These terms will help readers understand fundamental concepts within the subject.
Glossary / {Terms and Definitions}
Glossary Page 2
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31. Inflation
A sustained increase in the general price level of goods and services in an economy over a period of time. When inflation is high, purchasing power decreases, meaning consumers can buy fewer goods for the same amount of money.
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32. Deflation
The opposite of inflation, deflation is a decrease in the general price level of goods and services. While it might seem beneficial for consumers, deflation can lead to reduced business profits, wage cuts, and increased unemployment.
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33. Stagflation
An economic condition characterized by slow growth, high unemployment, and rising inflation. It presents a dilemma for policymakers because the tools to fight inflation (e.g., higher interest rates) may worsen unemployment, and vice versa.
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34. Progressive Taxation
A tax system in which the tax rate increases as the taxable income increases. Progressive taxation aims to redistribute wealth by ensuring that those with higher incomes contribute more to public revenues than those with lower incomes.
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35. Regressive Taxation
A tax system in which lower-income individuals pay a higher percentage of their income in taxes compared to higher-income individuals. Regressive taxes, such as sales taxes, often disproportionately affect the poor.
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36. Flat Tax
A tax system with a constant marginal rate, usually applied to individual or corporate income. A flat tax treats all income levels equally, taxing everyone at the same rate, which critics argue can increase inequality.
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37. Import Substitution Industrialization (ISI)
An economic policy strategy that seeks to reduce a country’s dependence on foreign goods by promoting the development of domestic industries. ISI often involves protective tariffs, subsidies, and state support for local industries.
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38. Export-Oriented Industrialization (EOI)
An economic policy strategy that encourages domestic industries to focus on producing goods for export rather than domestic consumption. EOI is associated with rapid industrialization in many East Asian economies.
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39. Human Capital
The economic value of a worker's experience, knowledge, skills, and abilities. Investments in human capital, such as education and training, are seen as essential for increasing productivity and economic growth.
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40. Crony Capitalism
An economic system where businesses and individuals gain unfair advantages through connections with politicians, bureaucrats, or other authorities. Crony capitalism undermines free markets, leading to inefficiency and inequality.
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41. Dependency Theory
A theory in political economy that suggests developing nations are economically dependent on developed nations, which exploit them through unfair trade practices and economic domination. It highlights the structural imbalances in the global economy that hinder development.
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42. Rent Control
A policy designed to regulate the amount landlords can charge for renting property, aiming to keep housing affordable for tenants. While it protects tenants, opponents argue that rent control can lead to housing shortages by discouraging new construction.
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43. Universal Basic Income (UBI)
A government program in which every citizen receives a set amount of money regularly, regardless of their employment status or income level. UBI aims to reduce poverty, support economic stability, and adapt to future changes in the labor market, especially automation.
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44. Informal Economy
Economic activities and transactions that occur outside of government regulation or taxation. Informal economies are common in developing nations and include street vending, unregulated small businesses, and undeclared labor.
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45. Gig Economy
A labor market characterized by short-term contracts or freelance work rather than permanent jobs. Workers in the gig economy typically have flexible schedules but may lack benefits such as health insurance, job security, and retirement plans.
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46. Financialization
The increasing dominance of financial motives, financial markets, financial actors, and financial institutions in shaping the economy and society. Financialization often leads to the prioritization of shareholder profits over investment in productive sectors of the economy.
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47. Hyperinflation
An extremely high and typically accelerating rate of inflation, often caused by excessive money supply, political instability, or loss of confidence in a currency. Hyperinflation can lead to economic collapse as prices soar and the value of money becomes almost worthless.
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48. Tariffs
Taxes imposed on imported goods, designed to protect domestic industries from foreign competition or to raise revenue for the government. Tariffs are a common tool in trade policy but can lead to retaliatory measures and trade wars.
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49. Quotas
Limits set by a government on the quantity of a particular good that can be imported or exported. Quotas are used to protect domestic industries or manage trade imbalances, but they can disrupt free trade.
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50. Comparative Politics
A field of study that compares political systems, institutions, and processes across different countries to understand how politics works on a global scale. Comparative politics is essential for understanding how different political arrangements impact economic development.
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51. Mixed Economy
An economic system that incorporates elements of both capitalism and socialism, where the government intervenes to regulate and promote certain sectors of the economy, while private individuals and companies operate within a market framework.
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52. Laissez-Faire Economics
An economic philosophy advocating minimal government intervention in the economy. Laissez-faire proponents argue that free markets, unencumbered by government regulation, will lead to more efficient outcomes and innovation.
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53. Labor Theory of Value
A theory in economics, particularly associated with Karl Marx, which suggests that the value of a good is determined by the amount of socially necessary labor time required to produce it. The theory is central to critiques of capitalism, highlighting the exploitation of labor by capital.
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54. Bretton Woods System
The international monetary system established after World War II, in which currencies were pegged to the U.S. dollar, and the dollar was convertible into gold. The system provided stability for international trade until its collapse in the early 1970s, leading to a system of floating exchange rates.
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55. Sovereign Debt
The amount of money that a country's government owes to external or internal creditors. Managing sovereign debt is a critical issue in political economy, as high debt levels can lead to austerity measures, economic instability, and default.
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56. Labor Union
An organized association of workers formed to protect and advance their rights and interests, particularly regarding wages, working conditions, and benefits. Labor unions play a critical role in negotiating with employers and influencing labor policy.
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57. Poverty Trap
A situation in which an individual or community cannot escape poverty due to structural conditions or the lack of resources, opportunities, or social mobility. Breaking the poverty trap requires targeted interventions such as education, healthcare, and access to credit.
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58. Sovereign Wealth Fund
A state-owned investment fund or entity that manages a country’s reserves, typically derived from surplus revenue, such as oil profits or foreign exchange reserves. These funds are used to invest in a variety of assets to promote long-term economic stability and growth.
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59. Welfare Economics
A branch of economics that focuses on evaluating the economic well-being of individuals and society as a whole. It examines how different economic policies impact social welfare, often using tools like cost-benefit analysis to assess the trade-offs of various policy choices.
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60. Free Trade Agreements (FTAs)
Agreements between countries to reduce or eliminate tariffs, quotas, and other trade restrictions on goods and services. FTAs aim to increase trade between signatories, but they can lead to job displacement and inequality if not properly managed.
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