31 of the Economics glossary’s terms, each with the part of the syllabus where you first meet it.
The quantity and quality of the factors of production a country has, such as land, natural resources, labour, skills and capital, which shape its comparative advantage.
The payments households receive for supplying factors of production: rent for land, wages for labour, interest for capital and profit for entrepreneurship.
The resources used to produce goods and services, grouped into four categories: land, labour, capital and entrepreneurship.
A certification system in which producers in developing countries receive a guaranteed minimum price and a premium for community projects when they meet labour, environmental and organisational standards.
The part of the balance of payments that records flows of investment into and out of a country: foreign direct investment, portfolio investment, other loans, official borrowing and changes in reserve assets.
The situation in which individuals and firms, including those on low incomes, have access to useful and affordable financial services such as payments, savings, credit and insurance.
Banks and other financial institutions that take in savings from households and firms and lend them to borrowers, for example to finance investment.
Businesses that hire factors of production from households and use them to produce and sell goods and services.
The use of government spending and taxation by the government to influence aggregate demand and so the level of economic activity, employment and prices.
A lasting legal or constitutional limit on a government’s budget, such as a maximum deficit or debt as a percentage of GDP, intended to keep the public finances sustainable.
Costs of production that do not change with the level of output in the short run, such as rent, insurance and interest on loans; they must be paid even if output is zero.
An exchange rate system in which the government or central bank sets the value of its currency against another currency or a basket of currencies and keeps it there by intervening in the foreign exchange market.
An exchange rate system in which the value of a currency is set by the demand for and supply of it on the foreign exchange market, with no government or central bank intervention.
The transfer of resources, such as money, goods, technical help or concessional loans, from governments, international organisations or charities in richer countries to poorer countries to promote development or relieve suffering.
Investment by a firm in one country to set up, buy or expand a lasting business operation in another country in which it has a controlling interest (usually at least 10% of the voting shares).
Foreign currencies, which a country earns mainly from exports and inflows of capital and needs in order to pay for imports and foreign debts.
The global market in which currencies are bought and sold, and where floating exchange rates are determined by demand and supply.
Holdings of foreign currencies and other liquid foreign assets kept by a central bank, which it can use to buy its own currency and support the exchange rate.
Firms, households and governments in other countries that buy a country’s exports and sell it imports.
Communication by a central bank about the likely future path of its policy rate, used to shape expectations and longer-term interest rates.
A bias in which people’s decisions are influenced by the way information or options are presented, rather than only by the information itself.
A good that is not scarce, so it has no opportunity cost: using more of it does not mean giving up anything else, such as air or seawater.
An economic system in which resources are privately owned and the basic economic questions are answered by consumers and firms through the price mechanism, with little government intervention.
The right of workers from one member country of a common market to live and work in any other member country without needing a work permit.
The situation in which people benefit from a good without paying for it, because they cannot be excluded, so private firms cannot collect enough revenue and the good is under-provided or not provided.
International trade that takes place without government-imposed barriers such as tariffs, quotas, subsidies or administrative restrictions.
A trading bloc whose members eliminate tariffs and quotas on trade between themselves, while each member keeps its own separate trade barriers against non-members.
Short-term unemployment of people who are between jobs or entering the labour market and are searching for suitable work.
The situation where the only unemployment is the natural rate (structural, frictional and seasonal unemployment), so there is no cyclical unemployment and the economy produces its potential output.
A correctly drawn and fully labelled diagram whose changes, such as shifts, new equilibria and shaded areas, are referred to and explained step by step in the written answer.
Consumers’ or producers’ beliefs about what the price of a good will be in the future, which affect how much they buy or sell today.