These terms will help readers understand fundamental concepts within the subject.
Glossary / {Terms and Definitions}
Glossary Page 7
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181. Financialization
The increasing importance of financial markets, institutions, and motives in the economy, often characterized by the growth of speculative financial activities over productive investments. Financialization can lead to income inequality and economic instability as financial sectors become dominant.
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182. Protectionism
An economic policy aimed at shielding domestic industries from foreign competition through tariffs, quotas, or other trade barriers. Protectionism is often used to protect emerging industries or reduce reliance on imports but can lead to trade wars and reduced economic efficiency.
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183. Labor Market Flexibility
The ability of the labor market to adapt to changes in the economy, including the ease with which workers can be hired or fired, wages can be adjusted, or jobs can be reallocated. Increased labor market flexibility is often associated with deregulation, which can lead to higher employment but also job insecurity.
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184. Development Aid
Financial assistance provided by wealthy nations or international organizations to support the economic, political, or social development of developing countries. Development aid can take the form of grants, low-interest loans, or technical assistance to foster growth and reduce poverty.
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185. Social Democracy
A political ideology that advocates for a democratic political system alongside a mixed economy, combining free markets with strong government intervention to ensure social justice and equal opportunities. Social democracies often have comprehensive welfare systems, universal healthcare, and progressive taxation.
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186. Trade Union
An organized group of workers who come together to collectively bargain with employers over wages, working conditions, and other employment terms. Trade unions play a key role in representing workers' interests and advocating for labor rights.
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187. Bretton Woods System
A post-World War II international monetary order established in 1944, which pegged currencies to the US dollar, with the dollar convertible to gold. The system aimed to ensure exchange rate stability and promote international trade but collapsed in 1971 when the US abandoned the gold standard.
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188. Hyperinflation
An extremely rapid and out-of-control increase in prices, often exceeding 50% per month. Hyperinflation erodes the value of currency, reduces consumer confidence, and can lead to social and political instability. Historical examples include Zimbabwe and the Weimar Republic in Germany.
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189. Infant Industry Argument
A rationale for protecting new industries from international competition until they become mature and competitive enough to survive in the global market. Governments often use tariffs and subsidies to support infant industries, though critics argue this can lead to inefficiency and dependency.
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190. Stagflation
An economic condition characterized by stagnant economic growth, high unemployment, and high inflation. Stagflation is considered unusual because inflation typically rises during periods of economic growth. The 1970s oil crisis is a famous example of stagflation.
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191. Human Development Index (HDI)
A composite statistic used by the United Nations to measure a country's social and economic development. The HDI includes indicators such as life expectancy, education, and per capita income to provide a broader understanding of well-being than GDP alone.
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192. Deficit Spending
The practice of a government spending more money than it receives in revenue, typically financed through borrowing. Deficit spending is often used to stimulate the economy during recessions, but persistent deficits can lead to higher national debt and interest payments.
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193. Privatization
The process of transferring ownership or control of a business or service from the public sector to private hands. Privatization is often implemented to improve efficiency and reduce government costs, though it can also lead to job losses and reduced access to essential services.
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194. Austerity
A set of economic policies implemented by governments to reduce public debt by cutting government spending, increasing taxes, or both. Austerity measures are often controversial, as they can lead to reduced social services and lower economic growth, especially during times of recession.
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195. Externalities
Unintended side effects of economic activity that affect third parties. Externalities can be positive (such as education benefiting society) or negative (such as pollution). Governments often intervene to correct externalities through regulation or taxation.
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196. Multilateralism
A diplomatic approach in which multiple countries work together on a given issue, typically through international organizations or treaties. Multilateralism promotes collective decision-making and cooperation, particularly in global challenges like climate change or trade.
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197. Central Planning
An economic system in which the government makes all decisions regarding production, investment, and distribution of resources. Central planning is most associated with socialist or communist economies, but it has largely been abandoned in favor of market economies in most countries.
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198. Deadweight Loss
An economic inefficiency that occurs when the equilibrium outcome in a market is not Pareto optimal, often due to taxes, subsidies, price controls, or monopolies. Deadweight loss represents the lost economic value that results from market distortions.
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199. Fiscal Federalism
The division of government functions and financial relations between levels of government, such as national, state, and local authorities. Fiscal federalism involves determining which level of government is responsible for taxation and spending on various public services.
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200. In-Kind Transfers
Non-cash benefits provided by the government or organizations to individuals, such as food stamps, housing assistance, or healthcare. In-kind transfers are a form of social welfare designed to directly meet the needs of disadvantaged populations.
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201. Global Value Chains (GVCs)
The full range of activities and processes involved in the production of goods or services, from initial design and production to distribution and marketing, often spread across multiple countries. GVCs reflect the globalization of production and the interconnectedness of the world economy.
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202. Informal Economy
Economic activities that are not regulated or taxed by the government, including unregistered businesses, black market transactions, and under-the-table employment. The informal economy can play a significant role in developing countries but lacks legal protections and benefits for workers.
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203. Post-Keynesian Economics
An economic school of thought that builds on Keynesian principles but rejects some of the assumptions of mainstream economics, such as the efficient market hypothesis. Post-Keynesian economists emphasize uncertainty, income distribution, and the role of institutions in shaping economic outcomes.
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204. Currency Depreciation
A decline in the value of a currency relative to other currencies in the foreign exchange market. Currency depreciation makes exports cheaper and imports more expensive, which can help boost domestic industries but also lead to inflation.
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205. Public Choice Theory
An economic theory that applies the principles of economics to political decision-making. Public choice theory suggests that politicians and government officials act in their own self-interest, much like individuals in markets, and that this can lead to inefficiencies in public policy.
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