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Encyclopedia economics, Terms and Definitions

  1. 1. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. ManagementA to Z Keyword Definition Topic 0-9 Economics 2x2x2 Model The Heckscher-Ohlin Model with 2 factors, 2 goods, and 2 countries. A Economics Abnormal profit Abnormal profit is any profit in excess of normal profit - also known as supernormal profit. In balance of payments accounting, this refers to those transactions that are included in calculating the balance of payments A Economics Above the line surplus or deficit. Transactions below the line, typically official reserve transactions and sometimes short term capital flows, are not included. A Economics Absolute advantage Absolute advantage occurs when a country or region can create more of a product with the same factor inputs. Absolute advantage The idea, advocated by opponents of globalization, that a country should import only goods in which other countries have an A Economics trade policy absolute advantage, particularly goods that the importing country cannot (or cannot "reasonably") produce itself. Absolute poverty measures the number of people living below a certain income threshold or the number of households unable A Economics Absolute poverty to afford certain basic goods and services. Page 1 of 379
  2. 2. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. Total demand for final goods and services by all residents (consumers, producers, and government) of a country (as opposed A Economics Absorption to total demand for that countrys output). The term was introduced as part of the Absorption Approach. A way of understanding the determinants of the balance of trade, noting that it is equal to income minus absorption. Due to A Economics Absorption approach Alexander (1952) Available in large supply. Usually meaningful only in relative terms, compared to demand and/or to supply at another place or A Economics Abundant time. The factor in a countrys endowment with which it is best endowed, relative to other factors, compared to other countries. May A Economics Abundant factor be defined by quantity or by price. Academic A group of academic economists and lawyers who are specialized in international trade policy and international economic law. A Economics Consortium on ACITs purpose is to prepare and circulate policy statements and papers that deal with important, current issues of International Trade international trade policy. Planned capital investment by private sector businesses is linked to the growth of demand for goods and services. When consumer or export demand is rising strongly, businesses may increase investment to expand their production capacity and A Economics Accelerator effect meet the extra demand. This process is known as the accelerator effect. But the accelerator effect can work in the other direction! A slowdown in consumer demand can create excess capacity and may lead to a fall in planned investment demand. A Economics Accession The process of adding a country to an international agreement, such as the GATT, WTO, EU, or NAFTA. Page 2 of 379
  3. 3. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. A Economics Accession country A country that is waiting to become a member of the EU. In the balance of payments, a transaction that is a result of actions taken officially to manage international payments; in Accommodating A Economics transaction contrast with autonomous transaction. Thus official reserve transactions are accommodating, as may be short-term capital flows that respond to expectations of intervention. The acquisition of an increasing quantity of something. The accumulation of factors, especially capital, is a primary mechanism A Economics Accumulation for economic growth. A Economics ACIT Academic Consortium on International Trade A group of African, Caribbean, and Pacific less developed countries that were included in the Lomé Convention and now the A Economics ACP Countries Cotonou Agreement. As of June 2007, the group included 79 countries. A Economics Actionable subsidy A subsidy that is not prohibited by the WTO but that member countries are permitted to levy countervailing duties against. A Economics Actual protection rate Implicit tariff. Page 3 of 379
  4. 4. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. A Economics AD Anti-dumping A Economics Ad valorem Per unit of value (i.e., divided by the price). Ad valorem The ad valorem tariff that would be equivalent, in terms of its effects on trade, price, or some other measure, to a nontariff A Economics equivalent barrier. An indirect tax based on a percentage of the sales price of a good or service. The best known example in the UK is Value A Economics Ad valorem tax Added Tax. One of the founding fathers of modern economics. His most famous work was the Wealth of Nations (1776) - a study of the A Economics Adam Smith progress of nations where people act according to their own self-interest - which improves the public good. Smiths discussion of the advantages of division of labour remains a potent idea in the economic literature. A Economics ADB African Development Bank Group An exchange rate that is pegged, but for which it is understood that the par value will be changed occasionally. This system A Economics Adjustable peg can be subject to extreme speculative attack and financial crisis, since speculators may easily anticipate these changes. Page 4 of 379
  5. 5. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. Corrected for price changes to yield an equivalent in terms of goods and services. The adjustment divides nominal amounts for A Economics Adjusted for inflation 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. Government program to assist those workers and/or firms whose industry has declined, either due to competition from imports Adjustment A Economics assistance (trade adjustment assistance) or from other causes. Such programs usually have two (conflicting) goals: to lessen hardship for those affected, and to help them change their behavior -- what, how, or where they produce. Adjustment A Economics mechanism The theoretical process by which a market changes in disequilibrium, moving toward equilibrium if the process is stable. A price for a good or service that is set and maintained by government, usually requiring accompanying restrictions on trade if A Economics Administered price the administered price differs from the world price. Protection (tariff or NTB) resulting from the application of any one of several statutes that respond to specified market Administered A Economics protection circumstances or events, usually as determined by an administrative agency. Several such statutes are permitted under the GATT, including anti-dumping duties, countervailing duties, and safeguards protection. Administrative A unit of government charged with the administration of particular laws. In the United States, those most important for A Economics agency administering laws related to international trade are the ITC and ITA. Advance deposit A requirement that some proportion of the value of imports, or of import duties, be deposited prior to payment, without A Economics requirement competitive interest being paid. Page 5 of 379
  6. 6. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. A Economics Advanced country Developed country. Usually refers to a cost advantage, though it could refer to a strategic advantage (such as first mover advantage) or to a A Economics Advantage superiority of technology or quality. The tendency for insurance to be purchased only by those who are most likely to need it, thus raising its cost and reducing its A Economics Adverse selection benefits. Adverse terms of A terms of trade that is considered unfavorable relative to some benchmark or to past experience. Developing countries A Economics trade specialized in primary products are sometimes said to suffer from adverse or declining terms of trade. Developing consumer loyalty by establishing branded products can make successful entry into the market by new firms much A Economics Advertising more expensive. Advertising can cause an outward shift of the demand curve and also make demand less sensitive to changes in price. A Economics AEC African Economic Community African Development A Economics Bank Group A multinational development bank for Africa. Page 6 of 379
  7. 7. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. An organization of African countries that aims to promote economic, cultural and social development among the African African Economic A Economics Community 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 U.S. legislation enacted May 2000 providing tariff preferences to African countries that qualify. As of May 2007, 38 countries A Economics Opportunity Act had qualified. A Economics AFTA ASEAN Free Trade Area An increase in the average age of the population arising from an increase in life expectancy and a fall in the birth rate. In the long run, an ageing population has important implications for both the level and pattern of demand in the economy. There are A Economics Ageing population also widespread consequences for government welfare spending (egg on state pensions) and the demand for health and other need services. A Economics Agenda 21 A plan of action adopted at the Rio Summit to promote sustainable development. A Economics Agent One who acts on behalf of someone else. The phenomenon of economic activity congregating in or close to a single location, rather than being spread out uniformly over A Economics Agglomeration space. Page 7 of 379
  8. 8. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. Agglomeration Any benefit that accrues to economic agents as a result of having large numbers of other agents geographically close to them, A Economics economy thus tending to lead to agglomeration. This is a basic feature of the New Economic Geography. 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 A Economics Aggregate on the last syllable), this means to combine such items or add them up. The total demand for a countrys output, including demands for consumption, investment, government purchases, and net A Economics Aggregate demand exports. Aggregate demand The aggregate-demand curve shows the quantity of goods and services that households, firms, and the government want to A Economics curve buy at each price level. Aggregate measure A Economics of support Variation of aggregate measurement of support. Aggregate The measurement of subsidy to agriculture used by the WTO as the basis for commitments to reduce the subsidization of A Economics measurement of agricultural products. It includes the value of price supports and direct subsidies to specific products, as well as payments that support are not product specific. Aggregate production A Economics possibility frontier The production possibility frontier, or curve obtained by adding the production possibilities of two or more countries or regions. Page 8 of 379
  9. 9. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. Aggregate supply (AS) measures the volume of goods and services produced within the economy at a given price level. In simple terms, aggregate supply represents the ability of an economy to produce goods and services either in the short-term or A Economics Aggregate supply in the long-term. It tells us the quantity of real GDP that will be supplied at various price levels. The nature of this relationship will differ between the long run and the short run. Aggregate A Economics transformation curve Aggregate production possibility frontier The combining of two or more kinds of an economic entity into a single category. Data on international trade necessarily A Economics Aggregation aggregate goods and services into manageable groups. For macroeconomic purposes, all goods and services are usually aggregated into just one. A Economics AGOA African Growth and Opportunity Act Agreement on A Economics Textiles and Clothing The 10-year transitional program of the WTO to phase out the quotas on textiles and apparel of the MFA. A Economics Agricultural good A good that is produced by agriculture. Contrasts with manufactured good. Production that relies essentially on the growth and nurturing of plants and animals, especially for food, usually with land as an A Economics Agriculture important input; farming. Contrasts with manufacturing. Page 9 of 379
  10. 10. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. Agriculture The agreement within the WTO that commits member governments to improve market access and reduce trade-distorting A Economics Agreement subsidies in agriculture, starting with the process of tariffication. Assistance provided by countries and by international institutions such as the World Bank to developing countries in the form of A Economics Aid monetary grants, loans at low interest rates, in kind, or a combination of these. A Economics ALADI Asociación Latinoamericana de Integración (Spanish for Latin-American Integration Association) A Economics ALCA Acuerdo de Libre Comercio de las Américas (Spanish for Free Trade Area of the Americas ) A Economics ALCAN Acuerdo de Libre Comercio de América del Norte (Spanish for North American Free Trade Agreement) An assignment of economic resources to uses. Thus, in general equilibrium, an assignment of factors to industries producing A Economics Allocation 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 occurs when the value that consumers place on a good or service (reflected in the price they are willing A Economics Allocative efficiency and able to pay) equals the cost of the resources used up in production. The technical condition required for allocative efficiency is that price = marginal cost. When this happens, total economic welfare is maximised. Page 10 of 379
  11. 11. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. Alternative Trade An addition to the US program of trade adjustment assistance, enacted in 2002, that provides wage insurance for a limited A Economics Adjustment group of older workers. Assistance The category of subsidies in the WTO Agriculture Agreement the total value of which is to be reduced. It includes most A Economics Amber box domestic support measures that distort production and trade. 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 A Economics Amicus brief been whether to permit dispute settlement panels to accept such submissions, especially from NGOs. A Economics Amortization The deduction of an expense in installments over a period of time, rather than all at once. The extent of the up and down movements of a fluctuating economic variable; that is, the difference between the highest and A Economics Amplitude lowest values of the variable. A Economics AMS Aggregate measure of support. A Economics ANCERTA Australia-New Zealand Closer Economic Relations Trade Agreement. Also ANZCERTA and just CER. Page 11 of 379
  12. 12. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. An organization of five Andean countries -- Bolivia, Colombia, Ecuador, Peru, and Venezuela -- formed in 1997 out of the A Economics Andean Community Andean Pact. It provides for economic and social integration, including regional trade liberalization and a common external tariff, as well as harmonization of other policies. The Cartagena Agreement of 1969, which provided for economic cooperation among a group of five Andean countries; A Economics Andean Pact predecessor to the Andean Community. Andean Trade US legislation enacted in 2002 authorizing the U.S. president to provide tariff preferences to countries in the Andean region in A Economics Promotion and Drug connection with the effort to curtail production of illegal drugs. Eradication Act Animal spirits refers to the expectations of businesses, entrepreneurs and consumers. When business confidence is high, we expect to see a rise in planned capital investment at each rate of interest. If there is a downturn in business confidence, for A Economics Animal spirits example during a recession, then planned investment may fall and some capital investment projects may be scrapped even when interest rates are fairly low. Anti competitive A Economics behaviour Anti-competitive practices are business strategies designed deliberately to limit the degree of competition inside a market. A Economics Anticipated inflation Anticipated inflation is expectations about future price rises which households & firms use when planning economic decisions. Tariff levied on dumped imports. The threat of an anti-dumping duty can deter imports, even when it has not been used, and A Economics Anti-dumping duty anti-dumping law is therefore a form of nontariff barrier. Page 12 of 379
  13. 13. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. A complaint by a domestic producer that imports are being dumped, and the resulting investigation and, if dumping and injury A Economics Anti-dumping suit are found, anti-dumping duty. A Economics Anti-trust policy U.S. term for competition policy. A Economics AOA Agreement on Agriculture A Economics APC Average propensity to consume A Economics APEC Asia-Pacific Economic Cooperation Clothing. The apparel sector is important for trade because, as a very labor intensive sector, it is a likely source of comparative A Economics apparel advantage for developing countries. Apparent Production plus imports minus exports, sometimes also adjusted for changes in inventories. The intention here is not to A Economics consumption distinguish different uses for a good within the country, but only to infer the total that is used there for any purpose. Page 13 of 379
  14. 14. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. A Economics Appellate Body The standing committee of the WTO that reviews decisions of dispute settlement panels. A Economics Applied tariff rate The actual tariff rate in effect at a countrys border. A rise in the value of a countrys currency on the exchange market, relative either to a particular other currency or to a weighted A Economics Appreciation average of other currencies. The currency is said to appreciate. Opposite of "depreciation." A combination of transactions designed to profit from an existing discrepancy among prices, exchange rates, and/or interest A Economics Arbitrage 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. Argument for A Economics protection A reason given (not necessarily a good one) for restricting imports by tariffs and/or NTBs. The assumption that internationally traded products are differentiated by country of origin. Due to Armington (1969) in an Armington A Economics assumption 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. A Economics Armington elasticity The elasticity of substitution between products of different countries. Page 14 of 379
  15. 15. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. A Economics Article XIX The Safeguards Clause of the GATT. The article of the GATT that permits countries to form free trade areas and customs unions as exceptions to the MFN A Economics Article XXIV principle. The model and/or diagram that determines the level of aggregate economic activity through the interaction of aggregate supply A Economics AS-AD and aggregate demand. A Economics ASEAN Association of Southeast Asian Nations ASEAN Free Trade A Economics Area A free trade area announced in 1992 among the ASEAN countries that is in the process of being implemented. A Economics Asian Crisis A major financial crisis that began in Thailand in July 1997 and quickly spread to other East Asian countries. Asian Development A multilateral institution based in Manila, Philippines, that provides financing for development needs in countries of the Asia- A Economics Bank Pacific region. As of June 2007, ADB had 44 developing member countries. Page 15 of 379
  16. 16. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. A Economics Asian Tigers The Four Tigers. Asia-Pacific An organization of countries in the Asia-Pacific region, launched in 1989 and devoted to promoting open trade and practical A Economics Economic economic cooperation. As of June 2007, APEC had 21 member countries. Cooperation An item of property, such as land, capital, money, a share in ownership, or a claim on others for future payment, such as a A Economics Asset bond or a bank deposit. A theory of determination of the exchange rate that focuses on its role as the price of an asset. With high capital mobility, A Economics Asset approach equilibrium requires that expected returns on comparable domestic and foreign assets be the same. A Economics Asset position See net foreign asset position. How to use macroeconomic policies to achieve both internal balance and external balance; specifically, with only monetary and A Economics Assignment problem fiscal policies available under fixed exchange rates, which instrument should be "assigned" to which goal? Mundell (1962) showed that monetary policy should be assigned to external balance. A Economics Assimilative capacity The extent to which the environment can accommodate or tolerate pollutants. Page 16 of 379
  17. 17. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. Association A Economics Agreement Early predecessor to the Europe Agreements but excluding provision for political dialogue. Association of Natural An inter-governmental organization, formed by natural rubber producing countries to promote the overall interests of the A Economics Rubber Producing commodity. Countries Association of An organization of countries in southeast Asia, the purpose of which is to promote economic, social, and cultural development A Economics Southeast Asian as well as peace and stability in the region. Starting with five member countries in 1967, it had expanded to ten members as of Nations June 2007. Asymmetric Information relating to a transaction in a market where there is imbalance in the information available to either the buyer or the A Economics information seller. Asymmetric information can distort the working of the market mechanism and lead to market failure. An exogenous change in macroeconomic conditions affecting differently the different parts of a country, or different countries A Economics Asymmetric shock of a region. Often mentioned as a source of difficulty for countries sharing a common currency, such as the Euro Zone. At equality. Two currencies are said to be "at par" if they are trading one-for-one. The significance is more psychological then A Economics At par 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. A Economics ATAA Alternative Trade Adjustment Assistance Page 17 of 379
  18. 18. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. A Economics ATC Agreement on Textiles and Clothing A Economics ATPDEA Andean Trade Promotion and Drug Eradication Act Australia-New A free trade agreement formed in 1983 between Australia and New Zealand. Said to be one of the most comprehensive Zealand Closer A Economics Economic Relations bilateral free trade agreements in the world, it was also the first to include trade in services. Identified as ANCERTA, ANZCERTA, and CER. Trade Agreement A Economics Autarkic Associated with the situation of autarky. The situation of not engaging in international trade; self-sufficiency. (Not to be confused with "autarchy," which in at least some A Economics Autarky dictionaries is a political term rather than an economic one, and means absolute rule or power.) Price in autarky; that is, the price of something within a country when it is not traded by that country. Relative autarky prices A Economics Autarky price turn out to be the most theoretically robust (but empirically elusive) measures of comparative advantage. The licensing of imports or exports for which licenses are assured, for gathering information, or as a holdover from when A Economics Automatic licensing licenses were not automatic. Depending on how the licensing is administered, automatic licensing can add to the bureaucratic and/or time cost of trade. Page 18 of 379
  19. 19. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. An institutional feature of an economy that dampens its macroeconomic fluctuations, e.g., an income tax, which acts like a tax A Economics Automatic stabilizer increase in a boom and a tax cut in a recession. Refers to an economic variable, magnitude, or entity that is caused independently of other variables that it may in turn A Economics Autonomous influence; exogenous. That portion of consumption that is autonomous. For example, if the consumption function has the form C=C 0+cY , where C 0 Autonomous A Economics consumption and c are parameters and Y is income, then C 0 may be called autonomous consumption. An increase in autonomous consumption then represents an upward shift in the consumption function. Autonomous In the balance of payments, a transaction that is not itself a result of actions taken officially to manage international payments; A Economics transaction in contrast with accommodating transaction. A theory of the determinants of international trade, due to Kravis (1956), that says that countries import what they do not have A Economics Availability theory 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. A Economics Average cost Total cost divided by output. Earnings are the total factor reward to labour. Average earnings comprise basic pay + wage drift (I.e. extra income from A Economics Average earnings productivity related pay, overtime and other bonuses). Page 19 of 379
  20. 20. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. A Economics Average product Total output divided by the total units of labour employed. A Economics Average propensity The fraction of total income spent on an activity, such as consumption or imports. Average propensity to A Economics consume The fraction of total (or perhaps disposable) income spent on consumption. Contrasts with marginal propensity to consume. Average propensity to A Economics import The fraction of total income spent on imports; thus the ratio of imports to GDP. Contrasts with marginal propensity to import. The proportion of gross income paid in tax. With a progressive income tax system, the average rate of tax rises as income A Economics Average rate of tax rises. This is because the marginal rate of tax goes up at certain income levels. An average of a countrys tariff rates. This can be calculated in several ways, none of which are ideal for representing how A Economics Average tariff protective the countrys tariffs are. Most common is the trade-weighted average tariff, which under-represents prohibitive tariffs, since they get zero weight. Refers to the activities of a firm that are necessary to its functioning but are not directly part of production, such as accounting. B Economics Back office Such activities, despite the name that suggests a location behind the shop or shop floor, are increasingly done at remote locations, including in other countries, as business process outsourcing. Page 20 of 379
  21. 21. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. Refers to a curve that reverses direction, usually if, after moving out away from an origin or axis, it then turns back toward it. B Economics Backward bending 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 labor supply curve, the supply curve for foreign exchange, or an offer curve. B Economics Backward indexation The setting of wages based in part on past performance of prices. B Economics Backward integration Acquisition by a firm of its suppliers. B Economics Backward linkage The use by one firm or industry of produced inputs from another firm or industry. Acronyms for the 12 original members and non-members of the Euro Zone. BAFFLING PIGS = Belgium, Austria, Finland, BAFFLING PIGS and B Economics DUKS France, Luxembourg, Ireland, Netherlands, Germany, Portugal, Italy, Greece, and Spain. DUKS = Denmark, United Kingdom, and Sweden. Balance of B Economics merchandise trade The value of a countrys merchandise exports minus the value of its merchandise imports. The balance of payments (BOP) records all financial transactions between the UK and the Rest of the World. The BOP figures B Economics Balance of payments tell us about how much is being spent by British consumers and firms on imported goods and services, and how successful UK firms have been in exporting to other countries and markets. Page 21 of 379
  22. 22. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. Balance of payments Any process, especially any automatic one, by which a country with a payments imbalance moves toward balance of payments B Economics adjustment equilibrium. Under the gold standard, this was the specie flow mechanism. mechanism Balance of payments A common reason for restricting imports, especially under fixed exchange rates, when a country is losing international reserves B Economics argument for due to a trade deficit. It can be said that this is a second best argument, since a devaluation could solve the problem without protection distorting the economy and therefore at smaller economic cost. Balance of payments B Economics deficit A negative balance of payments surplus. Meaningful only under a pegged exchange rate, this referred to equality of credits and debits in the balance of payments using Balance of payments B Economics equilibrium a traditional definition of the capital account. A surplus or deficit implied changing official reserves, so that something might ultimately have to change. A number summarizing the state of a countrys international transactions, usually equal to the balance on current account plus Balance of payments B Economics surplus 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. The value of a countrys exports minus the value of its imports. Unless specified as the balance of merchandise trade, it B Economics Balance of trade normally incorporates trade in services, including earnings (interest, dividends, etc.) on financial assets. Balance on capital B Economics account A countrys receipts minus payments for capital account transactions. Page 22 of 379
  23. 23. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. Balance on current A countrys receipts minus payments for current account transactions. Equals the balance of trade plus net inflows of transfer B Economics account payments. B Economics Balanced budget A government budget surplus that is zero, thus with net tax revenue equaling expenditure. B Economics Balanced growth Growth of an economy in which all aspects of it, especially factors of production, grow at the same rate. B Economics Balanced trade A balance of trade equal to zero. Balassa-Samuelson The hypothesis that an increase in the productivity of tradables relative to nontradables, if larger than in other countries, will B Economics Effect cause an appreciation of the real exchange rate. Due to Balassa (1964) and Samuelson (1964). The consumption possibility frontier for a large country, constructed as the envelope formed by moving the foreign offer curve B Economics Baldwin envelope along the countrys transformation curve. Due to Baldwin (1948). A trade dispute between the EU and the U.S. over EU preferences for bananas from former colonies. On behalf of U.S.-owned B Economics Banana war companies exporting bananas from South America and the Caribbean, the U.S. complained to the WTO, which ruled in favor of the U.S. Page 23 of 379
  24. 24. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. The international currency proposed by Keynes for use as the basis for the international monetary system that was being B Economics Bancor 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 B Economics Settlements An international organization that acts as a bank for central banks, fostering cooperation among them and with other agencies. The Bank of England (www.bankofengland.co.uk) is charged with the task of maintaining the integrity and value of the currency. The Bank pursues this objective through the use of monetary policy. Above all, this involves maintaining price B Economics Bank of England stability, as defined by the inflation target set by the Government, as a precondition for achieving a wider goal of sustainable economic growth and high employment. Since 1997, the BoE has had operational independence in the setting of interest rates. The Bank aims to meet the Bank of England B Economics independence Governments inflation target - currently 2.0 per cent for the consumer price index- by setting short-term interest rates. Interest rate decisions are taken by the Monetary Policy Committee (MPC) at their monthly meetings. B Economics Bank rate The interest rate charged by a central bank to commercial banks for very short term loans; the discount rate. B Economics Barcelona Process The Euro-Mediterranean Partnership. Any impediment to the international movement of goods, services, capital, or other factors of production. Most commonly a B Economics Barrier trade barrier. Page 24 of 379
  25. 25. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. B Economics Barriers to entry Barriers to entry are designed to block potential entrants from entering a market profitably. B Economics Barter The exchange of goods for goods, without using money. An economic model of international trade in which goods are exchanged for goods without the existence of money. Most B Economics Barter economy theoretical trade models take this form in order to abstract from macroeconomic and monetary considerations. B Economics Base money Monetary base. The year used as the basis for comparison by a price index such as the CPI. The index for any year is the average of prices for B Economics Base year that year compared to the base year; e.g., 110 means that prices are 10% higher than in the base year. The base year is also the year whose prices are used to value something in real terms or after adjusting for inflation. Also known at Basel I, this was an agreement in 1988 by the Basel Committee of central bankers to measure the credit risk of B Economics Basel Capital Accord commercial banks and set minimum standards for bank capital in order to reduce the likelihood of international repercussions due to bank failures. B Economics Basel I The Basel Capital Accord Page 25 of 379
  26. 26. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. B Economics Basel II A substantially revised set of standards for capital adequacy of banks, with an agreed text first issued in June 2004. One of the more frequently used measures of the balance of payments surplus or deficit under pegged exchange rates, the B Economics Basic balance basic balance was equal to the current account balance plus the balance of long-term capital flows. B Economics Basis point One one-hundredth of a percentage point. Small changes in interest rates are commonly measured in basis points. One of two conditions needed for infant industry protection to be welfare-improving, this requires that the protected industry be B Economics Bastables test able to pay back an amount equal to the national losses during the period of protection. B Economics BEA Bureau of Economic Analysis The idea that if costs of entering a market, such as through exports, become sunk costs, then a temporary change in market B Economics Beachhead effect conditions such as an exchange rate can cause a lasting change in trade patterns. As one explanation for hysteresis in international trade, this was named by Baldwin (1988). A trade dispute that began in 1989 when the EC banned imports of beef from cows that had been injected with growth B Economics Beef hormone case hormones, arguing that the health effects of these hormones were suspect. The U.S. eventually complained under the WTO in 1996, arguing the absence of scientific evidence of any harm, and in 1997 the WTO panel agreed with the U.S. Page 26 of 379
  27. 27. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. For a country to use a policy for its own benefit that harms other countries. Examples are optimal tariffs and, in a recession, B Economics Beggar thy neighbor tariffs and/or devaluation to create employment. A branch of economics which focuses on understanding the nature of human decision making and which explores how Behavioural B Economics economics decisions are taken when economic agents do not have access to full and free information and when their behaviour is not automatically assumed to be rational. B Economics Benefit-cost analysis Same as cost-benefit analysis. Refers to doing nothing about a problem, in the hope that it will not be serious or will be solved by others. Said to be U.S. policy B Economics Benign neglect toward its balance of payments deficit in the late 1960s, based on other countries need for dollar reserves. Bergsonian social A social welfare function that takes as arguments only the levels of utility of the individuals in society. Due to Bergson (1938) as B Economics welfare function interpreted by Samuelson (1981). Also called a Bergson-Samuelson social welfare function. The assumption, sometimes assumed to be made by firms in an oligopoly, that other firms hold their prices constant as they B Economics Bertrand competition themselves change behavior. Contrasts with Cournot competition. Both are used in models of international oligopoly, but Cournot competition is used more often. Bias of a trade Refers to whether the structure of protection favors importables or exportables, based on comparing their effective rates of B Economics regime protection. If these are equal, the trade regime is said to be neutral. Page 27 of 379
  28. 28. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. Refers to economic growth through factor accumulation and/or technological progress and whether if favors one sector or B Economics Bias of growth another. Growth is said to be export biased if the export sector expands faster than the rest of the economy, import biased if the import-competing sector does so. Either change or difference, refers to a shift towards or away from use of a factor. The exact meaning depends on the B Economics Bias of technology definition of neutral used to define absence of bias. Factor bias matters for the effects of technological progress on trade and welfare. In the elasticities approach to analyzing effects of exchange rates, the condition for a depreciation to have a positive effect on the trade balance: [hX hM (1 + eX + eM ) – eX eM  (1 – hX   –  hM )] / [(eX + hX )(eM + hM )] > 0, where eI (hI ) is the supply B Economics Bickerdike-Robinson- (demand) elasticity of I=X ,M exports and imports respectively. If supply elasticities are infinite, it reduces to the Marshall- Lerner Condition. Due to Bickerdike (1920), Robinson (1947), and Metzler (1948). With regard to the process of multilateral trade liberalization, the theory that if it ceases to move forward (i.e., achieve further B Economics Bicycle Theory liberalization), then it will collapse (i.e., past liberalization will be reversed). The idea was suggested by Bergsten (1975) and named by Bhagwati (1988). B Economics BID Banco Interamericano de Desarrollo (Spanish for Inter-American Development Bank) The difference between the price that a buyer must pay on a market and the price that a seller will receive for the same thing. B Economics Bid/ask spread The difference covers the cost of, and provides profit for, the broker or other intermediary, such as a bank on the foreign exchange market. An index of PPP exchange rates based solely on the prices of the Big Mac sandwich in McDonalds restaurants around the B Economics Big Mac Index world, published each spring by the Economist. Page 28 of 379
  29. 29. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. B Economics Bilateral Between two countries, in contrast to plurilateral and multilateral. B Economics Bilateral agreement An agreement between two countries, as opposed to a multilateral agreement. B Economics Bilateral aid Aid from a single donor country to a single recipient country, in contrast to multilateral aid. Bilateral exchange The exchange rate between two countries currencies, defined as the number of units of either currency needed to purchase B Economics rate one unit of the other. A market in which a single seller faces a single buyer. The final determination of price and output is such a situation is B Economics Bilateral monopoly uncertain - much depends on the relative bargaining strength between the two parties concerned. An import (or export) quota applied to trade with a single trading partner, specifying the amount of a good that can be imported B Economics Bilateral quota from (exported to) that single country only. The trade between two countries; that is, the value or quantity of one countrys exports to the other, or the sum of exports and B Economics Bilateral trade imports between them. Page 29 of 379
  30. 30. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. B Economics Bilateral transfer A transfer payment from one country to another. B Economics Bill of exchange Any document demanding payment. The receipt given by a transportation company to an exporter when the former accepts goods for transport. It includes the B Economics Bill of lading contract specifying what transport service will be provided and the limits of liability. As an adjective, this refers to a restriction that is met exactly, and is therefore having an effect on behavior, in contrast to B Economics Binding nonbinding. B Economics BIS Bank for International Settlements A black market (or shadow market) is an illegal market in which the normal market price is higher than a legally imposed price ceiling (or maximum price). Black markets develop where there is excess demand (or a shortage) for a commodity. Some B Economics Black market consumers are prepared to pay higher prices in black markets in order to get the goods or services they want. When there is a shortage, higher prices act as a rationing device. Good examples of black markets include tickets for major sporting events, rock concerts and black markets for childrens toys and designer products that are in scarce supply. A special category of subsidies permitted under the WTO Agriculture Agreement, it includes payments that are linked to B Economics Blue box production but with provisions to limit production through production quotas or requirements to set aside land from production. Page 30 of 379
  31. 31. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. B Economics BM Banco Mundial (Spanish for World Bank) A debt instrument, issued by a borrower and promising a specified stream of payments to the purchaser, usually regular B Economics Bond interest payments plus a final repayment of principal. Bonds are exchanged on open markets including, in the absence of capital controls, internationally, providing a mechanism for international capital mobility. The market for bonds, in which the prices of the bonds, and therefore the corresponding interest rates, are determined by the B Economics Bond market interaction of buyers and sellers. B Economics Bonds The issue of debt is done by the central bank and involves selling debt to the bond and bill markets. A pattern of performance over time in an economy or an industry that alternates between extremes of rapid growth (booms) B Economics Boom-bust cycle and extremes of slow growth or decline (busts), as opposed to sustained steady growth. For an economy, this indicates an extreme form of the business cycle. B Economics BOP Balance of payments. A discontinuity that exists in prices or in quantities of trade at the border between countries. If the price of a good is higher on B Economics Border effect one side of a border than the other, this is a border effect. If a gravity equation includes a dummy for trade across a border and that dummy is significant, that also indicates a border effect. Page 31 of 379
  32. 32. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. B Economics Border price The price of a good at a countrys border. In the context of trade policy, this refers to policies such as tariffs and quotas that enhance profits and employment in a B Economics Border protection domestic industry, as opposed to other policies such as production subsidies that might have similar effects without restricting trade. Border tax Rebate of indirect taxes (taxes on other than direct income, such as a sales tax or VAT) on exported goods, and levying of B Economics adjustment them on imported goods. May distort trade when tax rates differ or when adjustment does not match the tax paid. B Economics Borderless world The concept that national borders no longer matter, perhaps for some specified purpose. The amount that an entity, usually a country or its government, has borrowed. Thus often the (negative of) the net foreign asset B Economics Borrowing position or the national debt. B Economics BOT Balance of trade. B Economics Bound rate See tariff binding. Page 32 of 379
  33. 33. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. B Economics Bound tariff See tariff binding. Curved. "Bowed out" is used to describe a typical transformation curve, which is concave to the origin. In contrast, a B Economics Bowed transformation curve reflecting increasing returns to scale might be "bowed in" toward the origin. Used with a color, a category of subsidies based on status in WTO: red=forbidden, amber=go slow, green=permitted, B Economics Box blue=subsidies tied to production limits. Terminology seems only to be used in agriculture, where in fact there is no red box. B Economics Box diagram The Edgeworth Box. To protest by refusing to purchase from someone, or otherwise do business with them. In international trade, a boycott most B Economics Boycott often takes the form of refusal to import a countrys goods. In the Mundell-Fleming model, the curve representing balance of payments equilibrium. It is normally upward sloping because B Economics BP-Curve an increase in income increases imports while an increase in the interest rate increases capital inflows. The curve is used under pegged exchange rates for effects on the balance of payments and under floating rates for effects on the exchange rate. B Economics BPO Business process outsourcing Page 33 of 379
  34. 34. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. The migration of skilled workers out of a country. First applied to the migration of British-trained scientists, physicians, and B Economics Brain drain university teachers in the early 1960s, mostly to the United States. Branch plant An economy that relies heavily on branch plants, i.e., production subsidiaries, of foreign companies, and therefore on foreign- B Economics economy owned capital and technology. A distinctive product offering which is created by the use of a logo, symbol, name, design, packaging or combination thereof. B Economics Brand The key in designing and building a brand is to differentiate it from competitors. Brand loyalty exists when consumers regard one particular brand of a product differently from competing products. Persuasive advertising seeks to reinforce and strengthen brand loyalty and thereby make the demand for the product more inelastic. Brand B Economics Brand loyalty loyalty can be seen as a potential entry barrier in a market. It makes it more difficult and costly for a new product to break into the market when there are established suppliers enjoying a substantial degree of brand loyalty. The break even output is the volume of goods or services that have to be sold in order for the business to make neither a loss B Economics Break even nor a profit. The break even price is when price = average total cost. B Economics Break even output The break-even output occurs when AR=ATC (at this output, normal profit only is made). A town in New Hampshire at which a 1944 conference launched the IMF and the World Bank. These, along with the B Economics Bretton Woods GATT/WTO became known as the Bretton Woods Institutions, and together they comprise the Bretton Woods System. Page 34 of 379
  35. 35. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. B Economics Bribe A payment made to person, often a government official such as a customs officer, to induce favorable treatment. B Economics Brokers fee The fee for a transaction charged by an intermediary in a market, such as a bank in a foreign-exchange transaction. Brown field FDI that involves the purchase of an existing plant or firm, rather then construction of a new plant. Contrasts with green field B Economics investment investment. Brussels Tariff An international system of classification for goods that was once widely used for specifying tariffs. It was changed, in name B Economics Nomenclature only, to the CCCN in 1976 and later superseded by the Harmonized System of Tariff Nomenclature B Economics BTN Brussels Tariff Nomenclature A rise in the price of an asset based not on the current or prospective income that it provides but solely on expectations by B Economics Bubble market participants that the price will rise in the future. When those expectations cease, the bubble bursts and the price falls rapidly. Term for an economy in which the presence of one or more bubbles in its asset markets is a dominant feature of its B Economics Bubble economy performance. Japan was said to be a bubble economy in the late 1980s. Page 35 of 379
  36. 36. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. For an individual or household, the condition that income equals expenditure (in a static model), or that income minus B Economics Budget constraint expenditure equals the value of increased asset holdings (in a dynamic model). When the government is running a budget deficit, it means that in a given year, total government expenditure exceeds total tax B Economics Budget deficit revenue. As a result, the government has to borrow through the issue of debt such as Treasury Bills and long-term government. B Economics Budget deficit The negative of the budget surplus; thus the excess of expenditure over income. Refers in general to an excess of income over expenditure, but usually refers specifically to the government budget, where it is B Economics Budget surplus the excess of tax revenue over expenditure (including transfer and interest payments). A large quantity of a commodity held in storage to be used to stabilize the commoditys price. This is done by buying when the B Economics Buffer stock price is low and adding to the buffer stock, selling out of the buffer stock when the price is high, hoping to reduce the size of price fluctuations. See international commodity agreement. One way to smooth out the fluctuations in prices is for the government to operate price support schemes through the use of B Economics Buffer stock schemes buffer stocks. Buffer stock schemes seek to stabilize the market price of agricultural products by buying up supplies of the product when harvests are plentiful and selling stocks of the product onto the market when supplies are low. B Economics Building block See stumbling block. Page 36 of 379
  37. 37. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. Issues that were scheduled for continued negotiations within the WTO in the Uruguay Round agreement. In addition to B Economics Built-in Agenda reviewing the implementation of various agreements, these included negotiations for further liberalization in agriculture and services. B Economics Built-in stabilizer Automatic stabilizer. Bureau of Economic The government agency within the United States Department of Commerce that collects macroeconomic data, especially the B Economics Analysis National Income and Product Accounts, as well as data on balance of payments and international investment. The state of business confidence can be vital in determining whether to go ahead with an investment project. When confidence B Economics Business confidence is strong then planned investment will rise. The business, trade or economic cycle is when actual GDP tends to move up and down in a regular pattern causing booms B Economics Business cycle and slumps (depressions), with recession and recovery as intermediate stages. Business Cycle B Economics Dating Committee See National Bureau of Economic Research. Business ethics is concerned with the social responsibility of management towards the firm‘s major stakeholders, the  B Economics Business ethics environment and society in general. Page 37 of 379
  38. 38. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. Business process The outsourcing and/or offshoring of business processes, such as the back office functions such as accounting, human B Economics outsourcing resource management, etc. U.S. legislation requiring that government purchases give preference to domestic producers unless imports are at least a B Economics Buy American Act specified percentage cheaper. This is an example of a government procurement NTB that was partially given up under the Tokyo Round. A US law enacted in 2000 requiring that revenues from anti-dumping duties and countervailing duties be given to the US B Economics Byrd Amendment domestic producers who had filed the cases. Navigation and trade by ship along a coast, especially between ports within a country. Restricted in the U.S. by the Jones Act C Economics Cabotage to domestic shipping companies. C Economics CACM Central American Common Market. C Economics CAFTA U.S.-Central American Free Trade Agreement. Cairnes-Haberler C Economics Model A trade model in which all factors of production are assumed immobile between industries. See specific factors model. Page 38 of 379
  39. 39. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. A group of agricultural exporting countries, currently (2007) numbering 19, that was formed in 1986 to act as a counterweight C Economics Cairns Group especially to the EU in international negotiations on agriculture. Named after the city in Australia where the group first met, in August 1986. In economic models, particularly computable general equilibrium models, this refers to the assignment of values to parameters C Economics Calibration so as to align the model with real-world data. C Economics CAN Comunidad Andina (Spanish for Andean Community) Canada-US Auto The "Canada-United States Automotive Products Agreement of 1965" which reduced trade barriers on specified trade between C Economics Pact Canada and the United States in automobiles and original-equipment auto parts. Canada-US Free C Economics Trade Agreement A free trade agreement between Canada and the United States signed in 1989 and superseded by the NAFTA in 1994. The 5th ministerial meeting of the WTO held in Canc?exico, September 2003 as part of the Doha Round of multilateral trade C Economics Cancún Ministerial negotiations. The meeting failed to reach agreement on a framework text for the round because of disagreements between the US/EU and the G-20, mostly over agricultural subsidies. Canonical model of This term has been used to refer to the model that Krugman (1979) presented of a currency crisis that results when domestic C Economics currency crises policy is pursued in a manner inconsistent with a pegged exchange rate. Page 39 of 379
  40. 40. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. C Economics CAP Common Agricultural Policy The term used repeatedly in the Doha Declaration referring to the assistance to be provided to developing countries in C Economics Capacity building establishing and administering their trade policies, conducting analysis, and identifying their interests in trade negotiations. The term capital means investment in goods that are used to produce other goods in the future. Fixed capital includes C Economics Capital machinery, plant and equipment, new technology, factories and buildings - all of which are capital goods designed to increase the productive potential of the economy in future years. A country is capital abundant if its endowment of capital is large compared to other countries. Relative capital abundance can C Economics Capital abundant be defined by either the quantity definition or the price definition. A countrys international transactions arising from changes in holdings of real and financial capital assets (but not income on C Economics Capital account them, which is in the current account). Includes FDI, plus changes in private and official holdings of stocks, bonds, loans, bank accounts, and currencies. Capital account C Economics balance Balance on capital account Capital account C Economics deficit Debits minus credits on capital account. See deficit. Page 40 of 379
  41. 41. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. Capital account C Economics surplus Credits minus debits on capital account. Same as balance on capital account. See surplus. The process by which the stock of capital inputs is increased. For the capital stock to grow, gross investment needs to be C Economics Capital accumulation higher than that required simply to replace worn out or obsolete machinery and technology. Net investment must be positive. Capital adequacy The ratio of a banks capital to its risk-weighted credit exposure. International standards recommend a minimum for this ratio, C Economics ratio intended to permit banks to absorb losses without becoming insolvent, in order to protect depositors. Said of a technological change or technological difference if one production function produces the same as if it were the other, C Economics Capital augmenting but with a larger quantity of capital. Same as factor augmenting with capital the augmented factor. Also called Solow neutral. Capital consumption C Economics allowance The name used in the National Income and Product Accounts for depreciation of capital. C Economics Capital control Any policy intended to restrict the free movement of capital, especially financial capital, into or out of a country. C Economics Capital depreciation See depreciation. Page 41 of 379
  42. 42. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. C Economics Capital flight Large financial capital outflows from a country prompted by fear of default or, especially, by fear of devaluation. C Economics Capital flow International capital movement. The increase in value that the owner of an asset experiences when the price of the asset rises, including when the currency in C Economics Capital gain which the asset is denominated appreciates. Contrasts with capital loss. Producer or capital goods such as plant (factories) and machinery are useful not in themselves but for the goods and services C Economics Capital goods they can help produce in the future. A net flow of capital, real and/or financial, into a country, in the form of increased purchases of domestic assets by foreigners C Economics Capital inflow and/or reduced holdings of foreign assets by domestic residents. Recorded as positive, or a credit, in the balance on capital account. C Economics Capital infusion An increase in financial capital provided from outside a bank, corporation, or other entity. A measure of the relative use of capital, compared to other factors such as labor, in a production process. Often measured by C Economics Capital intensity the ratio of capital to labor, or by the share of capital in factor payments. Page 42 of 379
  43. 43. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. Describing an industry or sector of the economy that relies relatively heavily on inputs of capital, usually relative to labor, C Economics Capital intensive compared to other industries or sectors. See factor intensity. This is investment spending by companies on fixed capital goods such as new plant and equipment and buildings. Investment C Economics Capital investment also includes spending on working capital such as stocks of finished goods and work in progress. The decrease in value that the owner of an asset experiences when the price of the asset falls, including when the currency in C Economics Capital loss which the asset is denominated depreciates. Contrasts with capital gain. Capital market Anything that interferes with the ability of economic agents to borrow and lend as much as they wish at a fixed rate of interest C Economics imperfection that truly reflects probability of repayment. A common source of imperfection is asymmetric information. The ability of capital to move internationally. The degree of capital mobility depends on government policies restricting or taxing C Economics Capital mobility capital inflows and/or outflows, plus the risk that investors in one country associate with assets in another. C Economics Capital movement Capital inflow and/or outflow. A net flow of capital, real and/or financial, out of a country, in the form of reduced holdings of domestic assets by foreigners C Economics Capital outflow and/or increased holdings of foreign assets by domestic residents. Recorded as negative, or a debit, in the balance on capital account. Page 43 of 379
  44. 44. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. C Economics Capital output ratio The ratio of the quantity of capital to the quantity of output, usually in the one-sector economy of a simple growth model. A country is capital scarce if its endowment of capital is small compared to other countries. Relative capital scarcity can be C Economics Capital scarce defined by either the quantity definition or the price definition. C Economics Capital stock The total amount of physical capital that has been accumulated, usually in a country. C Economics Capitalism An economic system in which capital is mostly owned by private individuals and corporations. Contrasts with communism. C Economics Capitalist An owner (or sometimes only a manager) of capital. An economic system organised along capitalist lines uses market-determined prices to guide our choices about the production C Economics Capitalist economy and distribution of goods; these economies generally have productive resources which are privately owned and managed. State intervention is kept to a minimum. One key role for the state is to maintain the rule of law and protect private property. The ratio of the quantity of capital (usually only physical) to the quantity of labor, usually as employed in a particular industry, C Economics Capital-labor ratio but sometimes referring to the entire factor endowment of a country. Page 44 of 379
  45. 45. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. A technological change or technological difference that is biased in favor of using less capital, compared to some definition of C Economics Capital-saving neutrality. A technological change or technological difference that is biased in favor of using more capital, compared to some definition of C Economics Capital-using neutrality. Caribbean Basin A preferential trading arrangement originally enacted in 1983 by the United States, providing duty-free access to a group of C Economics Initiative Caribbean countries for selected products. It was renewed and extended in 2000. The Caribbean Community and Common Market was formed among four Caribbean countries in 1973 and had 15 members Caribbean C Economics Community as of 2007. Its purpose is the promotion of economic integration among the member countries and coordination of foreign policies. C Economics CARICOM Caribbean Community and Common Market. Carriage of Goods by C Economics Sea Act U.S. legislation governing ocean transport of cargo. C Economics Carrier A firm that provides transportation of persons or goods. Page 45 of 379
  46. 46. Encyclopedia Economics (2658 Terms) Powered by www.drawpack.com; All rights reserved. The practice of borrowing in the currency of a country where interest rates are low and lending the proceeds in the currency of C Economics Carry trade a country where interest rates are higher, in hopes of profiting from the difference. Success depends on exchange rates remaining relatively constant. Also known as uncovered interest arbitrage. Cartagena C Economics Agreement The 1969 agreement, also known as the Andean Pact, that led ultimately to the Andean Community. A producer cartel seeks to maximise joint profits in a market by engaging in price fixing. This can be achieved by controlling C Economics Cartel market output. C Economics Cascading tariffs Same as tariff escalation. C Economics CBI Caribbean Basin Initiative C Economics CCCN Customs Cooperation Council Nomenclature A 1988 report by a group of experts, chaired by Paolo Cecchini, examining the benefits and costs of creating a single market in C Economics Cecchini Report Europe, in accordance with provisions of the Treaty of Rome. Page 46 of 379

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