67 of the Economics glossary’s terms, each with the part of the syllabus where you first meet it.
The situation where aggregate demand equals aggregate supply, which determines the economy’s average price level and real GDP; in the short run it occurs where AD meets SRAS.
The branch of economics that studies the economy as a whole, including total output, unemployment, inflation, economic growth and the effects of government policies on them.
An exchange rate system in which the currency floats, but the central bank intervenes from time to time to keep it within a band or to limit large or rapid changes in its value.
A form of choice architecture in which people must state their decision before they can proceed, so they cannot avoid the choice and no option is preselected.
A good produced in the secondary sector by processing raw materials and components, such as a car, a smartphone or a chocolate bar.
Decision-making that compares the additional (marginal) benefit of one more unit of an activity with its additional cost, rather than comparing totals or averages.
The additional benefit consumers receive from consuming one more unit of a good, measured by the maximum price they are willing to pay for it; shown by the demand curve.
The additional cost to a firm of producing one more unit of output.
The extra benefit to a consumer of consuming one more unit of a good; the demand curve shows it.
The extra cost to a producer of producing one more unit of a good; in a competitive market the supply curve shows it.
The additional output produced when one more unit of a variable factor of production, such as one more worker, is employed.
The proportion of an increase in income that is spent on domestically produced goods and services; MPC = ΔC ÷ ΔY.
The proportion of an increase in income that is spent on imported goods and services; MPM = ΔM ÷ ΔY.
The proportion of an increase in income that is saved rather than spent; MPS = ΔS ÷ ΔY.
The proportion of an increase in income that is paid to the government in taxes; MPT = ΔT ÷ ΔY.
The additional revenue a firm earns from selling one more unit of output (MR = ΔTR ÷ ΔQ).
The percentage of each additional unit of income that is paid in tax: the change in tax paid divided by the change in income, multiplied by 100.
The additional satisfaction (utility) a consumer gains from consuming one more unit of a good or service.
One of the levels of performance used to mark extended answers, each describing the qualities an answer must show to earn the range of marks in that level.
Any arrangement through which buyers and sellers exchange a good, service or factor of production, physically or online, at a price.
The total quantity of a good demanded by all consumers in a market at each price, found by adding the quantities that individual consumers demand at that price.
The situation in a market where quantity demanded equals quantity supplied, so there is no tendency for the price or the quantity traded to change; it occurs at the market-clearing price.
The situation where a free market fails to allocate resources efficiently, so that too much or too little of a good is produced and consumed compared with the socially optimal output.
George Akerlof’s 1970 model of a market where buyers cannot tell good products from bad ones, so they pay only an average price, good-quality sellers withdraw and the market shrinks or collapses.
The market in which savers supply funds and borrowers (firms, households and the government) demand them; the real interest rate brings the two into equilibrium.
The ability of a firm to influence the price of the good it sells, by changing its output or its price, rather than accepting the price set by the market.
The characteristics of a market that shape how firms behave in it, such as the number and size of firms, how similar their products are and how easily new firms can enter.
The total quantity of a good supplied by all producers in a market at each price, found by adding the quantities that individual firms supply at that price.
Supply-side policies that raise productive capacity by letting markets work more freely, through more competition, more flexible labour markets and stronger incentives, such as deregulation, privatisation and tax cuts.
The marking guidance written for a specific exam paper, listing the points, diagrams and working that earn marks for each question.
The condition that a depreciation or devaluation improves the current account balance only if the sum of the price elasticities of demand for exports and imports is greater than one.
Karl Marx’s criticism of capitalism and of classical economics: workers are exploited because owners of capital keep the surplus value their labour creates, leading to inequality and recurring crises.
The number of women who die from causes related to pregnancy or childbirth per 100,000 live births in a year.
A transfer payment made only to people whose income or wealth is below a set level, so that support is targeted at those most in need.
A good or service that is better for people than they realise, such as education or healthcare, so it is underconsumed in a free market; it often has positive consumption externalities.
The branch of economics that studies the behaviour of individual decision-makers, such as consumers, firms and workers, and how individual markets and industries work.
The provision of small loans, savings accounts, insurance and other financial services to people on low incomes who lack access to ordinary banks, often without collateral and through group lending.
Eight international development goals agreed in 2000, with targets for 2015, focused on reducing extreme poverty, hunger, disease and illiteracy in developing countries.
The income a particular type of household needs for a minimum acceptable standard of living, found by pricing a basket of goods and services that members of the public agree is necessary.
The minimum proportion of deposits that commercial banks must legally hold as reserves (cash or deposits at the central bank) rather than lend out.
A price floor in the labour market: the lowest wage rate per hour that employers may legally pay workers, usually set above the market equilibrium wage.
An economic system that combines a market sector, where private firms and consumers make decisions through prices, with a public sector, where the government owns resources, provides services and regulates markets.
Financial services such as storing money, sending and receiving payments, paying bills and saving, carried out through a mobile phone, often without a bank account and using local cash agents.
The ease with which factors of production, such as labour and capital, can be moved from one use, firm or place to another; greater mobility makes supply more price elastic.
The process by which the IB re-marks a sample of a school's internally assessed work and adjusts the teacher's marks if they are too generous or too harsh.
The school of thought, led by Milton Friedman, which holds that inflation is caused by the money supply growing faster than output, so governments should control money growth rather than manage demand actively.
A demand-side policy in which the central bank changes interest rates, the money supply or credit conditions to influence aggregate demand and reach goals such as low and stable inflation.
The chain of effects by which a change in the central bank’s policy rate spreads through other interest rates, asset prices, the exchange rate and expectations to aggregate demand, output and inflation.
A group of countries that share a single currency and a common central bank that sets one monetary policy, including one interest rate, for all members.
Anything generally accepted as payment for goods and services; it serves as a medium of exchange, a unit of account, a store of value and a standard of deferred payment.
The process by which commercial banks increase the money supply by making loans, since each new loan creates a new deposit; also called credit creation.
The maximum increase in total bank deposits that can result from an initial new deposit, equal to one divided by the reserve requirement ratio.
The total quantity of money in an economy at a point in time, made up of notes and coins held by the public plus deposits in commercial banks.
A market structure with many firms selling differentiated products, with free entry and exit, so that each firm has a small degree of market power.
A market structure in which a single firm, or one dominant firm, supplies the whole market for a product with no close substitutes, protected by high barriers to entry.
A form of asymmetric information arising after a transaction, in which one party takes more risk or less care because another party bears part of the cost and cannot fully observe its behaviour.
The WTO rule that any trade advantage a member gives to one country, such as a lower tariff, must be given immediately to all other WTO members.
A change in the quantity demanded caused only by a change in the good’s own price, shown as a move from one point to another on the same demand curve.
A change in the quantity supplied caused only by a change in the good’s own price, shown as a move from one point to another on the same supply curve.
A composite poverty measure counting people as poor if deprived in at least one-third of ten weighted indicators of health, education and living standards; it combines the share of people poor with the intensity of their deprivation.
Aid, loans and technical support given to developing countries by international organisations funded by many member governments, such as the World Bank, the IMF and regional development banks.
A trade agreement among many countries across the world, usually negotiated through the World Trade Organization, whose terms apply equally to all of them.
A firm that owns or controls production in more than one country, for example through factories, mines, offices or subsidiaries abroad.