements in the world, it was also the first to include trade in services. Identified as ANCERTA, ANZCERTA, and CER.

Autarky

The situation of not engaging in international trade; self-sufficiency. (Not to be confused with “autarchy,” which in at least some dictionaries is a political term rather than an economic one, and means absolute rule or power.)

Autarky Equilibrium

In a model of an economy, the configuration of prices and quantities at which quantities supplied and demanded within the economy are equal, so that no trade would take place even if it were permitted.

Autarky Price

Price in autarky; that is, the price of something within a country when it is not traded by that country. Relative autarky prices turn out to be the most theoretically robust (but empirically elusive) measures of comparative advantage.

Automated Commercial Environment

ACE is an online system developed by U.S. Customs and Border Protection to process international trade.

Automatic Licensing

The licensing of imports or exports for which licenses are assured, for gathering information, or as a holdover from when licenses were not automatic. Depending on how the licensing is administered, automatic licensing can add to the bureaucratic and/or time cost of trade.

Automatic Stabilizer

Government spending programmes which respond to changes in the level of national income in such a way as to offset those changes. For example, unemployment insurance benefits typically rise when the economy enters a recession, and decline when prosperity returns.

Automaticity

The feature of the WTO dispute settlement mechanism whereby panel reports are adopted (subject to review by the Appellate Body) automatically unless blocked by a unanimous vote of the membership. Under the prior GATT, unanimity was required to adopt, rather than reject, panel reports.

Autonomous

Refers to an economic variable, magnitude, or entity that is caused independently of other variables that it may in turn influence; exogenous.

Autonomous Consumption

That portion of consumption that is autonomous. For example, if the consumption function has the form C=C0+ cY, where C0 and c are parameters and Y is income, then C0 may be called autonomous consumption. An increase in autonomous consumption then represents an upward shift in the consumption function.

Autonomous Transaction

In the balance of payments, a transaction that is not itself a result of actions taken officially to manage international payments; in contrast with accommodating transaction.

Autoregressive Process Of Order One [AR(L)]

A time series model whose current value depends linearly on its most recent value plus an unpredictable disturbance.

Auxiliary Regression

A regression used to compute a test statistic-such as the test statistics for heteroskedasticity and serial correlation or any other regression that does not estimate the model of primary interest.

Availability Theory

A theory of the determinants of international trade, due to Kravis (1956), that says that countries import what they do not have available domestically and export what they do. The theory can be said to encompass explanations of trade that stress factor endowments, technological differences, and product differentiation.

Average Cost

The average cost is computed by dividing the total cost of goods available for sale by the total units available for sale. This gives a weighted-average unit cost that is applied to the units in the ending inventory. There are two commonly used average cost methods: Simple Weighted-average cost method and moving-average cost method.

Average Fixed Cost

In the theory of the firm fixed costs are costs of production which are constant whatever the level of output. Average fixed costs are total fixed costs divided by the number of units of output, that is, fixed cost per unit of output.

Average Product

The average product of a factor in a firm or industry is its output divided by the amount of the factor employed.

Average Productivity

Total quantity divided by the total quantity of input.

Average Propensity

The fraction of total income spent on an activity, such as consumption or imports.

Average Propensity To Consume

The fraction of total (or perhaps disposable) income spent on consumption. Contrasts with marginal propensity to consume.

Average Propensity To Import

The fraction of total income spent on imports; thus the ratio of imports to GDP. Contrasts withmarginal propensity to import.

Average Propensity To Save

The average propensity to save (APS), also known as the savings ratio, is an economics term that refers to the proportion of income which is saved, usually expressed for household savings as a percentage of total household disposable income. The ratio differs considerably over time and between countries. The savings ratio can be affected by (for example): the proportion of older people, as they have less motivation and capability to save; the rate of inflation, as expectations of rising prices can encourage people to spend now rather than later (monetary base/mass depreciation).

Average Revenue And Marginal Revenue

Average revenue is the level of total revenue divided by output. Marginal revenue is the revenue that the firm receives for the next unit of output.

The average revenue curve is the demand curve that the firm faces. It shows the quantity that will be demanded at each price level. The marginal revenue curve shows how much extra revenue the firm will get from selling one more unit. The MR curve will always slope downwards at twice the rate of the AR curve.

Average Revenue Product

In the theory of factor pricing, average revenue product is total revenue divided by the number of units of the factor employed.

Average Tariff

An average of a country’s tariff rates. This can be calculated in several ways, none of which are ideal for representing how protective the country’s tariffs are. Most common is the trade-weighted average tariff, which under-represents prohibitive tariffs, since they get zero weight.

Average Tax Rate

The amount paid as tax as a fraction of the amount being taxed. In the case of an income tax, the total amount of tax as a fraction of total income.

Average Total Cost

is the sum of all the production costs divided by the number of units produced.

Average Variable Cost

Axes

The fixed lines on a graph which carry the scales against which the coordinates are plotted.

B

Backward Bending

Refers to a curve that reverses direction, usually if, after moving out away from an origin or axis, it then turns back toward it. The term is used most frequently to describe supply curves for which the quantity supplied declines as price rises above some point, as may happen in a labour supply curve, the supply curve for foreign exchange, or an offer curve.

Backward Indexation

The setting of wages based, in part, on past performance of prices.

Backward Integration

Acquisition by a firm of its suppliers.

Backward Linkage

The use by one firm or industry of produced inputs from another firm or industry.

Backward-Bending Supply Of Labour

In some circumstances it may be possible for the labour supply curve to become backward-bending as people become less willing to work at higher wage levels. As wages increase above a certain point less work will actually be done as work is an inferior good and leisure becomes more highly valued at the margins. The income effect has gradually become opposite to the substitution effect and starts to outweigh it at a wage level of W2.

Baffling Pigs And Duks

Bailout

The provision, usually by a government, of funds to a firm or to another government in danger of insolvency so as to prevent them from defaulting on their debt.

Balance Of Agricultural Trade

The value of agricultural exports less the value of agricultural imports. If agricultural export value is higher than agricultural import value, there is a positive agricultural balance of trade. This concept is the counterpart of a general balance of trade specific to agriculture.

Balance Of Merchandise Trade

The value of a country’s merchandise exports minus the value of its merchandise imports.

Balance Of Payments

1. A list, or accounting, of all of a country’s international transactions for a given time period, usually one year. Payments into the country (receipts) are entered as positive numbers, called credits; payments out of the country (payments) are entered as negative numbers called debits.

2. A single number summarizing all of a country’s international transactions: the balance of payments surplus.

Balance Of Payments Accounts

A record of all transactions involving a country’s exports and imports of goods and services, borrowing and lending.

Balance Of Payments Adjustment Mechanism

Any process, especially any automatic one, by which a country with a payments imbalance moves toward balance of payments equilibrium. Under the gold standard, this was the specie flow mechanism.

Balance Oof Payments Argument For Protection

A common reason for restricting imports, especially under fixed exchange rates, when a country is losing international reserves due to a trade deficit. It can be said that this is a second best argument, since a devaluation could solve the problem without distorting the economy and therefore at smaller economic cost.

Balance Of Payments Deficit

A negative balance of payments surplus.

Balance Of Payments Equilibrium

Meaningful only under a pegged exchange rate, this referred to equality of credits and debits in the balance of payments using a traditional definition of the capital account. A surplus or deficiti mplied changing official reserves, so that something might ultimately have to change.

Balance Of Payments Surplus

A number summarizing the state of a country’s international transactions, usually equal to the balance on current account plus the balance on financial account, but excluding official reserve transactions, or omitting also other volatile short-term financial-account transactions. It indicates the stress on a regime of pegged exchange rates.

Balance Of Trade

The value of a country’s exports minus the value of its imports. Unless specified as the balance of merchandise trade, it normally incorporates trade in services, including earnings (interest, dividends, etc.) on financial assets.

Balance Of Trade (Or Payment)

The difference between the visible exports and visible imports of two countries in trade with each other is called balance of payment. If the difference is positive the balance of payment (BOP) is called favourable and if negative it is called unfavourable.

Balance On Capital Account

A country’s receipts minus payments for capital account transactions.

Balance On Current Account

A country’s receipts minus payments for current account transactions. Equals The balance of trade plus net inflows of transfer payments.

Balance Sheet

It is a statement of accounts, generally of a business concern, prepared at the end of a year, showing debits and credits under broad heads, to find out the profit and loss position.

Balanced Budget

1. A government budget surplus that is zero, thus with net tax revenue equaling expenditure.

2. A balanced budget change in policy or behaviour is one in which a component of the government budget, usually taxes, is adjusted as necessary to maintain a balanced budget.

Balanced Growth

Growth of an economy in which all aspects of it, especially factors of production, grow at the same rate.

Balanced Trade

1. A balance of trade equal to zero.

2. The assumption that the balance of trade must be zero in equilibrium, as would be the case with a floating exchange rate and no capital flows. This is a standard assumption in real models of international trade, which exclude financial assets.

Balassa-Samuelson Effect

The hypothesis that increase in productivity of tradables relative to nontradables, if more than abroad, will cause appreciation of the real exchange rate and thus the Penn Effect. Due toBalassa (1964) and Samuelson (1964); also Harrod (1933), and thus called the Harrod-Balassa-Samuelson Effect.

Baldwin Envelope

The consumption possibility frontier for a large country, constructed as the envelope formed by moving the foreign offer curve along the country’s transformation curve.

Baltic Dry Index

An index of the rates charged for chartering large ships that transport coal, iron ore, and grain. It is regarded as a useful indicator of the current level of world trade.

Banana War

A trade dispute between the EU and the U.S. over EU preferences for bananas from former colonies. On behalf of U.S.-owned companies exporting bananas from South America and the Caribbean, the U.S. complained to the WTO, which ruled in favour of the U.S.

Bancor

The international currency proposed by Keynes for use as the basis for the international monetary system that was being constructed at the end of World War II. Instead, the Bretton Woods System that emerged was based on the U.S. dollar.

Bank For International Settlements

An international organization that acts as a bank for central banks, fostering cooperation among them and with other agencies.

Bank Rate

Bank rate, also referred to as the discount rate, is the rate of interest which a central bank charges on the loans and advances to a commercial bank. Whenever a bank has a shortage of funds they can typically borrow it from the central bank based on the monetary policy of the country.

Bank, Commercial

A financial institution accepts cheque deposits, holds savings, sells traveller’s cheques and performs other financial services.

Banker’s Cheque

A cheque by one bank on another.

Bankruptcy

The legal process that a person or firm goes through if they are unable to pay their debts. The process seeks an orderly sharing of the losses by creditors and a chance to start fresh, usually after some delay, for the debtor. No such process exists for national governments or countries, exacerbating the problems of debt crisis and financial crisis.

Banque Ouest Africaine De Developpement

The West African Development Bank, BOAD serves as a development bank for Benin, Burkina, Cote d’Ivoire, Guinee Bissau, Mali, Niger, Senegal, and Togo.

Barrier

1. Any impediment to the international movement of goods, services, capital, or other factors of production. Most commonly a trade barrier.

2. An entry barrier.

Barriers To Entry

Factors that prevent firms from entering a market, such as government rules or patents.

Barriers To Entry

Factors that prevent firms from entering a market, such as government rules or patents.

Barter