A2 Macroeconomics Definitions

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Tutor2u A2 Macroeconomics Glossary

Term/Concept Glossary Description

AAA Credit Rating The best credit rating that can be given to a corporation's or a government’s bonds(loans), effectively indicating that the risk of loan default is negligible

Absolute advantage The ability to produce a product (good or service) at a lower unit cost

Absolute poverty Those people who do not have adequate nutritional intake per day, or do not haveadequate shelter or clothing in order to survive. The World Bank reports thenumber of people in countries below a $1.25 or $2 a day

Accelerator effect When planned investment is linked positively to past & expected growth of demand

Accession Countries Countries in the process of joining the European Union

Accommodatory policy A neutral policy stance in the face of an economic shock. For fiscal policy,generally means keeping tax and government expenditure rates unchanged. Formonetary policy, generally means keeping (real) interest rates unchanged.

Adjusted net savings The true rate of savings in an economy after taking into account investments inhuman capital, depletion of natural resources and damage caused by pollution

Advanced economies According to the IMF, 35 economies are ‘advanced economies’. 24 in Europe +USA, Canada, Australia, New Zealand, Israel, Japan and South Korea

Age dependency ratio The ratio of the nonworking population- people under 15 or over 65-to the workingpopulation- people 15-64

Ageing population A rising average age and a growing number of people living beyond the standardworking ages

Aggregate supply shock Either an inflation shock or a shock to potential national output; adverse aggregatesupply shocks of both types reduce output and increase inflation

Aid A voluntary transfer of money and/or resources from one country to another

Aid effectiveness Quality of aid delivery and impact on poverty reduction and development

Appreciation An increase in the external value of a currency in a floating exchange rate system

Appropriate technology A technology that complements the factor endowments of the country

ASEAN Association of Southeast Asian Nations – a regional trade bloc that seeks tobecome a fully-fledged single market in the next few years

Asymmetric bargainingpower

When the bargaining power in trade between one or more countries is imbalanced – this can lead to shifts in the measured terms of trade

Austerity Economic policy aimed at reducing a government's deficit (or borrowing)

Automatic fiscal stabilisers Tax revenues that rise and government expenditure that falls as GDP rises. The

more they change with income, the bigger the stabilising effect on national incomee.g. during a recession

Bail out Financial rescue of a struggling borrower

Balanced budget fiscalexpansion

A policy to increase GDP through changing government spending and taxationlevels, whilst leaving the overall fiscal budget the same

Balanced growth Balanced growth occurs when output and the capital stock grow at the same rate

Balassa-Samuelson Effect Where countries with higher per capita real incomes have a higher real exchangerate. A rise in productivity in the tradable goods sector will drive up wages in thissector and the non-tradable sector and thereby lead to a rise in inflation

Basic needs Access to safe water, sufficient living space, adequate health care, and education

Beggar my Neighbour A policy that seeks to promote a country's economy at the expense of anothercountry. An obvious example is the use of tariff barriers.

Birth rate The number of live births in a year as % of the population or per 1,000 people.

Bond Debt issued by companies and government and traded in bond (capital) markets



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Brain drain The movement of highly skilled or professional people from their own country toanother country where they can earn more money

BRIC economies The BRIC grouping – Brazil, Russia, India and China – has become short hand forthe rise of emerging markets in the global economy

Budget deficit Known as a fiscal deficit, the annual excess of state spending over tax revenue

Capacity building Growing the capacity of businesses, organizations and communities to produce,invest and consume – includes a broader definition of capital

Capital accumulation Using investment to build capital assets such as roads, ports, buildings

Capital deepening Development process involving a transition from traditional agriculture, which islabour-intensive, to more capital-intensive modern manufacturing. Leads to anincrease in the capital stock per worker employed

Capital flight The rapid movement of large sums of money out of a country. Reasons include alack of confidence in a country's economy and/or its currency and political turmoil.Capital flight occurs when owners of liquid assets move them to other countriesperceived as safe havens or as offering better returns. It can be legal or illegal

Capital flows Movements of capital between countries – important part of balance of payments

Capital output ratio The value of a nation’s capital stock relative to the size of GDP. Capital-output

ratios are usually around 2 or 3. Poor countries have lower capital-output ratiosbecause they have less capital-intensive economies.

Capital stock The total amount of physical capital available in the economy

Carbon tax Tax on the consumption or production of products which cause carbon emissions

Carbon trading Pollution control that uses the market mechanism to change relative prices and theincentives of producers and consumers

Carry trade A strategy in which an investor borrows money at a low interest rate in order toinvest in an asset that is likely to provide a higher return.

Cash crops A crop produced for commercial revenue & profit rather than for use by the grower

Catch-up effect Countries that start off poor tend to grow more rapidly. The result is someconvergence in the standard of living as measured by per capita GDP

Chronic hunger The chronically hungry are undernourished. Their undernourishment makes it hardto study, work or otherwise perform physical activities

CIVETS Group of high growth emerging countries comprising - Columbia – Indonesia –Vietnam – Egypt – Turkey – South Africa

Clean float Currency that floats according to market forces, free from government intervention

Commodity exports Exports of primary commodities such as rubber, coffee, oil

Common external tariff Import tariff on a product applied equally by all countries inside a customs union

Comparative advantage Comparative advantage refers to the relative advantage that one country orproducer has over another. Countries can benefit from specializing in andexporting the product(s) for which it has the lowest opportunity cost of supply

Competitive devaluation When a country tries to devalue its currency to increase its internationalcompetitiveness. However, this often encourages other countries to also devalueleading to only temporary increases in the competitiveness of exports

Concessional lending Loans given through the International Development Association. IDA provideslong-term loans at zero interest to the poorest of the developing countries.

Conditional cash transfers Attempts to cut poverty by giving cash transfers to households in need; and bytying these transfers to certain conditions, such as sending children to school

Conditionality When donors require their partners to do something in order to receive aid.

Convergence A coming together of economic indicators i.e. a narrowing of the gap in per capitaincomes between the poorest and the richest nations of the world

Corruption The abuse of entrusted power for private gain, government failure



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Cost benefit analysis Technique to determine the feasibility of a project by quantifying costs and benefits

Countervailing tariffs Tariffs imposed by a country to counteract subsidies provided to a foreign producer

Creditor nations Those nations that have a balance of payments surplus

Creeping protectionism Where import tariffs rise + quotas and barriers to the mobility of labour and capital

Currency union A group of countries (or regions) using a common currency

Currency war Competitive devaluation of currencies, a scenario where various nations try todevalue their currencies in an attempt to gain an advantage over each other

Current account deficit The amount by which money relating to trade, investment income and transfersgoing out of a country is more than the amount coming in

Debt burden Debt that a business or country has normally expressed as a share of GDP

Debt deflation High levels of debt leading to falling asset prices

Debt forgiveness The cancelling by a creditor of a debt to a country or a company

Debt relief Cancellation, rescheduling, refinancing of a nation’s external debts

Debt rescheduling Increasing the length of time over which a loan has to be repaid

Debt servicing The repayment of interest and principle to external creditors

Debt sustainability Debt sustainability is the ability to manage debts so they do not grow and impedeeconomic stability and growth.

Debtor nations Those nations that have a balance of payments deficit

De-coupling Where output rises and environmental impacts fall

De-development When a range of development indicators start to worsen, linked to a depression

De-industrialization A decline in the share of national income and jobs from manufacturing industries

De-leveraging Reducing long-term debt as a % of shareholder equity, seen recently in banks

Demographic dividend The demographic dividend happens when most of a country’s population is in the15-to-64 working-age range. This increases productivity if supported by policiesthat promote health, family, labour and financial and human capital

Demographic transition Changes in population growth rates due to changes in birth and death rates

Dependency ratio Ratio of dependent population (young and the elderly) to working age population

Depreciation A fall in the external value of a currency

Deprivation Deprivation takes into account whether people have access to things essential fora basic standard of living. These include: clean drinking water, electricity, cleanfuel for cooking, education, toilet facilities, basic transport with a bicycle, basiccommunication with a radio and basic income and wealth

Development Assistance Loans, grants, and technical assistance provided to developing countries

Development Banks Development Banks which serve particular regions e.g. the African DevelopmentBank or European Bank for Reconstruction and Development

Development diamonds 4 indicators in a country compared with its income-group average i.e. grossprimary enrolment, access to safe water, GNP per capita and life expectancy

Development Goals Targets which aim to reduce poverty, hunger, maternal and child deaths, disease,inadequate shelter, gender inequality and environmental degradation by 2015

Disguised unemployment Hidden unemployment, where part of the labour force is either left without work oris working in a redundant manner where worker productivity is essentially zero

Domestic remittances Money received from family or friends living in a different city of their own country

Domestic savings Savings accumulated by domestic households, businesses and government

Dual exchange rate A system where there is a fixed official exchange rate and an illegal market-determined parallel exchange rate



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Dumping When a producer in one country exports a product to another at a price which isbelow the price it charges in its home market or is below its costs of production

Ecological deficit Depleting natural assets faster than these can be replenished

Economic Freedom Index 1 Size of Government: Expenditures, Taxes, and Enterprises2 Legal Structure and Security of Property Rights3 Access to Sound Money

4 Freedom to Trade Internationally5 Regulations of Credit, Labour, and Business.

Economic nationalism Protection for industries from competition e.g. through tariffs or capital controls

Economic re-balancing Altering the balance of economic activity e.g. away from debt-fuelled consumptionand imports towards a higher level of business investment and exports

Economic shocks Unpredictable outside events such as volatile prices for commodities

Economic structure The balance of output, incomes and employment drawn from different sectors –ranging from primary (farming, fishing, mining) to secondary (manufacturing andconstruction) to tertiary and quaternary (tourism, banking, software industries)

Embargo An import ban, an import quota of zero

Emerging markets Financial markets of developing countries

Environmental tax An environmental tax is a tax on a good or service or a factor input, which is judged to be detrimental to the environment.

Euro Area Member nations of the single European currency bloc

Expenditure-reducing Measures to curb the demand for imports by cutting real income / spending power

Expenditure-switching Attempts to improve trade balance through a depreciation of the exchange rate orthrough a fall in the relative prices of a country’s products against other nations

Export quota A restriction on the volume of exports that can be sold overseas – this acts as asupply constraint in international markets

Export revenue Sales from selling goods and services overseas

External debt External debt is money owed by a government to international creditors

External demand Net change in demand for goods and services from international trade. Net trade ispositive when a country runs a trade surplus and negative with a trade deficit.

External imbalances Large scale surpluses or deficits on the balance of payments

Externalities Action of one agent affects the action of another agent. Too little or too much of thegood is produced or consumed than would be socially optimal

Fair trade Movement dedicated to raising prices and incomes for producers in lower-incomecountries, also focused on linking premium prices to environmental standards

FDI Foreign direct investment - long term participation by country A into country B.such as participation in management, joint-venture, transfers of technology

Fertility Rate The average number of children a woman will have during her lifetime

Financial inclusion The ability of a household to access credit, insurance and savings facilities

Financial sector stability The stability of institutions that are part of the financial system such as banks andother lenders

Fiscal austerity Attempts by a government to reduce the size of a fiscal deficit over a period ofyears. Fiscal austerity normally involves increases in taxation and cuts in spendingon state-provided goods and services

Fiscal multiplier The fiscal multiplier is the change in real GDP that is produced by a shift in thefiscal stance (deficit or surplus) equivalent to 1% of GDP

Fiscal stimulus Changes in tax and government spending aimed at boosting demand and output



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Fixed exchange rate An exchange rate that is fixed against other major currencies through action bygovernments or central banks

Floating exchange rate When external value of a currency depends on market forces of supply & demand

Foreign direct investment Acquisition of a controlling interest in productive operations abroad by companiesresident in the home economy. May involve creation of new productive capacity

Foreign exchange gap When a country's balance of payments on current account deficit is greater thanthe value of capital inflows, a shortfall of money from engaging in overseas trade

Foreign exchange reserves The reserves of gold or foreign currencies (e.g. US dollars or Euros) typically heldby central banks on behalf of their national government

Foreign savings Foreign savings can flow into countries and provide a supplement to domesticsavings. They include overseas aid, private FDI and capital flows

Fragile states Those states where the government cannot or will not deliver core functions to themajority of its people, including the poor

Free trade When trade is allowed to occur without any form of import restriction

GDP per capita: National income per head of population

Genuine progress indicator GPI is an attempt to measure whether a country's growth, increased production of

goods, and expanding services have actually resulted in improved well-being. GPIadvocates claim that it can more reliably measure economic progress, as itdistinguishes between worthwhile growth and uneconomic growth

Globalisation Deepening of relationships between countries of the world reflected in anincreasing level of overseas trade and investment.

Government debt Government debt is also known as public debt, national debt, sovereign debt ismoney (or credit) owed by a central government to creditors within the country(domestic, or internal debt) as well as to international creditors

Green development A pattern of development that decouples growth from heavy dependence onresource use, carbon emissions and environmental damage, and promotes growththrough the creation of new green product markets, technologies, investments, andchanges in consumption and conservation behaviour

Gross Domestic Product: The total value of an economy's domestic output of goods and services

Gross National Income This is broadly the same as GDP except that it adds what a country earns fromoverseas investments and subtracts what foreigners earn in a country and sendback home. GNI is affected for example by profits from businesses ownedoverseas and also remittances sent home by migrant workers.

Gross saving rate Gross saving = GDP minus consumption by government and the private sector,expressed as a percentage of GDP. A high gross domestic saving rate usuallyindicates a country's high potential to invest in capital

Hard commodities Commodities which can be mined, such as metals, minerals and oil

Hard infrastructure Examples include power, transport, and telecommunications systems

Harrod-Domar Model An idea that aggregate output (GDP) is proportional to the stock of physical capital.

Heavily Indebted PoorCountries Initiative

An initiative to provide debt relief to heavily indebted low income countries

HIPC Abbreviation for a highly indebted poor country

Hot Money Money that flows freely and quickly around the world looking to earn the best rateof return. It might be invested in any asset whose value is expected to rise orsimply be placed in an account offering the best real rate of interest.

Human Assets Index (HAI) HAI includes data on (i) nutrition (percentage of the population that isundernourished); (ii) health (child mortality rate); (iii) school enrolment (grosssecondary school enrolment rate); and (iv) literacy (adult literacy rate)



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Human capital flight When a country suffers net outward migration of skilled / younger workers whichcauses their labour force to contract and may cause lower labour productivity

Human Development Index HDI captures not only the level of income but also incorporates measures of health(life expectancy) and education (school enrolment and literacy rate).

Humanitarian Aid Emergency disaster relief, food aid, refugee relief and disaster preparedness

Hysteresis When a sustained period of low aggregate demand can lead to permanent

damage to the supply side of the economy

Import substitution Replacing imports with domestic production, perhaps using import tariffs

Inclusive growth Growth where the benefits are spread across all sections of society - broad basedgrowth, shared growth, and pro-poor growth

Inclusive Wealth Index Assesses changes in a country’s productive base, including produced, human, andnatural capital. By taking a more holistic approach, the IWI shows governments thetrue state of their nation’s wealth and the sustainability of its growth.

Income convergence Income convergence happens when a nation’s per capita income moves closer tothat of another i.e. the gap in relative income per head decreases

Income distribution Income distribution is how income is divided up among all the citizens in a country.The most common measure of income distribution is the Gini Coefficient.

Inequality-adjusted HDI IHDI takes into account achievements of a country on health, education andincome, and how those achievements are distributed among citizens by“discounting” each dimension’s average value according to its level of inequality.

Infant (fledgling) industry Fledgling industry that requires government protection from overseas competition(for instance through import tariffs) in order to develop

Inflation A persistent rise in the general price level for goods and services

Inflation expectations The rate of increase of consumer prices expected by consumers. Expectations caninfluence spending and saving decisions.

Informal sector The sector of the economy, normally comprising of small businesses, which is

unregistered with the tax authoritiesInfrastructure Transport links, communications networks, sewage systems, energy plants and

other facilities essential for the efficient functioning of a country and its economy

Intellectual Property (IP) Private property rights over ideas and inventions including copyrights, patents,trademarks and industrial designs.

Internal devaluation Where a country seeks to improve competitiveness through lowering unit wagecosts and increasing productivity and not reducing the value of their exchange rate

Internal devaluation Restoring the international competitiveness of a country mainly by reducing itslabour costs rather than allowing an exchange rate depreciation / devaluation

Internationalcompetitiveness

External competitiveness is the ability to sell goods and services at competitiveprices in a foreign country

International Monetary Fund Oversees the global financial system by following the macro policies of membercountries including those with impact on exchange rates and balance of payments

Interventionist policies Government intervention in markets to affect the allocation of scarce resources

Inward orienteddevelopment

Government policy that attempts to achieve development by stimulating domesticindustry and import substitution behind trade barriers

J Curve Effect When a trade deficit can worsen after depreciation, but get better in medium term.

Knowledge capital The scientific and technological know-how that raises productivity in business

output and the promotion of physical and natural capital

Land grab Investments in agricultural land by foreign investors

Least Developed Countries A group of countries that have been classified by the United Nations as leastdeveloped in terms of their low gross domestic product (GDP) per capita, weak



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human assets and high degree of economic vulnerability

Lewis Turning Point Occurs when a country’s surplus labour evaporates, pushing up wages,consumption and inflation rates. Within a country the supply of migrants from thecountryside might dry up causing urban wages to surge

Liberalisation Opening up markets and industries to greater trade and competition

Managed floating currency A floating exchange rate but subject to intervention by the monetary authorities, in

order to resist fluctuations that they consider to be undesirable

Market liberalization Removing state controls, for example, lifting price and wage controls and importquotas or lowering taxes and import tariffs.

Marshall-Lerner Condition Predicts the circumstances in which a fall in the exchange rate improves the BoP. A devaluation of a currency improves the BoP only if the combined (or sum of)price elasticities of demand for imports & exports are greater than one.

Mercantilism The notion that the wealth of a nation was based on how much it could export. Applied in the modern context to countries accumulating huge trade surpluses ingoods or services and focusing on export-led growth

Micro-credit Credit services offered to low-income individuals not traditionally serviced by theformal banking sector

Middle income trap Occurs when a country's growth stagnates after reaching middle income levels

Money illusion When people confuse nominal and real values when making economic decisions

Moral hazard When asymmetric rewards to losses encourages risk-taking e.g. riskier behaviourbecause of having insurance or the belief that losses will be bailed out

Multi-dimensional Poverty An international measure of acute poverty covering 109 developing countries

N-11 Countries with fast-growth potential - Bangladesh, Egypt, Iran, Nigeria, Pakistan,Philippines, Vietnam, Mexico, Korea, Turkey, Indonesia

NAFTA North American Free Trade Agreement - a free trade area agreement signed by

the US, Canada and MexicoNAIRU Non-accelerating inflation rate of unemployment, the rate of unemployment

consistent with a country experiencing a stable rate of cost & price inflation

National debt Total amount of debt owed by a government usually measured as % of GDP

National savings Total public and private sector saving measured as a share of GDP. Saving is thedifference between income and consumption. In countries such as China, thenational savings rate is high in contrast to developed economies. Gross nationalsaving measured as a percentage of GDP in 2008 for China was 54%

Natural assets Assets of the natural environment - biological assets (produced or wild), land andwater areas with their ecosystems, subsoil assets and air, see also natural capital

Natural capital The stock of natural ecosystems that yields a flow of valuable ecosystem goods or

services into the future. Natural capital may also provide services like recyclingwastes or water catchment and erosion control

Net inward migration When number of migrants coming into a country than those who leave each year

NGOs Private non-profit making bodies which are active in development work

Nominal exchange rate The price of the domestic currency in another foreign currency e.g. £1 buys $1.60

Nominal interest rate The price of borrowing money unadjusted for the effects of inflation

OECD Organisation of Economic Co-operation and Development

Off-shore banking Banks based abroad in a country where you pay less tax

Output Gap Difference between actual and (estimated) potential GDP



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Outward-orienteddevelopment

Government policy that attempts to achieve development by encouraging freetrade and the unrestricted movement of labour and capital

Overseas assets Assets such as businesses, shares, property which are owned in overseascountries and which might generate a flow of investment income which is a credititem on the current account of the balance of payments.

Pacific Alliance The Pacific Alliance is a trade pact between Chile, Colombia, Mexico and Peru

Paradox of thrift Higher saving in a recession may cause lower consumption, incomes and saving

Potential output The economy's maximum productive capacity in a physical sense. The largestoutput that could be produced, given the prevailing state of technology

Potential productivity Estimates of the productivity of the labour force. Improvements in productivity havean important effect on long run aggregate supply and trend growth

Poverty line The income level below which a person or household is deemed poor. Can also beused to measure the % of a population living in extreme poverty

PPP Exchange Rate The rate at which the currency of one country is converted into that of another topurchase the same amount of goods and services in each country

Prebisch-Singer Hypothesis States that the terms of trade between primary and manufactured productsdeteriorate over time threatening slower economic growth for poorer countries

Primary sector An industry involved in the production of raw materials including agriculture

Property rights These are the rights to ownership of an asset such as land or ideas (intellectualproperty rights)

Protectionism The use of tariff and non-tariff restrictions on imports

Public Goods Goods that are non-rival (consumption by one person does not reduce the supplyavailable for others) and non-excludable

Public sector Central government, local government and state-owned/nationalized industries

Purchasing Power Parity The current exchange rate is adjusted so that a basket of goods and services canbe bought for the same amount of dollars

Quantitative easing (QE) Central banks injecting extra cash into banking system through buying bonds

Quota A quota imposes a physical limit on the quantity of a good that can be importedinto a country in a given period of time.

Randomized controlled trial Studies that use one randomly selected test group and one randomly selectedcontrol group to create a fair comparison – these can be used to evaluate theeffectiveness of a specific government intervention or project

Real exchange rate The product of the nominal exchange rate (the dollar cost of a euro, for example)and the ratio of prices between the two countries

Real interest rate Real rate of interest = nominal rate of interest – rate of inflation E.g. if the inflationrate is 2% and nominal interest rate is 6% then real interest rate is 4%

Rebalancing Changing the nature of economic growth and development. For example a countrymight try to increase reliance on domestic demand, achieve a more equal incomedistribution and introduce incentives for environmental sustainability

Recovery The term typically refers to a phase of above average growth after a downturn

Regrettables Output which might be necessary but does not add to (and might detract from) thequality of life, e.g. expenditure on armaments and commuting

Relative poverty The relative position of some economic unit (e.g. individual, household, racialgroup) compared to another economic unit. A person can be relatively poor butnot absolutely poor – it is to do with distribution of income in a country

Remittances When migrants send home part of their earnings in the form of either cash orgoods to support their families.

Rent-seeking behaviour Behaviour by producers in a market that improves the welfare of one but at theexpense of another. A feature of monopoly and oligopoly

Reserve currency A foreign currency that is held in countries' official reserves because of its globalimportance as a medium of exchange and its inherent stability



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Resource efficiency Producing more goods and services but with a lower environmental footprint

Resource rent A measure of the financial return from operating in a natural resource industry – forexample in the fishing sector, it is what remains after fishing costs and subsidiesare deducted from revenue

Resource rich economies Countries with a large endowment of natural resources which are often traded withother countries

Revealed comparative

advantage

Calculated (for example) as the share of footwear in the economy’s exports divided

by the share of footwear in global exports. The comparative advantage of aparticular economy is ‘revealed’ when this ratio is greater than 1

Rural urban migration Migration of people from rural areas to urban areas

Savings surplus Excess of aggregate savings over domestic investment, where investment is infixed capital and inventories by both the public and the private sectors.

SEZ Abbreviation for special economic zones used extensively in China

Social cohesion How united, trustful, cooperative and tolerant of cultural diversity society is

Social exclusion When people are denied access to opportunities considered ‘normal’ in a society

Soft commodities Commodities which can be grown, such as coffee, sugar, tea or maize

Soft infrastructure The financial system and regulation, education system, the legal framework, socialnetworks, values and other intangible structures in an economy

Soft loan A loan made to a country on a concessionary basis with a lower rate of interest

Sovereign debt crisis Widespread problem of high fiscal deficits and rising national debts in manydeveloped countries

Sovereign wealth fund A government or state run fund usually created by profits from natural resources

Special drawing rights A unit of money created by the IMF. Each member country can borrow SDRs atfavourable interest rates from the IMF's reserves when they are needed

Specialisation When individuals, regions or countries concentrate on making one or just a fewproducts to create a surplus to trade, linked to comparative advantage

Stability and Growth Pact EU’s fiscal rules intended to control government borrowing

Stagflation A combination of slowing economic growth and rising cost and price inflation

Structural fiscal deficit The size of a fiscal (budget) deficit adjusted to take account of the effects ofchanges in the economic cycle

Structural transformation The reallocation of economic activity away from the least productive sectors of theeconomy to more productive ones – e.g. movement of labour out of less productivesemi-subsistence agriculture and into the more productive sectors ofmanufacturing or services, in both urban and rural areas

Subsistence farming Farming where output is for consumption of the farmer/family, not for cash sale

Sustainable budget position Extent to which a government can sustain current levels of spending andborrowing – affected for example by the rate of interest that it must pay on newissues of government debt

Sustainable development To leave future generations the option or capacity to be as well off as we are

Sustainable growth Growth that meets the needs of the present without compromising the ability offuture generations to meet changing needs and wants. Each generation shouldbequeath as large a productive base as it inherited from its predecessor

Technology spillovers Transfer of production technologies, ideas arising from trade and FDI

Terms of Trade The terms of trade (also known as the real exchange rate) is the real value ofcountries exports in terms of their imports. Thus it is a function of the price levels inthe domestic and foreign country and the nominal exchange rate

Trading bloc A group of countries co-operating to liberalize trade between each other



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Transition economies Former countries of the Eastern Bloc that have been engaged in a transition frombeing largely command economies to market systems with a greater role forprivate enterprise and resource allocation via the price mechanism

Trend growth Long term non-inflationary increase in GDP caused by an increase in LRAS

Trickle down The process whereby the economic gains from economic growth pass downthroughout the entire society eventually giving rise to development

Unbalanced economy A common feature of most modern economies. E.g. imbalances between: (i)savings & investment (ii) domestic & external demand (iii) public & private sectors(iv) formal & informal economic activity (v) BoP deficits and surpluses

Under-employment When people want to work full time but find that they can only get part-time work –the result is a loss of hours that the economy can use

Under-nourishment When food intake is chronically insufficient to meet minimum energy requirements.

Unit wage costs Wage costs per unit of output – determined by wage and productivity levels

World Bank Promotes the institutional, structural and social development, providing low interestloans for domestic investment projects and technical assistance

World Trade Organisation Polices free trade agreements, and decides on trade disputes between countries.It arranges trade negotiations to liberalize trade by mutually agreed reductions intariffs & quotas and opening domestic markets up to foreign competition

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A2 Macroeconomics Definitions