These terms will help readers understand fundamental concepts within the subject.
Glossary / {Terms and Definitions}
Glossary Page 10
---
256. Financial Inclusion
The process of ensuring that individuals and businesses, particularly those in underserved areas, have access to useful and affordable financial products and services that meet their needs, such as transactions, payments, savings, credit, and insurance.
---
257. Subsistence Economy
An economy in which the population primarily engages in producing enough goods to meet their own basic needs, with little or no surplus for trade. This type of economy often relies on agriculture and traditional practices and is commonly found in rural and underdeveloped regions.
---
258. Debt-to-GDP Ratio
A metric that compares a country’s public debt to its gross domestic product (GDP). It is used to gauge a country's ability to repay its debt. A high debt-to-GDP ratio indicates that a country might struggle to pay back its debt without incurring further debt.
---
259. Crony Capitalism
An economic system in which business success is determined by close relationships between business owners and government officials. This often results in favoritism in the distribution of legal permits, government grants, and special treatment in regulation and taxation.
---
260. Capital Flight
The large-scale exodus of financial assets and capital from a country due to economic instability, fear of government intervention, or unfavorable political conditions. This can weaken a country's economy and lead to currency devaluation.
---
261. Industrial Policy
Government strategies and policies designed to promote and regulate the development of specific sectors of the economy, particularly manufacturing and heavy industry. Industrial policy often involves subsidies, tax incentives, and protectionist measures to encourage growth in targeted sectors.
---
262. Bretton Woods System
An international monetary system established in 1944 in which currencies were pegged to the US dollar, which was convertible to gold. The system aimed to promote global financial stability but collapsed in 1971 when the US ended the dollar’s convertibility to gold.
---
263. Import Substitution Industrialization (ISI)
An economic policy that advocates replacing foreign imports with domestic production. ISI seeks to reduce dependency on foreign goods, foster local industry, and reduce balance-of-payment issues. It was widely adopted in developing countries during the mid-20th century.
---
264. Primary Sector
The part of the economy that involves the extraction and harvesting of natural resources, such as agriculture, mining, fishing, and forestry. The primary sector forms the foundation of an economy, especially in developing nations.
---
265. Creative Destruction
A concept in economics where innovation and technological advancement result in the demise of older industries and jobs, making way for new industries and economic growth. The term was popularized by Joseph Schumpeter to describe capitalism's constant process of renewal.
---
266. Transfer Pricing
The setting of prices for transactions between divisions or subsidiaries of the same multinational company in different countries. This can be used by corporations to shift profits to low-tax jurisdictions, a practice often scrutinized by tax authorities.
---
267. Export-Led Growth
An economic strategy focused on increasing a country's exports as a primary driver of economic growth. Export-led growth policies often involve improving international competitiveness, reducing trade barriers, and focusing on industries with a comparative advantage.
---
268. Gini Coefficient
A measure of income or wealth inequality within a nation, ranging from 0 to 1, where 0 represents perfect equality (everyone has the same income) and 1 represents maximal inequality (one person has all the income). It is widely used to assess the distribution of wealth within societies.
---
269. Arbitrage
The practice of buying an asset in one market and simultaneously selling it in another market at a higher price to take advantage of price differences. Arbitrage ensures market efficiency by balancing prices across different markets.
---
270. Base Erosion and Profit Shifting (BEPS)
A term used to describe tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax jurisdictions. BEPS strategies are a major concern for governments seeking to ensure fair taxation of multinational enterprises.
---
271. Quantitative Easing (QE)
A monetary policy tool used by central banks to stimulate the economy by purchasing government securities or other securities from the market to increase the money supply and encourage lending and investment. QE is often used when traditional monetary policy tools are no longer effective.
---
272. Shadow Economy
The segment of the economy that operates outside government regulation, taxation, and oversight, including black-market activities, undeclared work, and informal labor. The shadow economy can be substantial in some countries but poses challenges for tax collection and regulation.
---
273. Zero-Sum Game
A situation in which one party’s gain is exactly balanced by another party’s loss, resulting in no net gain or loss in the overall system. In zero-sum games, resources are finite, and the success of one party directly comes at the expense of others.
---
274. Keynesian Multiplier
An economic concept that refers to the magnified impact of government spending or tax cuts on overall economic activity. For instance, an initial increase in spending can lead to increased consumption and investment, creating a multiplier effect throughout the economy.
---
275. Middle-Income Trap
A situation in which a developing country’s growth slows down after reaching middle-income levels, preventing it from achieving high-income status. This can happen when a country’s comparative advantage in low-cost labor erodes, but it fails to move up the value chain into more advanced industries.
---
276. Corporate Social Responsibility (CSR)
A business model in which companies integrate social and environmental concerns into their operations and interactions with stakeholders. CSR activities can include philanthropy, environmental sustainability, ethical labor practices, and community development.
---
277. Trade Deficit
A situation where a country's imports of goods and services exceed its exports. A trade deficit can lead to a buildup of foreign debt and pressure on the national currency but may also reflect strong consumer demand and economic growth.
---
278. Balance of Payments (BOP)
A comprehensive record of a country’s economic transactions with the rest of the world, including trade in goods and services, capital flows, and financial transfers. The BOP consists of two main accounts: the current account and the capital and financial account.
---
279. Soft Power
The ability of a country to influence others through cultural or ideological appeal, diplomacy, and other non-coercive methods, rather than through military or economic power (hard power). Soft power is crucial for international relations and global influence.
---
280. Green Bonds
Fixed-income instruments that are specifically earmarked to raise money for climate and environmental projects. Green bonds are part of the broader strategy to finance sustainable development and the transition to a low-carbon economy.
---
281. Devaluation
A deliberate downward adjustment of a country’s currency value relative to another currency or standard, such as gold. Devaluation is often used to boost exports by making them cheaper for foreign buyers, but it can also lead to inflation and increased costs for imported goods.
---
282. Securitization
The process of pooling various types of debt—such as mortgages, auto loans, and credit card debt—and selling them as bonds or securities to investors. Securitization can provide liquidity to lenders, but it played a controversial role in the 2008 financial crisis.
---
283. Intellectual Property (IP)
A category of property that includes intangible creations of the human intellect, such as inventions, designs, software, music, and literary works. IP rights grant creators exclusive control over the use and distribution of their creations, which can promote innovation but also lead to monopolistic practices.
---
284. Central Planning
An economic system in which the government makes all major decisions about production, distribution, and consumption of goods and services, rather than relying on market forces. Central planning was characteristic of many socialist and communist economies during the 20th century.
---
285. Multinational Corporation (MNC)
A company that operates in multiple countries, often by owning or controlling production or distribution facilities abroad. MNCs play a significant role in globalization and can influence international economic policies, labor practices, and environmental standards.
---