Glossary

Detail from a dictionary showing the definition of the word 'just'

Here we define many of the terms used on our site (and some that are not as well). Use the alphabetical index below to navigate to the defined terms, and the arrows following each definition (««) to jump back to the index.

Index

A
AFL-CIO: The American Federation of Labor-Congress of Industrial Organizations (AFL-CIO) is a voluntary federation of 66 unions in the United States. The AFL-CIO represents 13 million working women and men of every race and ethnicity and from every walk of life: teachers and teamsters, musicians and miners, firefighters and farm workers, bakers and bottlers, engineers and editors, pilots and public employees, doctors and nurses, painters and labourers, and more. ««
Absolute Poverty: A level of poverty when only the minimum levels of food, clothing and shelter can be met. ««
Absolute advantage: Exists when a country can produce more of a product per resource unit than another country. It is a basis for trade. A country with an absolute advantage is producing more efficiently than another. ««
Accelerator theory: The principle states that a given change in demand for consumer goods will cause a greater percentage change in demand for capital goods. The principle is used to help explain business cycles. The accelerator theory suggests that the level of net investment will be determined by the rate of change of national income. If national income is growing at an increasing rate then net investment will also grow, but when the rate of growth slows net investment will fall. There will then be an interaction between the multiplier and the accelerator that may cause larger fluctuations in the trade cycle. ««
Active labour market policies: Policies designed to improve the working of the labour market and reduce the rate of unemployment without causing wage inflation. Measures include government sponsored training schemes, measures to improve the flow of information on job vacancies. ««
Aggregate demand: The total of all planned expenditure in an economy at each level of prices. Aggregate demand is the total level of demand in the economy. It is the total of all desired expenditure at any time by all groups in the economy. The main groups who spend are consumers (consumption), firms (who spend on investment), government (government expenditure) and overseas (exports). ««
Aggregate supply: Aggregate supply is the total of all planned production at each level of prices. Aggregate supply is the total quantity supplied at every price level. It is the total of all goods and services produced in an economy in a given time period. There is some dispute between Keynesians and Monetarists about what determines the level of aggregate supply. Keynesians argued that supply was determined by the level of aggregate demand, while classical (economists followed Say's Law which argued that aggregate supply was determined by supply-side factors. ««
Agricultural sector: The part of the economy comprised of farming, fishing, forestry, hunting. ««
Aid: This is the transfer of resources from industrial to developing countries in many different ways: one country can support a specific project in another; an international organisation can decide to spend money on supporting a country's economy; specialised staff or equipment can provide technical assistance, or loans are given with a special repayment rate. However much more money flows from the 'poor south' to the 'rich north' in debt repayments than comes the other way through aid. ««
Allocative efficiency: Allocative efficiency refers to the efficiency with which markets are allocating resources. A market will be allocatively efficient if it is producing the right goods for the right people at the right price. An allocatively efficient market is therefore one which has no imperfections. This will be true when marginal cost is equal to average revenue in the market. It occurs where a firm produces at MC = AR (marginal cost pricing). ««
American Center for International Labor Solidarity: A US-based organization that works with trade unions in over 50 countries to promote democracy and advance and strengthen the rights of workers. Also known as the Solidarity Center. ««
Anti-capitalism: This is a very broad term which shot into the media spotlight during the 1999 WTO summit in Seattle, where a range of people and organisations demonstrated against how the world's international economic system works. It can cover any challenge to capitalism as the best or only way to organise the world. ««
Appropriate technology: A technology that complements the factor endowments of the country. ««
B
Balance of payments: A record of the income and expenditure transactions between UK residents and persons abroad. The balance of payments accounts record all flows of money in and out of the UK. These flows might result from the sale of exports (an inflow or credit) or from the UK purchasing imports from overseas (an outflow or debit). They might also arise from other countries investing in the UK (inward investment - a credit), or from UK companies investing abroad (a debit). All flows of money are added together and grouped according to their type. The overall account is then called the balance of payments - principally because the total of outflows must be equivalent to the total of inflows. The balance of payments therefore balances! ««
Balance of trade: The difference between the value of visible exports and visible imports. ««
Barriers to entry: For supernormal profits to be maintained the monopolist must prevent the entry of new firms/products. ««
Barter: The direct exchange of goods and services without the use of money. ««
Bilateral aid: Official development assistance that takes place between a donor country and a recipient country. ««
Bilateral debt: Debt owed directly to governments. ««
Biodiversity: The variety of plants and animals inhabiting an area, country or ecosystem. A high biodiversity usually indicates a rich and healthy environment. ««
Black market: Created when buyers and sellers meet to negotiate the exchange of a prohibited or illegal good. More generally any unofficial market in which prices are inordinately high. ««
Budget deficit: A situation where government expenditure exceeds government income. Government income comes from taxation and other revenue and where this is less than the money the government is spending on defence, education, health, welfare and so on, this is called a budget deficit. ««
Buffer stock scheme: A buffer stock scheme is a form of intervention to try to stabilise the price of a commodity. Stocks of the commodity are kept and sold when the price is high to try to reduce it. When the price is low further stocks of the commodity are bought. ««
C
Capital: Man made resources e.g. machines, factories, offices. Capital is one of the factors of production. ««
Capital Output Ratio: The ratio that shows the amount of units of capital that are needed to produce a certain level of output. ««
Capital account: That part of the balance of payments accounts that measures the flows of capital in and out of the country. ««
Capital flight: The movement of financial assets out of a country in response to an unfavourable domestic circumstances. ««
Capitalism: This is an economic system and ideology based around the idea of people trading on a market, owning private property and accumulating capital to invest in financial or industrial enterprise. Most people in a capitalist system work for private employers, providing goods or services that are sold for profit. The state employs few people, owns no enterprise and puts few regulations on the economy. ««
Cartel: A group of producers who act together to fix price, output or conditions of sale. ««
Cash Crops: Crops that are produced only for the market. ««
Cash crop: A crop which is grown to sell, usually overseas as an export (for example, coffee, cotton, cocoa and so on). It is not used directly by the grower. In recent years, the prices of cash crops on world markets have fallen dramatically. ««
Chronic: Lasting for a long period of time or frequently recurring, as certain diseases. ««
Circular Flow of Income: The flow of income and payments between economic agents in an economy. The key agents are households and firms and the circular flow shows how money moves between them. There may also be leakages from the circular flow and injections into it. ««
Colonisation: The process of a country being taken over and becoming a colony of another. ««
Command economy: An economic system where the State owns and then allocates resources through some form of planning process. ««
Commercial bank: A commercial organisation that provides a variety of banking services such as loans and savings schemes. ««
Commodities: Raw materials or unprocessed products such as coffee beans, copper ore or cotton. ««
Common Agricultural Policy (CAP): The CAP came into force in 1962, and is a system of rules which regulate the production, trade, and processing of agricultural products in the European Union. It establishes a common market for agricultural products between member states, and protects those products from international competition. ««
Common External Tariff: The common tariff that members of a customs union, common market or economic union impose on non members. ««
Common market: A customs union which permits the free movement of capital and labour between member states. ««
Comparative advantage: This exists when a country produces a good or service at a lower opportunity cost than its trading partners. ««
Compulsory education: schooling that is required by law. ««
Compulsory licensing: A provision within the TRIPS Agreement allowing a government to authorise production of a patented product without the permission of the patent holder, for government purposes such as protecting public health. ««
Concessional terms: A loan that is made at more favourable terms that could be obtained commercially. ««
Consumer surplus: This occurs when people are able to buy a good for less than they would be willing to pay. They enjoy more utility than they had to pay for. ««
Consumption: Expenditure by households on goods and services which satisfy current wants. It is a key component of aggregate demand. ««
Cost benefit analysis: A method of assessing investment projects which takes into account social costs and benefits. ««
Cost push inflation: When a cost of production (e.g. wages) increases and firms put up prices to maintain profits. Cost increases may happen because wages have gone up or because raw material prices have increased. It is important not to muddle cost-push with demand-pull inflation. Cost-push inflation happens when costs have risen independently of demand. ««
Creditor nation: Those nations that have a balance of payments surplus. ««
Crude birth rate: The number of children born alive each year per 1000 of the population. ««
Crude death rate: The yearly number of deaths per 1000 of the population. ««
Current account: Usually taken to mean the current account of the balance of payments. The current account measures flows of visible and invisible trade, that is trade in goods and services. ««
Current account balance: A record of a country's earnings from the sale of visible and invisible items minus its expenditure on visible and invisible items from abroad. ««
Customary Law: A land tenure arrangement where there is communal ownership of land. ««
Customs union: A group of countries which removes tariff barriers between member countries and also imposes common external tariffs on non-members. ««
D
Death rate: The number of deaths per thousand of the population in a year. ««
Debt: This is money a government owes to either another country, private creditors, or international agencies like the IMF and World Bank. ««
Debt for equity swap: A mechanism where indebted LDCs swap shares in domestic firms for private foreign debt. ««
Debt for nature swap: A mechanism where foreign debt is exchanged for domestic debt enabling resources to be released to finance environmental conservation. ««
Debt service: The total amount of interest payments and repayments of principal on external public debt. ««
Debt service ratio: The ratio of interest and principle payments as a proportion of exports for a given year. ««
Debt servicing: The repayment of interest and principle to external creditors. ««
Debt-bondage: Occurs when, in return for a money advance or credit, a person, having nothing else to offer, pledges his/her labour or that of a child for an indefinite period of time. In many cases a parent pledges the labour of his/her entire family in order to get a loan. In other cases just the child is subjected to bondage by parents or a guardian who pledge the child's labour in exchange for a loan. Technically, bonded labourers can end their state of servitude once the debt is repaid. But this rarely happens. ««
Debtor nation: A country with a balance of payments deficit. ««
Deflation: Price deflation is when the economy-wide rate of inflation becomes negative, e.g. nominal prices are falling and the value of money is increasing. ««
Deflationary policy: Policies designed to reduce aggregate demand. ««
Deforestation: The clearing of forested land. ««
Demand: Demand is the want or need or desire for a product that is backed by an ability to pay. Demand is measured over a given time period. It is determined by a number of factors including income, tastes and the price of complementary and substitute goods. ««
Demand pull inflation: Occurs when aggregate demand exceeds aggregate supply. If there is an excess level of demand in the economy, this will tend to cause prices to rise. This type of inflation is called demand-pull inflation and is argued by Keynesians to be one of the main causes of inflation. Demand-pull inflation is essentially too much money chasing too few goods. ««
Demerit goods: A product, such as alcohol, which consumers may overvalue but which the government believes may be harmful for consumers. ««
Demographic transition: Changes in population growth rates over time due to changes in birth and death rates. ««
Dependency ratio: The ratio of dependent population (the young and the elderly) to the working age population. ««
Deregulation: The removal of controls on a particular market aimed at improving the economic efficiency of that market and therefore the performance of the economy at the microeconomic level. Deregulation is generally considered a supply side policy. An example would be the abandonment of a licensing system for taxis. ««
Devaluation: Occurs when the government lowers the value of the exchange rate from one fixed rate to another. ««
Developing world: poor or middle-income countries, based upon the average income per person. Most countries in Africa, Asia and Latin America are in the 'developing world'. ««
Development: The process of improving the quality of all people lives within a country. ««
Development trap: The vicious cycles of poverty that prevent a country from developing. ««
Digital divide: The gap between those with access to electronic information and communication tools and technologies, such as the Internet, and those without. ««
Diminishing Returns: When the addition of a variable factor of production results in a fall in marginal product. Diminishing returns refers to a situation where a firm is trying to expand by using more of its variable factors, but finds that the extra output they get each time they add one gets progressively less and less. This usually arises because their capacity is limited in the short-run and the combination of the fixed and variable factors becomes less than optimal. Diminishing returns is the main reason why the short-run aggregate supply curve is upward sloping. ««
Disbursement: The transfer of financial resources and or good and services from a donor to a recipient country. ««
Diversification: A firm increasing the range of products it produces. ««
Domestics: A person who works in a private home doing chores such as cleaning, cooking, baby-sitting, errands, and so on. This person may be paid or unpaid. In the case of child domestics, they are often not allowed to go to school, work extremely long hours and are treated poorly. ««
Dual exchange rate: A system where there is a fixed official exchange rate and an illegal market determined parallel exchange rate. ««
Dumping: The sale of goods in a foreign country at a price below that charged in the home market. ««
E
Economic Growth: Typically refers to an increase in a country's output of goods and services. It is usually measured by changes in real GDP. ««
Economies of scale: A reduction in long run unit costs which arise from an increase in production. Economies of scale occur when larger firms are able to lower their unit costs. This may happen for a variety of reasons. A larger firm may be able to buy in bulk, it may be able to organise production more efficiently, it may be able to raise capital cheaper and more efficiently. All of these represent economies of scale. ««
Ethical trade: This involves companies finding ways to buy their products from suppliers that provide good working conditions and respect the environment and human rights. ««
Ethics: Operating within a system of morals; e.g. knowing and acting according to what you believe is good, taking others into consideration. ««
European Investment Bank: The European Investment Bank is the largest financial institution in the world. It gives loans for regional development particularly in the less developed areas of Europe. ««
European Regional Development Fund (ERDF): The ERDF provides finance for projects in the poorest regions of Europe. The intention is to try to reduce the inequalities between regions in Europe. ««
Exchange control: A government policy where the amount of foreign currency available to domestic firms and citizens is controlled. ««
Exchange rate: The price of one currency in terms of another currency. For example, the exchange rate between the £ and the $ USD may be £1=$1.65 USD. This means that you need to pay a price of £1 to get every $1.65 USD. Exchange rates can be fixed or floating. Fixed means that they stay at the same value as set by the government. Floating means that they fluctuate day to day according to the market. More generally the term can also refer to the price at which any good is being traded for another good. ««
Exchange rate mechanism: An adjustable peg system which involved EU countries maintaining the value of their currencies within limited margins but being allowed to float their currencies against non member currencies. The ERM was the forerunner to the implementation of the Euro. ««
Exploitation: The selfish or unfair using of someone or something for one's own advantage. Abuse. ««
Export Processing Zones (EPZs): An area designed to encourage foreign companies to set up manufacturing in a country by offering inducements such as a tax-free period, exemption from labour laws. They contain factories producing for transnational companies and have been established throughout the South. ««
Export promotion: The government attempts to stimulate exports by giving incentives to exporting firms. ««
Exports: Goods, services and capital assets sold abroad. The sale of exports results in the earning of foreign exchange for the country and credits on the balance of payments accounts. ««
External benefits: These are also known as positive externalities. They are impacts on 'outsiders' that are advantageous to them and for which they do not have to pay. Externalities occur where the actions of firms and individuals have an effect on people other than themselves. In the case of positive externalities the external effects are benefits on other people. There may be external benefits from both production and consumption. If these are added to the private benefits we get the total social benefits. An example of positive externalities would be the side effects of production processes. ««
External costs: They are also known as negative externalities. They are impacts on 'outsiders' that are disadvantageous to them and for which they receive no compensation. The externalities are occurring where the actions of firms and individuals have an effect on people other than themselves. In the case of negative externalities the external effects are costs on other people. There may be external costs from both production and consumption. If these are added to the private costs we get the total social costs. An example of negative externalities would be the side effects of production processes e.g. the pollution (noise, dust, vibration) endured by people living next to a quarry. ««
External debt: The total amount of private and public foreign debt owed by a country. ««
Externalities: The spillover effects of production or consumption for which no payment is made. Externalities can be positive or negative. For example all fax users gain as new users become connected (positive); and smoke from factory chimneys (negative). ««
F
Factors of production: The factors of production are the resources that are necessary for production. They are usually classified into 4 different groups. ««
Fair trade: A trading system which ensures that producers receive a good price for their product, have a fair contract, and maintain high social and environmental standards. ««
Family planning: The process whereby parents plan and regulate their family size. ««
Fertility rate: The number of children born alive per thousand fertile women per year. ««
Financial economies of scale: Cost savings linked to the financing of large scale businesses that deliver a cost advantage. ««
Fixed exchange rate: A fixed exchange rate system is one where the value of the currency against other currencies remains exactly the same. A fixed exchange rate doesn't stay fixed on its own. Governments have to hold large stocks of foreign exchange, so that they can actively intervene to hold the value of the currency stable. Monetary and fiscal policies will also have to be directed to keeping the rate constant. ««
Flexible labour: Employment which is often short-term or temporary, and which is less secure in terms of social insurance, pensions, and protection. Women's employment is increasingly of this kind. The phrase has become a euphemism for the erosion of workers' basic rights. ««
Floating exchange rate: A currency exchange rate that is determined by buyers and sellers without government intervention. A floating exchange rate system is where the external value of the currency is allowed to find its own value against other currencies. The value will be determined by supply and demand in the foreign exchange market. The value will then rise or fall according to changes in supply and demand. ««
Foreign Aid: The international transfer of public and private funds in the form of loans or grants from donor countries to recipient countries. ««
Foreign Capital Flows: Financial and capital assets that flow between countries. ««
Foreign Direct Investment: Overseas investment by multinational enterprises. ««
Foreign exchange gap: When a country's balance of payments on current account deficit is greater than the value of capital inflows. ««
Formal sector: The part of the economy that is regulated by governments or authorities, particularly in the areas of contracts, taxation and employment conditions. ««
Free market economy: A system where resources are owned by households: markets allocate resources through the price mechanism; and income depends upon the value of resources owned by an individual. ««
Free trade: A trading system which means that governments have to treat local and foreign producers the same. This is done, for instance, by not creating barriers against importing goods, services, or people from other countries and not giving local businesses advantages over foreign firms through financial support. There has always been a heated debate between counties of unequal power over reducing trade barriers. ««
Freehold land: A land tenure arrangement where the land is permanently owned and not leased. ««
G
G7 or G8: The group of seven (eight with Russia) most powerful countries, which hold an annual summit of the country leaders. The seven are: UK, USA, Canada, France, Germany, Italy, and Japan. ««
GATS: General Agreement on Trade and Services. A WTO Agreement, containing specific commitments to liberalise trade in the services sectors, such as banking, tourism, and advertising. ««
GATT: the General Agreement of Tariffs and Trade set up in 1947 to reduce barriers to free trade. ««
GDP: A measure of economic activity. Gross Domestic Product (GDP) is a measure of National Income. It is the total value of all goods and services produced over a given time period (usually a year) excluding net property income from abroad. It can be measured either as the total of income, expenditure or output. ««
GNP: A measure of economic activity. Gross National Product (GNP) is a measure of National Income. It is the total value of all goods and services produced over a given time period (usually a year) including net property income from abroad. It can be measured either as the total of income, expenditure or output. ««
Gini Coefficient: A numerical measure of income inequality ranging from 0 (absolute equality) to 1( absolute inequality). ««
Globalisation: A term used to describe the growing interdependence and interconnectedness of countries in recent years. It has come about as a result of a) technological changes which have allowed information and goods to travel much faster than before and b) the end of the Cold War which has resulted in the growth of free trade. However access to the benefits of these processes is uneven. ««
Goods in competitive supply: Good that can be produced using the same factors of production. ««
Grant: A form of foreign aid that involves a direct transfer payment from one country to another. ««
Gross Domestic Product: A measure of economic activity. Gross Domestic Product (GDP) is a measure of National Income. It is the total value of all goods and services produced over a given time period (usually a year) excluding net property income from abroad. It can be measured either as the total of income, expenditure or output. ««
Gross National Product: Gross National Product (GNP) is a measure of National Income and therefore economic activity. It is the total value of all goods and services produced over a given time period (usually a year) including net property income from abroad. It can be measured either as the total of income, expenditure or output. ««
H
HIPC 2 or Enhanced HIPC: Renamed HIPC after G8 committed to extending it to ensure that more money was made available to more countries, faster. ««
HIV: Human Immune Deficiency Virus. ««
Hard currency: A currency of an industrialised country that has general convertibility. ««
Hard loan: A loan where commercial rates of interest are changed and no concessions made to the debtor. ««
Harrod-Domar growth model: An economic model which maintains that the growth rate of GDP depends upon the level of savings and the capital output ratio. ««
Household income: The total level of income earned by all the households in the economy. This will be a significant part of the overall level of National Income. ««
Human Development Index: A composite index based on real GDP per capita (PPP), life expectancy at birth and educational achievement that measures socio-economic development. ««
Human Poverty Index: A composite index that measure human deprivation. ««
Human capital: The accumulated skill, knowledge and expertise of workers. ««
I
IBRD: The International Bank for Reconstruction and Development is a branch of the World Bank that lends money to countries specifically for development projects. ««
ILO: The International Labor Organization is an international organization located in Geneva, Switzerland, whose goal is to promote decent work for all men and women. There are 175 member countries of the ILO, represented by workers, employers and governments. It is the only international agency in which non-governmental sectors of society participate fully with government. The ILO has a special program about child labour, called IPEC. ««
ILO Convention 138: ILO Convention 138 (1973) is an international treaty that creates a general minimum age for work in most countries. The minimum age for work is 15 for most countries, and should never be lower than the age of compulsory schooling. Certain types of light work area permitted under fifteen. ««
ILO Convention 182: ILO Convention 182 on the Worst Forms of Child Labor (1999) is a new international treaty that defines the worst forms of child labour for children under 18 - including slavery, forced or compulsory labour, prostitution or pornography, drug trafficking, and hazardous work (likely to harm the health, safety or morals of children). ««
IMF: The International Monetary Fund is an international multilateral organisation that attempts to monitor the global financial system and to offer assistance to countries that are experiencing balance of payments problems. ««
Import Substitution: A government policy when the government attempts to replace imports with domestically produced goods. ««
Imports: Goods, services and capital assets purchased from overseas countries. The purchase of imports results in the loss of foreign exchange to pay for the goods and is recorded as debits on the balance of payments accounts. ««
Income elasticity of demand: This measures the responsiveness of demand to a given change in income. It is an important piece of information to a firm as it helps them to predict how much the demand for their product will grow as the economy grows. ««
Industrialisation: The process of expanding the country's capacity to produce secondary goods and services. ««
Industrialized world: Usually refers to countries in North America, Western Europe, Japan and Korea, with a high level of income per person, and having many companies and businesses. ««
Infant industry: Sunrise industries. That is industries that are at an early stage of their development. ««
Infant mortality rate: The rate at which children being born in a country are dying. Infant mortality is often used as a measure of how well developed the health system of a country is. ««
Inflation: The rise in general prices and the reduction in value of money. Inflation is a sustained increase in the general price level. In other words it is the rate at which prices are increasing. It can be measured either monthly, quarterly or annually. It is usually measured by a Consumer Price Index. ««
Informal sector: The sector of the economy, normally comprising of small businesses, which is unregistered with the tax authorities. ««
Infrastructure: The underlying amount of physical and financial capital that is embodied in the transport, communication, energy and public services e.g. roads, railways, powerstations, and schools. ««
Injections: An addition to the income of firms which does not normally arise from the expenditure of households e.g. changes in investment, government spending or exports. ««
Intellectual property rights: Private rights to the benefits of intellectual property, such as copyrights or patents. The TRIPS Agreement, signed in 1995, prescribes the minimum level of IP protection which WTO members must provide. ««
International Bank for Reconstruction and Development: Also known as the World Bank. It is a multinational institution set up in 1947 following the Bretton Woods conference in 1944. The bank aims to encourage capital investment for reconstruction and development in member countries. ««
International Development Association (IDA): Association is a branch of the World Bank that offers concessionary loans to less developed countries. ««
International Monetary Fund (IMF): An international financial organisation set up in 1945 to stabilise world trade and lend money to countries that needed it. The IMF often insists that countries adopt certain economic policies as a condition of being given a loan. ««
Intervention price: The price at which a government or the authorities managing a commodity agreement agree to purchase or sell stocks to maintain a particular price. ««
Intestinal problems: stomach problems. ««
Investment: Investment is the purchase of capital equipment, e.g. the purchase of machines, equipment, factories and so on, that firms need to enable them to produce. ««
Invisible balance: The difference between a country's income and expenditure on services such as tourism and banking together with profits earned and interest payments received from overseas. ««
Inward oriented development: Government policy that attempts to achieve development by stimulating domestic industry and import substitution behind trade barriers. ««
J
J curve effect: The tendency for a fall in the value of the currency to worsen the balance of trade before it improves the position. ««
L
Labour productivity: The Level of output per unit of labour. ««
Labour supply: The labour supply refers to the total number of hours that labour is willing and able to supply at a given wage rate. Increasing the effective supply of labour in an economy is important for those countries who want to expand their productive potential. ««
Land Tenure: The system of land ownership. ««
Law of diminishing returns: As we add more units of one factor of production (labour) to fixed amounts of others (land and capital) the increases in total product will first rise then fall. Diminishing returns to labour occurs when marginal product starts to fall. ««
Leakages: Income not passed on by consumers in the circular flow e.g. savings, taxation or money spent on imports. Leakages are sometimes called withdrawals. ««
Leasehold land: Land which is owned by the government or a landowner and then leased to a tenant for a fixed period of time. ««
Least Developed Countries: The very poorest of the Less Developed Countries. ««
Less Developed Countries (LDCs): Countries who are generally characterised by low levels of GDP and income per head. LDCs usually have a heavy dependence on the primary sector of the economy. In the case of Zambia this is true with dependence on agriculture and copper and cobalt mining. ««
Liberalisation: This refers to the process of opening up of markets to the free market forces of supply and demand. This means reducing the government's involvement in a country's economy, based on the idea that private businesses can run things more efficiently. It normally involves deregulation (removing governments regulations and restrictions), privatisation (sale of state owned enterprises to the private sector) and opening up economies (removing trade barriers). ««
Life expectancy: The average length of time that people in a country are expected to live. ««
Loan Principal: The sum of money that a country borrows. ««
Lomé Convention: A multilateral agreement signed in 1974 between the European Union and the ACP (African, Caribbean, and Pacific States), which governed aid and trade relations between these two groups. It was replaced by the Cotonou Agreement in 2000. ««
Long run average cost curve: Shows the minimum unit cost of producing each level of output, allowing the size of plant to vary. ««
Lorenz curve: A graph showing the difference between a country's actual income distribution and perfect equality of income distribution. ««
M
MDCs: More developed countries. ««
Maastricht criteria: The Maastricht Convergence Criteria were established in 1991 for those countries that planned to join the new European single currency arrangements in 1999. They were (are) designed to achieve a greater degree of economic convergence for countries participating in the Euro project. The criteria included targets for inflation, interest rates, government borrowing and the size of government debt. ««
Macroeconomic stabilisation: Government policy to stabilise inflation, budget deficits, trade deficits and money supply. ««
Marginal Cost: The amount spent on producing one extra unit. The marginal cost is the increase in total cost when one more unit is produced. ««
Marginal Product: The addition to total product following the employment of an extra unit of a variable factor, e.g. labour. ««
Marginal Propensity to Consume: The proportion of each extra pound of disposable income spent by households. For example, if a person earns £1 more and consumes 60 pence of it, then the MPC is 0.6. ««
Marginal Propensity to Import: The proportion of each extra pound of income spent on imports. An MPI of 0.4 would mean that 4 Kwacha more was spent on imports when 10 Kwacha extra was earned. ««
Marginal Propensity to Save: The proportion of each extra pound of disposable income not spent by households. ««
Marginal Propensity to Tax: The proportion of each extra pound of income taken by the government. An MPT of 0.2 would mean that 2 Kwacha more was taken in tax when 10 Kwacha extra was earned. ««
Market Failure: Market failure occurs when the price mechanism results in an inefficient or grossly unfair allocation of resources. ««
Market positioning: A marketing strategy that will position a business' products and services against those of its competitors in the minds of consumers. To achieve positioning success it is suggested that there are four basic competitive strategies that a company can follow (based on work by Porter). ««
Market segmentation: Segmentation is used to identify groups of individuals or organisations with characteristics in common. Market segments have significant implications for the development of marketing strategies. ««
Marketing strategy: It is the approach a business takes to securing and developing profitable customer relationships. ««
Marshall Lerner condition: States that a devaluation improves the current account balance if the combined price elasticities of demand for exports and imports are greater than 1. ««
Matrilineal: Land and other family assets are passed down the female line of succession. ««
Merit goods: A product, such as education, which consumers may undervalue but which the government believes is 'good' for consumers. Merit goods would be under-provided in a pure free-market economy. This is because they have external benefits that people would not take into account when they made their decisions about how much to consume. An example is vaccinations. As a result of people being vaccinated we keep disease out of the country, but if it was left just to the market many people might choose to take the risk and not pay for vaccinations. This could have negative effects for society. ««
Migrant worker: A person who travels from one area to another in search of work. ««
Millennium Development Goals: At the UN Millennium Summit in 2000, 191 countries committed themselves to halving poverty by the year 2015 and meeting a range of other targets in areas such as health, education, and gender equity. ««
Minimum wage: A national minimum wage is a pay floor introduced by the government which sets a wage level which producers cannot legally undercut. ««
Monetarists: A group of economists who believe that changes in the money supply are the most effective instrument of government economic policy, and the main determinant of the price level. ««
Multi-Fibre Agreement: A set of bilateral quotas imposed by industrialised countries on the exports of textiles from less developed countries. ««
Multi-National Corporations: these are companies which operate in many different countries beyond the one where they are registered. An MNC sells its products and services globally and often has offices and staff in several countries. Its products are often made step-by-step across several continents. The world has a rapidly growing number of MNCs, which are becoming increasingly powerful. ««
Multilateral debt: Debt owed to international institutions including the World Bank and the IMF. ««
Multinational Enterprise: An international or transnational enterprise which has productive capacity in several countries. ««
Multiplier: The multiplier is concerned with how national income changes as a result of a change in an injection, for example investment. The multiplier was a concept developed by Keynes that said that any increase in injections into the economy (investment, government expenditure or exports) would lead to a proportionally bigger increase in National Income. This is because the extra spending would have knock-on effects creating in turn even greater spending. The size of the multiplier would depend on the level of leakages. It can be measured by the formula 1/(1-MPC) where the MPC is the marginal propensity to consume. ««
N
NAFTA: The North American Free Trade Agreement took effect in 1994, and will eventually remove most barriers to cross-border trade and investment between the US, Canada, and Mexico. ««
Native Reserve Land: Land which was set aside by the Colonial Administration for use by African farmers. ««
Native Trust Land: Land where property rights were extended to European farmers. ««
Natural rate of population growth: The growth in population due to changes in the birth and death rates. ««
Natural rate of unemployment: The natural rate of unemployment is unemployment when the labour market is in equilibrium. At this point the demand for labour equals the supply of labour at the going market wage rate. ««
Nausea: Feeling sick to your stomach with an urge to vomit. ««
Negative externalities: Impacts on 'outsiders' that are disadvantageous to them and for which they receive no compensation. The externalities are occurring where the actions of firms and individuals have an effect on people other than themselves. In the case of negative externalities the external effects are costs on other people. They are also known as external costs. There may be external costs from both production and consumption. If these are added to the private costs we get the total social costs. An example of negative externalities would be the side effects of production processes e.g. the pollution (noise, dust, vibration) endured by people living next to a quarry. ««
Neo classical theory: The view that markets operate efficiently and that the way to increase output and employment is to raise aggregate supply. ««
Net Investment: investment over and above that needed to replace worn out capital (depreciation). ««
Net property income from abroad: The difference between incomes earned and incomes paid abroad. ««
Niche marketing: A niche market is a specialist area of the market. Niche marketing is therefore selling to that area of the marketing. It demands a very different approach to mass marketing of goods and services. ««
Non Governmental Organisations (NGOs): Privately owned organisations involved in providing financial and technical assistance to less developed countries. ««
O
OPEC: Organisation of Petroleum Exporting Countries. ««
Official Development Assistance (ODA): Disbursements of loans and grants at concessionary rates by governments. ««
Official Exchange Rate: The rate at which the Central Bank will exchange the local currency for foreign currency. ««
Oligopoly: A market dominated by a few producers each of which has some control over the market. A key feature of an oligopoly is interdependence of price and output decisions. Firms have to consider the likely reaction of their rivals to their own pricing strategies. ««
Opportunity Cost: The decision to produce or consume a product involves giving up another product. The real cost of an action is the next best alternative forgone. ««
Outward oriented development: Government policy that attempts to achieve development by encouraging free trade and the unrestricted movement of labour and capital. ««
P
Parallel economy: The production that takes place outside of the declared and formal circular flow of income. ««
Parallel importing: A provision within the TRIPS Agreement allowing a government to import patented drugs from another country in cases where the price charged by the patent holder in the local market is higher than the price charged in another market. ««
Parastatals: Large state owned enterprises. ««
Pareto Optimal: When no one can be made better off without someone else being made worse off, following a reorganisation of production or distribution. ««
Paris Club: A group formed by certain industrialised countries that are owed substantial amounts of debt by less developed countries. ««
Per capita income: Total income divided by the size of the population. Real GNP per capita is used as a benchmark for comparing living standards between countries. However real GNP per head has limitations as a measure of living standards. ««
Pesticides: Chemicals used to kill insects. It is dangerous to humans when they breathe or touch the chemicals. ««
Physical Quality of Life Index: A composite indicator of development composed from life expectancy, literacy rate, and infant mortality. ««
Pneumonia: A lung disease caused by viruses, bacteria, or other microorganisms and sometimes by physical and chemical irritants. ««
Polygamy: A system where a husband can have more that one wife. ««
Population pyramid: Graph showing the age structure of the population. ««
Positive externalities: Impacts on 'outsiders' that are advantageous to them and for which they do not have to pay. Externalities occur where the actions of firms and individuals have an effect on people other than themselves. In the case of positive externalities the external effects are benefits on other people. These are also known as external benefits. There may be external benefits from both production and consumption. If these are added to the private benefits we get the total social benefits. An example of positive externalities would be the side effects of production processes. ««
Poverty Reduction Strategy Papers (PRSPs): Introduced at the IMF/World Bank annual meetings in September 1999. PRSPs, are papers which poor country governments now have to produce in consultation with civil society before receiving debt relief. PRSPs will set out the Government's own plans for reducing poverty. Following endorsement by the IMF and World Bank, these will then provide a framework into which all donor lending will fit. NGOs and community groups are working to ensure that this name change is more than just a logo change for the same old policies. ««
Poverty Reduction and Growth Facility (PRGF): At its 1999 Annual Meeting the IMF also announced that it would change the name of the Enhanced Structural Adjustment Facility (ESAF), the IMF body responsible for 'SAPs', to the Poverty Reduction Growth Facility (PRGF). ««
Precautionary principle: This term refers to Principle 15 of the Rio Declaration on Environment and Development agreed at the Earth Summit in Rio de Janeiro in 1992. It introduces as customary international law the principle that, where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation. ««
Price band: A range within which a price is able to move. This will result from intervention in a market that sets minimum and maximum prices. ««
Price ceiling: A maximum limit for a price above which it is prevented from moving. ««
Price discrimination: A monopolist may be able to engage in a policy of price discrimination. This occurs when the firm charges different prices to separate sub-groups of consumers for the same good or service for reasons not associated with the costs of production. ««
Price elasticity of demand: Measures the responsiveness of demand to a given change in price. It is calculated by taking the percentage change in demand and dividing by the percentage change in price. ««
Price floor: A minimum limit for a price below which it is prevented from moving. ««
Primary education: The first level of education that usually provides the basic elements of education. ««
Primary industry: That part of the economy concerned with agriculture and the extraction of raw materials. ««
Primary products: Commodities produced by the extractive industries such as farming, fishing, forestry, and mining. ««
Protectionism: Trade policies, such as tariffs (taxes on imports) protecting domestic producers from competition in the international market. ««
Q
Quad countries: The name used at the WTO to describe the four major industrialised-country markets: the US, Canada, the European Union, and Japan. ««
Quota: A restriction, placed by the government, on the amount or number of a good that can be imported into a country. Any imports in excess of the quota are heavily taxed. ««
R
Real GDP/GNP: Measures the level of and rate of growth of the volume of output produced within the economy. An increase in real output means that expenditure on goods and services has risen faster than the rate of price inflation. ««
Rules of origin: These determine the country in which a product is said to have originated. They are used to ensure that trade preferences benefit goods which originate wholly in, or are manufactured in, the developing countries intended to benefit from the preferential market access. ««
S
Solidarity: A feeling or condition of unity based on common goals, interests, and sympathies among a group's members. ««
Special and differential treatment for developing countries: An example is the principle that exports from developing countries should be given preferential access to markets in developed countries, and that developing countries participating in trade negotiations need not reciprocate fully the concessions they receive. Developing countries may also be given longer time periods for adjusting to new rules. ««
Subsidy: A financial benefit given to producers, which enables them to sell or export goods at less than their costs of production, thus creating unfair competition. ««
Subsistence agriculture: A farm with only enough food to feed the family and not for sale or to make a living. ««
Sustainable development: Sustainable development has as many definitions as subscribers. In essence, it refers to economic development that meets the needs of all without leaving future generations with fewer natural resources than those we enjoy today. It is widely accepted that achieving sustainable development requires balance between three dimensions of complementary change. ««
Sweatshops: A term usually used to describe a business with bad working conditions, such as low wages, long hours, few safety and health protections, and child labour. ««
T
Tariffs: A tax that governments place on imports. They are an important source of income for governments. ««
Terms of trade: The terms of trade measures the rate of exchange of one good or service for another when two countries trade with each other. For international trade to be mutually beneficial for each country, the terms of trade must lay within the opportunity cost ratios for both countries. ««
The G8: The Group of Eight are the leaders of the world's most powerful industrialised nations - Canada, France, Germany, Italy, Japan, Russia, the UK and the USA. Together they control the world's international institutions. Their Heads of Government meet annually to discuss areas of global concern. ««
Trade balance: The balance between how much a country imports and how much it exports. If a country exports more than it imports, the balance is said to be positive. If the value of imports is greater than exports, a country is said to have a trade deficit. ««
Trade barriers: Quotas, tariffs and other conditions which restrict or control trade. ««
Trade liberalisation: The elimination, or reduction of trade barriers. ««
Trade unions: An organization of workers that promotes and protects the interests of its members in issues such as wages and working conditions, especially through negotiations with employers. Labour union. ««
Transnational companies (TNCs): Also known as multinational corporations. A company which owns and operates manufacturing or services businesses in more than one country, through branches or subsidiaries. ««
U
US Department of Labor: An agency of the Executive Branch of the United States government that serves all American workers. The many laws (including child labour laws) it administers and enforces affect virtually every worker and family in the United States. The agency helps people get training for new and better jobs. It also makes sure people get the wages they have earned, protects their health and safety on the job, and guarantees their pensions when they retire. The Labor Department also collects, analyzes, and publishes information on how many people are unemployed, how much money they earn, and how much it costs to run a household every month. The main office of the Labor Department is in Washington, DC, with local offices all across the country. ««
UN Convention on the Rights of the Child: The United Nations Convention on the Rights of the Child is an international treaty that recognizes the human rights of children, defined as persons up to the age of 18 years. Article 32 refers specifically to child labour. All countries of the world, except Somalia and the United States have agreed to this treaty. ««
United Nations: The UN came into existence in October 1945, when its Charter was ratified by China, France, the Soviet Union, UK, and the US. The Charter had been drawn up at an earlier conference attended by 50 countries in San Francisco that same year. When countries join the UN - and as at April 2002, there are 189 member countries - they agree to abide by the obligations of the Charter, which sets out some basic principles guiding international relations. ««
Unscrupulous: Lacking concern for honesty, fairness, or the like. Dishonest or crooked. ««
Uruguay Round Agreement: A set of multilateral trade agreements, which was launched in Uruguay, then negotiated between 1986 and 1994, and signed in Marrakesh, Morocco in 1995. It led to the establishment of the WTO. The Agreement expanded the scope of international trade rules to cover agriculture, services, and intellectual property (TRIPS). ««
W
World Bank: The World Bank was founded in 1944 at a conference attended by 44 governments in Bretton Woods, New Hampshire, USA. It has a membership of 183 countries (as at April 2002). Its headquarters are in Washington DC, and it has over 100 country offices around the world. ««
World Summit on Sustainable Development (WSSD): The World Summit on Sustainable Development takes place from 26 August - 4 September 2002 in Johannesburg, South Africa. Governments, UN agencies, and civil society organisations will come together to assess progress since the UN Conference on Environment and Development held in Rio in 1992 (hence the title 'Rio + 10' for the Johannesburg meeting). ««
World Trade Organisation (WTO): An international organisation set up in 1994 to unify international trade rules. It's mandate is to liberalise world trade. It is based in Geneva and has 143 member countries, with 75 per cent coming from the South. However, some countries have much more power than others. For example, Japan has 25 delegates, while Malawi cannot afford to keep any staff at the WTO headquarters. ««

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