These terms will help readers understand fundamental concepts within the subject.
Glossary / {Terms and Definitions}
Glossary Page 6
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151. Industrial Policy
A government's strategy to promote the growth and development of specific sectors or industries within the economy. Industrial policies can include subsidies, tax incentives, and regulations designed to support domestic industries, encourage innovation, or protect strategic sectors from foreign competition.
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152. Purchasing Power Parity (PPP)
An economic theory that compares the relative value of different currencies by determining the amount of a particular good or basket of goods that each currency can purchase. PPP is often used to compare living standards between countries and adjust GDP figures for inflation.
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153. Recession
A period of economic decline marked by falling GDP, high unemployment, and reduced consumer spending. Recessions are often defined as two consecutive quarters of negative economic growth and can be triggered by various factors, including financial crises or declining demand.
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154. Rent-Seeking
Economic behavior in which individuals or businesses try to increase their own wealth without producing any benefit or value to society. Rent-seeking often involves lobbying for government favors, subsidies, or monopolistic privileges rather than contributing to productive activities.
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155. Social Safety Net
Government programs and policies designed to provide financial assistance or services to individuals and families in need, such as unemployment benefits, food stamps, or social security. Social safety nets aim to reduce poverty and protect citizens from economic hardships.
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156. Subsistence Economy
An economic system in which people produce only what they need for survival, such as food and basic goods, with little to no surplus for trade or profit. Subsistence economies are often found in rural or underdeveloped regions where industrialization and market access are limited.
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157. The Invisible Hand
A concept introduced by economist Adam Smith, describing how individuals acting in their own self-interest unintentionally contribute to the overall economic well-being of society. The "invisible hand" represents the self-regulating nature of free markets.
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158. Tax Incidence
The analysis of who ultimately bears the burden of a tax, whether it is the producer, consumer, or another party. Tax incidence is an important concept in public finance as it determines the economic impact of taxes on different groups.
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159. Trickle-Down Economics
An economic theory that argues that benefits for the wealthy or businesses, such as tax cuts or deregulation, will eventually "trickle down" to the rest of the population through increased investment, job creation, and economic growth. Critics argue that trickle-down policies often exacerbate income inequality.
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160. Underemployment
A situation in which individuals are employed in jobs that do not fully utilize their skills, experience, or education, or where they are working fewer hours than they would prefer. Underemployment can be a hidden problem in economies with low official unemployment rates.
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161. Value-Added Tax (VAT)
A consumption tax that is levied on the value added to goods and services at each stage of production and distribution. VAT is widely used in many countries to raise revenue and is typically included in the final price paid by consumers.
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162. Zero-Sum Game
An economic concept where one party’s gain is exactly balanced by another party’s loss. In zero-sum situations, any advantage or profit made by one participant comes at the direct expense of others, as the total wealth or benefits available are fixed.
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163. Bilateral Trade Agreement
A trade agreement between two countries that outlines the terms of trade, including tariffs, quotas, and other trade barriers. Bilateral agreements are designed to promote trade between the two nations by reducing barriers and fostering economic cooperation.
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164. Cartel
A group of producers or organizations that collude to control production, set prices, or limit competition in a particular market. Cartels are often illegal due to their anti-competitive practices, but they can significantly influence supply and prices, particularly in global markets like oil.
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165. Comparative Advantage
An economic theory that suggests countries should specialize in producing goods and services they can produce most efficiently, relative to other nations. By focusing on their comparative advantage, countries can trade with others to maximize global production and benefit from trade.
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166. Quantitative Easing (QE)
A monetary policy tool used by central banks to stimulate the economy by purchasing government bonds or other financial assets, increasing the money supply and lowering interest rates. QE is typically used during economic downturns when conventional monetary policies, such as cutting interest rates, are insufficient.
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167. The Gold Standard
A monetary system in which a country’s currency is directly tied to a specific quantity of gold. Under the gold standard, currencies were exchangeable for gold at a fixed rate, providing stability but limiting monetary policy flexibility.
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168. Financial Inclusion
The availability and accessibility of financial services, such as banking, credit, insurance, and savings, to individuals and businesses. Financial inclusion aims to ensure that all segments of society, especially the underserved or low-income populations, have access to affordable and reliable financial services.
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169. Supply-Side Economics
An economic theory that emphasizes the importance of production, investment, and the supply of goods and services in driving economic growth. Supply-side policies typically include tax cuts, deregulation, and other measures to encourage investment and business expansion.
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170. Public Goods
Goods or services that are non-excludable and non-rivalrous, meaning they are available to everyone and one person’s use does not reduce their availability to others. Examples include clean air, national defense, and public parks. Public goods are typically provided by the government because private markets may not supply them efficiently.
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171. Keynesian Economics
An economic theory developed by John Maynard Keynes, which advocates for active government intervention in the economy, especially during recessions. Keynesians believe that increasing government spending and cutting taxes can stimulate demand, reduce unemployment, and spur economic growth during downturns.
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172. Heavily Indebted Poor Countries (HIPC) Initiative
A program initiated by the International Monetary Fund (IMF) and World Bank in 1996 aimed at reducing the debt burdens of the world’s poorest countries. The HIPC Initiative provides debt relief to eligible countries that implement economic reforms and pursue poverty reduction strategies.
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173. Fiscal Multiplier
A concept in economics that measures the impact of government spending or tax changes on overall economic output. The fiscal multiplier reflects the degree to which an increase in public spending leads to a proportionally larger increase in GDP or economic activity.
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174. Phillips Curve
An economic concept showing an inverse relationship between inflation and unemployment. The Phillips Curve suggests that as unemployment falls, inflation rises, and vice versa. However, the relationship has been challenged in the long run, particularly during periods of stagflation.
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175. Sovereign Wealth Fund (SWF)
A state-owned investment fund composed of financial assets such as stocks, bonds, real estate, or other investments. Sovereign wealth funds are typically created from budget surpluses or revenue generated from natural resources, such as oil, and are used to stabilize the economy or invest for future generations.
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176. Development Economics
A branch of economics that focuses on improving the economic and social conditions of developing countries. Development economics examines factors such as poverty, inequality, education, health, and infrastructure, with the goal of promoting sustainable development and raising living standards.
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177. Crony Capitalism
An economic system in which business success is influenced by close relationships between business leaders and government officials. Crony capitalism often leads to corruption, favoritism, and inefficient allocation of resources, as businesses receive special privileges through political connections rather than through competitive market forces.
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178. Collective Bargaining
A process of negotiation between employers and a group of employees, often represented by a trade union, to determine wages, working conditions, and other employment terms. Collective bargaining is a key component of labor relations and can lead to improved working conditions and wages for employees.
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179. Disinflation
A reduction in the rate of inflation, meaning prices are still rising but at a slower pace. Disinflation can occur due to tighter monetary policies, reduced demand, or supply shocks, and is considered less severe than outright deflation, where prices actually decline.
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180. Resource Curse
Also known as the "paradox of plenty," the resource curse refers to the phenomenon where countries with abundant natural resources, such as oil or minerals, tend to experience less economic growth and poorer development outcomes than countries with fewer natural resources. The resource curse can lead to corruption, conflict, and dependence on volatile commodity markets.
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