Economics

• Absolute advantage


  A situation where a country can produce a particular good or service using fewer resources than another country
• Absolute poverty


  A condition where household income is below the level necessary to maintain basic living standards in relation to food, shelter and housing
• Accelerating inflation


  A situation where the rate of inflation is rising over a period of time
• Accelerator


  A way of calculating the effect of a change in national income on investment in an economy
• Actual growth in national output


  A movement from within the production possibility curve of an economy to a position on the production possibility curve, resulting from the better utilisation of the existing factors of production
• Aggregate demand (AD)


  The total amount that is spent on an economy's goods and services at a given price level over a given period of time; it is made up of four main components — consumption, investment, government spending and net exports
• Aggregate supply (AS)


  The total output that firms in an economy are able and willing to supply at different price levels in a given period of time; it includes both consumer and capital products
• Aid


  The process of economically developed countries providing financial support to economically developing economies
• Allocative efficiency


  A situation that describes the extent to which the allocation of resources in an economy matches consumer preferences and P = MC
• Allocative mechanism


  A method of taking decisions about the different uses that can be made of factors of production
• Alternative demand


  A situation where two items are substitutes (i.e. one will be consumed or the other); an example is tea and coffee
• Appreciation


  A rise in the value of a floating exchange rate
• Asymmetric information


  A situation in which there is unequal knowledge between the parties of a transaction, resulting in an advantage to the party with additional knowledge
• Automatic stabilisers


  Where changes in the level of taxation and/or public expenditure automatically bring about changes in an economy without the need for deliberate action by a government
• Autonomous investment


  Capital investment that is not related to changes in the level of national income in an economy
• Average cost


  The total cost of employing all the factor inputs divided by the number of units produced; also known as 'average total cost'
• Average fixed cost


  The total fixed cost of production divided by the number of units produced
• Average product


  The output per unit of the variable factor (e.g. output per worker per period of time); also referred to as 'productivity'
• Average propensity to consume

  The proportion of income that is spent
• Average propensity to import


  The proportion of income that is spent on imports
• Average propensity to save

  The proportion of income that is saved
• Average propensity to tax


  The proportion of income that is taxed
• Average revenue (AR)


  The total revenue obtained by a firm from sales divided by the number of units sold
• Average tax rate


  The average percentage of total income that is paid in tax
• Average variable cost


  The total variable cost of production divided by the number of units produced
• Balance of payments


  A record of all transactions linked with exports and imports, together with international capital movements; it consists of the current account, the capital account and the financial account
• Balance of trade in goods account

  The trade in goods (e.g. cars) between countries
• Balance of trade in services account


  The trade in services (e.g. banking) between countries
• Balanced budget


  Where projected government revenue and planned government expenditure are equal
• Balancing item


  A positive or negative figure that accounts for any statistical errors in the balance of payments and ensures that the accounts, when added together, come to zero
• Bank deposits


  Deposits of money in accounts in financial institutions, many of which in a modern economy are in electronic form
• Barriers to entry or exit


  Various obstacles that make it very difficult, or impossible, for new firms to enter or exit an industry (e.g. technical economies of scale, patents or heavy capital investments)
• Barter


  The direct exchange of one good or service for another
• Base year


  A year chosen so that comparisons can be made over a period of time; the base year for an index is given a value of 100
• Behavioural economics


  An approach to decision making which argues that the behaviour of individuals is often based on ideas that do not correspond to the traditional view of rational economic behaviour
• Bilateral trade


  Where trade takes place between two countries
• Birth rate


  The average number of live births per 1,000 of population of a country in a given time period, usually a year
• Break-even point


  The level of output at which a firm is making neither a loss nor a profit
• BRICS/BRICs


  Refers to the countries of Brazil, Russia, India and China; South Africa is now usually included
• Broad money supply


  A measure of the stock of money that reflects the total potential purchasing power in an economy