A dictionary of economics

507 Pages·2003·35.04 MB·english

by  Black

0 X F O R D
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A Dictionary of
Economics
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Reference
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King's English *forthco111 ing
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AD ictioofn ary
Economics
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Contents
Preface vi
Dictionary 1
APPENDICES
The Greek Alphabet 511
2 Winners of the Nobel Prize for Economics 512
Preface
This dictionary aims to provide for the needs of students of economics at
A-level and in the 'mainstream' part of first degree courses, and oflay readers
of journals such as The Economist. To this end it includes several concepts in
mathematics and statistics which are widely used in standard economics
texts, and various terms connected with personal finances, including
insurance, pensions, and investment on the stock exchange. It is not intended
to cater for the full needs of economics researchers or postgraduate students,
or the wide range of specialist subjects within economics. It almost entirely
excludes 'great names' in economics, except insofar as they have 'laws' or
theorems named after them. An asterisk immediately before a word indicates
that it has a separate entry (disregarding the distinction between singular and
plural).
The author is indebted for general background ideas and concepts to
innumerable teachers. colleagues, pupils, and authors whose work he has
edited. He is indebted for comments, suggestions and encouragement to Jane
Black, Max Corden, Jonathan Levin, Molly Scott Cato, Peter Sinclair, and his
commissioning editor Angus Phillips. He is indebted for office facilities and
secretarial help to the Departments of Economics at the University of Exeter
and the University of Wales, Aberystwyth. None of these individuals or
institutions is responsible for any errors or omissions.
A
AAA rating See triple A rating.
ability to pay The principle thar any *tax should fall on those who can
afford to pay. Paying for *public goods or *income redistribution requires
taxes: raking account ofa bility to pay means that these should increase with
the income or assets of taxpayers, and as some minimum consumption is
needed for subsistence, taxes should be progressive rather than proportional.
Ability to pay is opposed to the *benefit principle, which suggests that only
those who benefit from any given public expenditure should be taxed to pay
for it. The main objections to the ability to pay criterion are that it is hard to
measure ability to pay reliably, and that taxing income reduces the incentive
to work. However, collection oft axes from those who cannot afford to pay is
unpopular, expensive, and sometimes impossible. Given the scale oft axes
necessary to run a modern society, use oft he ability to pay criterion for
taxation seems inevitable.
absolute advantage The use ofless resources per unit of output than other
producers. With only one type of resource, such as hours ofw ork, a producer
with lower inputs has an absolute advantage. In a world with many factors of
production absolute advantage is often hard to measure. In any case, absolute
advantage gives no advice on what to do with resources, which are best
employed where their *comparative advantage is greatest.
absolute value See modulus.
absorption The total ofe xpenditure on real goods and services, for
consumption, investment, and by the government. Absorption is the use
ofo utput: it excludes exports and includes imports. This is contrasted with
*production, which includes exports and excludes imports. The absorption
approach to * devaluation looks at its effects on various forms of expenditure,
and points out that devaluation can only improve rhe balance of payments on
current account ifp roduction increases relative to absorption.
abstinence Refraining from or at least postponing consumption which
could have been afforded. Where the funds not being spent arise from current
income, abstinence is thus the same as *saving: but the term also covers
refraining from running down past savings or spending windfall gains.
ACAS See Advisory, Conciliation and Arbitration Service.
accelerated depreciation The right to *write off capital goods for tax
purposes faster than the rate at which they would normally be depreciated.
This is intended to encourage *investment, as it enables a company to defer
its taxes when it invests. Under accelerated depreciation a firm's profits net of
*depreciation, and thus its tax liabilities, are lower than they would have been
under normal depreciation. Once the capital goods are written off, profits nee
of depreciation become higher than they would have been under normal
depreciation. and tax bills rise again.
accelerator 2
accelerator A model relating *investment to changes in *output. The
accelerator model asserts that firms invest more when output is rising and
Jess when it is falling. This seems reasonable: a rise in *demand leads some
firms to produce more, and leads them and other firms to expect that demand
will rise further. The rise in output raises the ratio of output to *capacity, and
the expectation of further rises in demand makes firms believe it would be
profitable to have more capital equipment. Accelerator-type models do help
empirically to explain variations in both *fixed investment and *investment
in stocks and work in progress.
accelerator-multiplier model See multiplier-accelerator model.
acceptance Adding one's signature to a *bill of exchange, thereby accepting
*liability to pay the bill at *maturity if the original signatory fails to do so.
Acceptance of a bill of exchange by an institution of high financial standing.
such as a *merchant bank, makes the bill safer to hold and thus easier to sell.
The acceptor is taking a *risk. and makes a charge for this.
acceptance schedule, job See job acceptance schedule.
accepting house A financial firm that is willing to accept *bills of
exchange, that is. to guarantee that they will be paid on the due date. An
accepting house uses its financial reputation to earn a fee for acceptance, and
its specialized knowledge of financial markets to avoid taking too many risks
of accepting bills where it is actually going to have to honour its *guarantee.
The principal London accepting houses form the Accepting Houses
Committee.
access, market See market access.
accommodatory monetary policy A policy of allowing the supply of
money to expand in line with the demand for it. If the *demand for money
rises because of sustainable real growth in the economy, accommodatory
monetary policy is desirable, and failure to expand the *money supply
obstructs real growth. If. however, the cause of rising demand for money is a
temporary, unsustainable surge in real activity. * inflation in prices and wages,
or both, accommodatory monetary policy allows these excesses to continue
too long. When obvious *excess demand or high inflation eventually forces a
shift to a more restrictive monetary policy, this will have to be severe and may
cause a serious *slump. Real world authorities find it very hard to assess
exactly how accommodatory their monetary policies should be.
account(s) A statement about activities over some period. Accountability is
the obligation to produce such a statement: the directors of companies are
accountable to their shareholders, and in the UK ministers are accountable
to Parliament for the activities of their departments. Accounts take various
forms:
1. A statement of the relations between two parties: a *bank account
records the deposits, borrowing, and withdrawals of a customer. Firms keep
accounts of the goods and services provided to customers: goods provided on
account are supplied on credit, and an account rendered is a demand for
payment for goods and services supplied.
2. A systematic summary in money terms of the activities of a business over
some period. usually a year. The two main statements in such accounts are the
3 accumulation, capital
*profit-and-loss account and the *balance-sheet. A profit-and-Joss accoum
shows receipts and payments, and the profit or Joss made during an
accounting period. A balance-sheet lists the *assets and *liabilities of a firm
on specified dates, at the start and end of an accounting period. Accountants
are producers and *auditors of accounts: they are often required to be
professionally qualified, where the accounts have to be credible to creditors.
law courts, and the tax authorities. Firms' accounts have to be certified as
accurate by professional auditors, but even so have sometimes been discovered
to be highly misleading.
3. National income and expenditure accounts are surveys of the economic
activities of a nation. They include analysis of the production of goods and
services, the distribution of incomes, and the expenditures of investors,
consumers, and the government. In the parts of national income accounts
relating to transactions with the rest of the world, the *current account
records sales and purchases of goods and services, property incomes and
transfers, and the *capital account records sales and purchases of assets.
including both real *foreign direct investment, inwards and outwards. and
financial transactions, sales and purchases of securities abroad, and the
making and repayment of international loans.
account, appropriation See appropriation account.
account, bank See bank account.
account, capital See capital account.
account, checking See checking account.
account, current See current account.
account. current (with bank) See current (bank) account.
account. deposit See deposit account.
accounting, cost See cost accounting.
accounting, creative See creative accounting.
accounting, inflation See inflation accounting.
accounting, management See management accounting.
accounting period The period of time. normally a year, to which a set of
company accounts refers.
account, merchandise See merchandise account.
account, profit-and-loss See profit-and-loss account.
accounts, consolidated See consolidated accounts.
accounts payable The pare ofa firm's *liabilities. as shown in its *balance­
sheet. consisting of bills received from suppliers on which payment is due but
has not yet actually been made.
accounts receivable The part of a firm's * assets, as shown in its *balance­
sheet, consisting of bills sent to customers on which payment is due but has
not yet actually been received.
account, unit of See unit of account.
accumulation, capital See capital accumulation.