These terms will help readers understand fundamental concepts within the subject.
Glossary / {Terms and Definitions}
Glossary Page 3
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61. Trade Liberalization
The removal or reduction of trade barriers, such as tariffs and quotas, to encourage free trade between nations. Trade liberalization is often promoted as a means of boosting economic growth and development, but critics argue that it can lead to job losses and inequality in certain sectors.
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62. Capital Flight
The large-scale exodus of financial assets and capital from a country, often due to political or economic instability, high taxes, or concerns over government policy. Capital flight can undermine economic development by depleting the resources needed for investment and growth.
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63. Keynesian Economics
An economic theory developed by John Maynard Keynes, which advocates for government intervention to stabilize economic cycles. Keynesians argue that during periods of recession, governments should increase public spending to stimulate demand and reduce unemployment.
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64. Monetarism
An economic theory that emphasizes the role of governments in controlling the amount of money in circulation. Monetarists believe that managing the money supply is the best way to control inflation and maintain economic stability.
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65. Subsidies
Financial assistance provided by governments to support businesses, industries, or individuals. Subsidies can take the form of direct cash payments or tax reductions and are often used to promote economic activities deemed important for national interests, such as agriculture or renewable energy.
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66. Trickle-Down Economics
A theory that suggests policies favoring the wealthy, such as tax cuts for businesses and high-income earners, will ultimately benefit society as a whole by encouraging investment and job creation. Critics argue that it increases inequality and primarily benefits the rich.
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67. Structural Adjustment Programs (SAPs)
Economic policies imposed on developing countries by international financial institutions, such as the International Monetary Fund (IMF) or the World Bank, as a condition for receiving loans. SAPs often involve austerity measures, privatization, and trade liberalization, but have been criticized for exacerbating poverty and inequality.
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68. Pareto Efficiency
A state of resource allocation in which it is impossible to make one individual better off without making someone else worse off. Pareto efficiency is often used as a benchmark in economic analysis to evaluate the optimal allocation of resources.
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69. Poverty Line
The minimum level of income deemed necessary to meet basic needs such as food, clothing, and shelter. Individuals or families whose income falls below this threshold are considered to be living in poverty.
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70. Protectionism
An economic policy that restricts imports from other countries through methods such as tariffs, quotas, and subsidies for domestic industries. Protectionism aims to shield domestic businesses from foreign competition but can lead to trade disputes and higher prices for consumers.
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71. Resource Curse
A paradox in which countries rich in natural resources, such as oil or minerals, often experience less economic growth and poorer development outcomes compared to countries with fewer natural resources. The resource curse is linked to corruption, conflict, and mismanagement.
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72. Marginal Utility
The additional satisfaction or benefit gained from consuming one more unit of a good or service. Marginal utility typically decreases as consumption increases, a concept known as the law of diminishing marginal utility.
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73. Capital Accumulation
The process of gathering and increasing amounts of capital, such as financial assets, machinery, and technology, which are essential for economic growth. Capital accumulation is a key factor in determining a nation’s long-term economic performance.
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74. Neo-Colonialism
A form of indirect control where powerful nations use economic, political, and cultural pressures to dominate less developed nations, often maintaining economic influence through multinational corporations, trade agreements, or financial institutions.
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75. Balance of Payments
A record of all economic transactions between the residents of a country and the rest of the world over a period of time. It includes the trade balance, capital flows, and financial transfers, helping to assess a country's economic strength and its position in the global economy.
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76. Marginal Propensity to Consume (MPC)
The proportion of additional income that a household is likely to spend on consumption rather than saving. A higher MPC indicates that consumers are more likely to spend extra income, which can boost economic growth.
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77. Public Goods
Goods or services that are provided by the government because they are non-excludable and non-rivalrous, meaning one person’s use does not reduce availability for others, and people cannot be excluded from using them. Examples include clean air, national defense, and public parks.
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78. Natural Monopoly
A market structure in which a single firm can provide a good or service at a lower cost than any potential competitor, due to economies of scale. Public utilities such as water and electricity are often natural monopolies because it is inefficient for multiple firms to provide these services.
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79. Regulatory Capture
A situation in which regulatory agencies are dominated or influenced by the industries they are supposed to be regulating, leading to policies that benefit industry rather than the public. Regulatory capture undermines fair competition and can result in higher prices and reduced quality of services.
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80. Foreign Direct Investment (FDI)
Investment by a company or individual from one country into business interests located in another country. FDI plays a significant role in international trade and economic development by facilitating the transfer of capital, technology, and expertise.
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81. Crowding Out
An economic theory that suggests government spending can reduce private sector investment by increasing interest rates or competing for resources. Crowding out can occur when the government borrows heavily, making it more expensive for businesses to access credit.
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82. Sovereign Default
A situation in which a country fails to meet its debt obligations. Sovereign default can lead to economic crises, loss of investor confidence, and damage to the country’s financial system.
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83. Social Safety Net
A collection of government programs designed to provide financial assistance or services to individuals and families in need, such as unemployment benefits, food assistance, and healthcare. Social safety nets aim to reduce poverty and provide a cushion during economic downturns.
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84. Exchange Rate Mechanism (ERM)
A system for managing a country’s currency exchange rate relative to other currencies, often within a band or range. The ERM helps to stabilize exchange rates, reduce currency volatility, and facilitate trade and investment between countries.
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85. Labor Market Flexibility
The ability of labor markets to adjust quickly to changes in the economy, such as shifts in demand for workers. Flexible labor markets allow for easy hiring and firing of employees, wage adjustments, and mobility of workers, but can also lead to job insecurity and lower wages.
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86. Gini Coefficient
A measure of income inequality within a population, ranging from 0 (perfect equality) to 1 (maximum inequality). The Gini coefficient is used to assess how evenly income is distributed across a society, with higher values indicating greater inequality.
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87. Inclusive Growth
An economic growth model that aims to ensure that the benefits of growth are widely shared across all sectors of society, particularly the poor and marginalized. Inclusive growth emphasizes equitable access to opportunities, education, and jobs.
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88. Multilateralism
A policy or practice in international relations that involves multiple countries working together to solve problems or pursue common goals. Multilateralism is a cornerstone of international organizations like the United Nations and the World Trade Organization.
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89. Fiscal Stimulus
Government measures, typically involving increased public spending and tax cuts, aimed at boosting economic activity during a recession. Fiscal stimulus is used to increase aggregate demand, reduce unemployment, and stimulate growth.
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90. Quantitative Easing (QE)
A monetary policy used by central banks to stimulate the economy by purchasing government bonds and other securities. QE increases the money supply and lowers interest rates, encouraging lending and investment, but it can also risk causing inflation.
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