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Econ 314 Final
Development Econ
22
Economics
Undergraduate 3
12/08/2009

Additional Economics Flashcards

 


 

Cards

Term
Current Account
Definition
The portion of a balance of payments that portrays the market value of a country's "visible" (commodity trade) and "invisible" (eg shipping services) exports and imports with the rest of the world
Term
income elasticity of demand
Definition
The responsiveness of the quantity demanded of a commodity to changes in the consumer's income, measured by the proportionate change in quantity divided by the proportionate change in income.
Term
Capital Account
Definition
The portion of the country's balance of payments that shows the volume of private foreign investment and public grants and loans that flow into and out of a country over a given period, usually one year.
Term
Price elasticity of demand
Definition
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Term
Export earnings instability
Definition
Wide and unpredictable fluctuations in LDC earnings on commodity exports resulting from low price and income elasticities of demand leading to erratic movements in export prices
Term
Commodity terms of trade
Definition

P/ Pm


Px= export price index

Pm= import price index

Term
Prebisch- Singer Thesis
Definition
The argument that the primary product export orientation of LDCs results in a decline in their terms of trade and a loss of income
Term
Comparative advantage
Definition

L= ALCQC + ALWQW


L: total amount of labor resources

ALC: labor required for each unit of cheese production

QC: total units of cheese production

AWC: labor required/ unit of wine production

QW: total units of wine production


IF the relative price of cheese is greater than the opportunity cost, then the economy should specialize in producing cheese

Term
Specialization (comparative advantage 2)
Definition
Pc/Pw < Pc*/Pw*.
Specialization (cheese in this example) will lead to an upward pressure for the relative price of the good in the home country. and whatever the foreign country specializes in (wine) will also have an upward pressure.
Term
Absolute advantage
Definition
If country A can produce more of a commodity with the same amount of real resources than country B (i.e. at a lower absolute unit cost), country A is at most, said to have an absolute advantage over country B
Term
Hecksher-Ohlin neoclassical / factor endowment trade theory
Definition
Differences in labor, labor skills, physical K, land, or other factors of production across countries create productive differences that explain why trade occurs
Term
Factor price equalization
Definition
The theory predicts that input factor prices will equalize among countries that trade. Since relative output prices are equalized and because of the direct relationship between output and input prices, factor prices are also equalized. 
Term
How can government affect growth? (4 ways)
Definition

Factor accumulation: investment in human and physcial capital, indirectly through fiscal discipline to retain domestic savings

set rules of the game: market regulation and enforcing the rule of law (especially property rights)




Term
Externalities of government? + and -
Definition

research and development, education, overcome coordination failure, regulate the market

-

pollution

Term
Why don't we need government?
Definition
Government failure is worse than market failure. Equity versus efficiency tradeoff, government can be inefficient
Term
Budget deficit
Definition
private saving-private investment+ current account deficit
Term
Fiscal deficit
Definition
public expenses < public revenues
Term
Direct Tax 
Definition

Income tax- regressive in LDCs

Property Tax- easy to administer and observable, yet weak source of govn't revenue in LDCs

 

 

Term
Indirect Taxes
Definition
corporate taxes, indirect tax on commodities (largest source of public revenue in LDCs, easy to collect), import + export duties
Term
Minimizing cost of securing maximum revenue (features of commodity to be taxes)
Definition

imported or produced by a small number of licensed firms (tax evasion less likely)

LOW Price elasticity of demand- if tax adds to price, demand won't significantly change

HIGH income elasticity of demand- as income rises, more tax money will be collected

*better to tax expensive commodities (cars, manufacured goods) rather than household commodities

Term
Why is public administration a "scarce resource" in LDC's?
Definition

-lack of training

-political instability

-poor rule of law & public disorder

-low conceptions of public service and statehood

-different civil service goals of governments

-shortage of skilled and competent managers

-parallel personnel systems

Term
Why are public-owned enterprises inefficient/ waste resources/ and low in profit?
Definition

-pressured to pursue both social and commercial goals

-over centralization of decision making

-bureaucratization of management

-unnecessarily use k-intensive techniques, don't utilize Labor

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