Economic Definitions A-C

Question	Answer
Absolute Advantge	Where a country using a given resource is able to produce more than other countries with the same input.
Absolute Poverty	When an individual or household's income is insufficient for them to afford basic shelter, food and clothing.
Accelerator Theory	The theory that the level of investment is related to past changes in national income.
Activist Shareholders	Shareholders that will clamour for greater dividends and may mobilise other shareholders to oppose the management.
Activity rate/participation rate	The proportion of the population of working age in a job or actively seeking work.
Actual Growth	An increase in the productive potential of the economy matched by an increase in demand.
Ad-volorem	A tax which is a percentage of the price of the unit.
Adaptive Expectations	Where decisions about the future are based on past information.
Adjustable Peg	Value of the fixed exchange rate can be changed as circumstances require.
Allocative Efficiency	The optimum allocation of scare resources that best accords with consumers patterns of demand.
Allocative Inefficiency	When resources are not sued to produce the goods and services consumers want.
Anglo-Saxon neo-liberalism	Economic reforms aimed at boosting the dynamism of economies - in contrast to the 'social model' which stresses social objectives..
Annual General Meeting	An annual meeting in which shareholders can discuss the accounts and elect directors.
Anticipated Inflation	Where economic agents correctly predict the future rate of inflation.
Appreciated	When a floating currency increases in value.
Appreciation	Increasing the value of a currency in a free floating exchange rate system.
Automatic Stabilisers	Features of government spending and taxation that minimise fluctuations in the economic cycle.
Average cost Pricing	Setting the cost at the level of average cost.
Average Fixed Cost	Total fixed cost divided by the number produced.
Average Product	The total product divided by the number of workers.
Average Revenue	Total revenue divided by number sold.
Average Total Cost	Total cost divided by the number produced.
Average Variable Cost	Total variable costs divided by the number produced.
Backward-bending Supply curve for labour	The individual supply curve for labour is thought to be this shape because it is assumed workers will prefer to work fewer hours as their income increases above a certain level.
Balance of Payments	A record of the financial transactions over a period of time between a country and its trading partners.
Balance of trade in goods	Visible exports minus visible imports.
Balance of trade in services	invisible exports minus invisible imports.
Balanced Budget	Where government spending equals government receipts in a financial year.
Barometric price leadership	A firm who'd price changes are accepted as they are adroit (clever) at interpreting market conditions.
Barriers to entry	Obstacles that stop new firms entering a market.
Base rate	The interest rate a bank sets to determine its lending and borrowing rates. It will tend to offer interest rates below the base rate to savers, whilst charging rates above the base rate for borrowers.
Benefit Principle	The argument that taxes should be linked to the benefits received by the taxpayers.
Benign deflation	Falling prices resulting from technological advances across the economy.
Brand Loyalty	A measure indicating the degree to which consumers will purchase a firm's products rather than products from a competing firm.
Broad Money	Money held in banks and building societies that is not immediately accessible. This money is held in accounts that require notice to withdraw money, for example, some types of saving accounts.
Budget Deficit	Where government spending exceeds government receipts in a financial year.
Budget Surplus	Where government receipts exceed government spending in a financial year.
Canons of Taxation	The characteristics of a 'good tax', after Adam Smith. (Cannons of equality, certainty, convenience and economy.)
Capital Account and Financial Account	The part of the balance of payments that records capital flows in and out of the country.
Capital Expenditure	Government spending to improve the productive capacity of the economy, for example, on schools and hospitals.
Capital Market Discipline	Where firms may be taken over by other firms if they appear to be making lower profits than there assets would suggest.
Carbon Footprint	The amount of greenhouse gasses produced measured in terms of carbon dioxide.
Cartel	A group of firms working together, or colluding.
Casual Unemployment	The type of frictional unemployment that occurs when workers are laid off on a short-term basis.
Ceiling Price	Maximum price determined by the authorities.
Classical or real-wage unemployment	Unemployment that is the result of real wages being above the market clearing level, resulting in excess supply of labour.
Collusion	Where firms cooperate in their pricing and output policies.
Comparative Advantage	Where a country can produce a good with a lower resource cost input than other countries.
Competition Commission	A government organisation responsible for implementing policies in relation to monopolies.
Competition Policy	Methods that the UK government and EU authorities use in order to make markets more efficient.
Concentration Ratio	The proportion of the market shares held by the dominant firms.
Conglomerate merger	Where firms with no obvious connection combine.
Constant Returns to Scale	Where an increase in factor inputs leads to a proportional increase in the factor outputs.
Consumer Price Index (CPI)	The headline measure of inflation, derived from movements in a weighed basket of consumer goods over a 12 month period.
Contestable Markets	Where there is free entry and free exit of other firms.
Contractionary or deflationary fiscal policy	Where the government runs a large budget surplus.
Copyright	Ownership of rights, for example, to a book, giving redress a law for copying by a third party.
Corporate Citizenship	Indicates that organisations embrace sustainable development.
Corporation	A private enterprise firm incorporated with The Registrar of Companies.
Cost-benefit analysis (CBA)	An investment appraisal technique that takes into account all the private external costs and benefits of an economic decision.
Cost-push Inflation	Inflation caused by economy-wide increases in the cost of production.
Crawling peg	Frequent changes in the value of a fixed exchange rate.
Credit Crunch	A recently coined term used to refer to the reduced willingness of financial institutions to lend money to households and to one another.
Crowding Out	Where a public sector deficit deters private sector investment and consumption.
Current Account	The part of the balance of payments that primarily records the trade in goods and services.
Current Account Deficit	Where imports of goods and services exceed exports.
Current Account Surplud	When exports of goods and services exceed imports.
Current Expenditure	Government spending on the day-to-day running of the public sector, including raw materials and wages of public sector workers.
Cyclical budget deficit	A budget deficit resulting in fluctuations in the economic cycle.
Cyclical or demand-deficit unemployment	Unemployment due to lack of aggregate demand.

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Economic Definitions A-C

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