Economics Dictionary for IGCSE, GCE A-Level, AP, and IB Diploma (update in progress)

Absolute advantage (HL) – can produce more goods or services with the same resources

Accelerator (HL) – Keynesian investment level depends on changes in national income

Accounting costs (HL) – explicit monetary production costs

Ad valorem tax – indirect tax expressed as a percentage of price (VAT)

Administrative obstacles or regulatory barriers – government regulations that cause imports to decrease to protect domestic industries

Aggregate demand – planned domestic spending on goods and services at various possible average price levels during a specified time period

Aggregate supply – planned output of goods and services at various possible price levels during a certain period of time

Aid – flow of capital to developing countries in the form of grants or low interest rate loans

Allocative efficiency – when marginal benefit is equal to marginal cost

Anti-dumping duties – tariff imposed on import price of good being dumped to reduce harm on domestic industry

Appreciation – the increase in value, strengthening of the currency, or increase in the exchange rate

Balance of Payments (BOP) – record of all transactions a nation makes, over a given period of time, with other nations, consisting of the Current Account and Capital Account

Barrier to entry – things that make it difficult for new firms to enter the market

Basic economic question –  what to make for whom

Bilateral aid – when the government of one country provides aid to the government of another country

Breakeven output – total revenue is equal to total costs of production

Budget deficit – when spending is more than revenues

Buffer stocks – buying surplus stock during a good harvest to stabilize the price

Business cycle – fluctuations in real GDP often referred to as peaks, recessions, depressions, troughs, recoveries, and booms.

Capital – means of production such as factories, machines, equipment, and tools

Capital account of Balance of Payments – foreign direct investments in and out of a country over a given period of time

Capital flight – financial capital quickly exiting a country

Cartels – formal collusion by oligopolies who behave like a monopoly, driving up price, often achieved by restricting output

Centrally planned (command) economy – the government sets prices and output of goods and services

Ceteris paribus – all other things remain constant

Circular flow of income model – shows how money, factors of production, goods, and services flow around the economy among households, firms, financial markets, overseas markets, and the government

Collusive oligopoly – firms agree (formally or tacitly) to fix price, reduce supply, or engage in non competitive behavior, which is illegal in the UK, USA, and Hong Kong

Commodities – primary raw material products that are not easily differentiated, like iron ore or wheat

Commodity agreements –  quotas or buffer stock systems to stabilize prices

Commodity concentration of exports – a few commodities make up a large percentage of export revenue, usually of a developing country

Common market – free trade and movement of factors of production among members

Comparative advantage – goods or services can be produced at a lower opportunity cost

Consumption externality – cost are imposed or benefits are enjoyed by third parties not directly involved in the consumption transaction

Contestable market – price efficient markets with low cost of entry or exit

Cost-push inflation – supply shocks caused by the increasing price of commodities, especially oil

Cross-price elasticity of demand – % change in quantity demanded of good X / % change in the price of good Y

Crowding-out – when expansionary fiscal spending causes increased interest rates, which leads to reduced private sector spending

Current account of the balance of payments – value of exports and imports of goods and services over a specific period of time

Customs unions – economic integration to abolish tariffs and trade barriers and strengthen position when negotiating with non-members


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