ECON 102 Test 3 Difinition

Interest

1. The charge for the privilege of borrowing money, typically expressed as an annual percentage rate. 2. The amount of ownership a stockholder has in a company, usually expressed as a percentage. Interest is commonly calculated using one of two methods: simple interest calculation, or compound interest calculation.

Brenton Woods

44 allied countries met in Brenton Woods New Hampshire in July, 1944 to commit to the goals of economic development, monetary stability, and free trade. This new Economic Order (low barriers to trade and investment), counterpart to the military alliance formed at the time (NATO). It created the IMF and WORLD BANK.

IMF

A United Nations agency to promote trade by increasing the exchange stability of the major currencies, (Twin Bank to the World Bank)- initial focus: stability of monetary system to solve balance of payments deficits without devaluation.

Patent

A grant made by a government that confers upon the creator of an invention the sole right to make, use, and sell that invention for a set period of time.

Negative Income Tax

A guaranteed minimum income plan advocated by economist Milton Friedman in 1962 where federal income subsidies are provided to persons or families whose income falls below a certain level.

Petrodollars

A notional unit of currency earned by a country from the export of petroleum.

Fixed Exchange Rate (graph pg789 Combo)

A policy under which a government commits itself to keep its currency at or around a specific value in terms of another currency or a commodity, such as gold.

Marshall Plan

A program of US economic aid for the reconstruction of post-World War II Europe (1948-52)

Windfall Profits Tax

A tax levied on an unforeseen or unexpectedly large profit, esp. one regarded to be excessive or unfairly obtained.

Single Tax

A taxation system in which a tax on one commodity, usually land, is the only source of revenue.

General Agreement On Tariffs And Trade (GATT)

A treaty created following the conclusion of World War II. The General Agreement on Tariffs and Trade (GATT) was implemented to further regulate world trade to aide in the economic recovery following the war. GATT's main objective was to reduce the barriers of international trade through the reduction of tariffs, quotas and subsidies.

Theory of Absolute Advantage

An absolute advantage occurs when one person, company, or country is more efficient at producing the same good or service than another company.

European Economic Community (EEC)

An economic organization established in 1957 to reduce tariff barriers and promote trade among the countries of Belgium, Luxembourg, the Netherlands, France, Italy, and West Germany. These countries became the original members of the European Community in 1965.

Close Economy

An economy that does not interact with the economy of any other country. A closed economy prohibits imports and exports, and prohibits any other country from participating in their stock market.

Floating Exchange Rate (graph pg 789 Combo graph)

An exchange rate policy under which a government permits its currency to be traded on the open market without direct government control or intervention.

World Trade Organization (WTO)

An international organization based in Geneva that monitors and enforces rules governing global trade., Administers the rules governing trade between its 144 members. Helps producers, importers, and exporters conduct their business and ensure that trade flows smoothly.

International Monetary Fund (IMF)

An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating the expansion and balanced growth of international trade. 3. Assisting in the establishment of a multilateral system of payments for current transactions.

Special Drawing Rights (SDR)

An international type of monetary reserve currency, created by the International Monetary Fund (IMF) in 1969, which operates as a supplement to the existing reserves of member countries.

Organization Of Petroleum Exporting Countries (OPEC)

An organization consisting of the world's major oil-exporting nations. The Organization of Petroleum Exporting Countries (OPEC) was founded in 1960 to coordinate the petroleum policies of its members, and to provide member states with technical and economic aid.

Profit

Financial benefit that is realized when the amount of revenue gained from a business activity exceeds the expenses, costs and taxes needed to sustain the activity.

Open Economy

Market-economy mostly free from trade barriers and where exports and imports form a large percentage of the GDP.

Most Favored Nation (MFN)

Non-discriminatory trade policy commitment offered by one country to another on a reciprocal basis. Both countries apply that lowest import-duty and quota-restrictions on imports from each other which they apply on the similar imports from any other country.

Truman Doctrine

President Truman's policy of providing economic and military aid to any country threatened by communism or totalitarian ideology

Euro

Single european currency used by all members of the european union except UK

Floating exchange rate/fixed exchange rate (graph)

System in which a currency's value is determined solely by the interplay of the market forces of demand and supply (which, in turn, is determined by the soundness of a country's basic economic position), instead of by government intervention.

Clayton Act of 1914/Federal Trade Act 1914.

The Clayton Antitrust Act of 1914 enacted October 15, 1914, was a part of United States antitrust law with the goal of adding further substance to the U.S. antitrust law regime; the Clayton Act sought to prevent anticompetitive practices in their incipiency. The Clayton Act specified particular prohibited conduct, the three-level enforcement scheme, the exemptions, and the remedial measures.

Sherman Act of 1890

The Sherman Antitrust Act of 1890, is a landmark federal statute in the history of United States antitrust law (or "competition law") passed by Congress in 1890. It prohibits certain business activities that federal government regulators deem to be anti-competitive. Its the first Federal law outlawing practices considered harmful to consumers (monopolies, cartels, and trusts).

Theory of Comparative Advantage (graph)

The benefit or advantage of an economy to be able to produce a commodity at a lesser opportunity cost than other entities is referred to as comparative advantage in international trade theory.

Balance of Payments Deficit and Surplus

The current account shows the net amount a country is earning if it is in surplus, or spending if it is in deficit. It is the sum of the balance of trade (net earnings on exports minus payments for imports), factor income (earnings on foreign investments minus payments made to foreign investors) and cash transfers.

Rent

The income derived from the ownership of land and other free gifts of nature.

Open-Economy Multiplier

The simple Keynesian multiplier for a small open economy. Equals 1/(s+m), where s is the marginal propensity to save and m is the marginal propensity to import.

Free Trade

The unrestricted purchase and sale of goods and services between countries without the imposition of constraints such as tariffs, duties and quotas.

Urban Rural Suburb

Urban: An urban area is an area with an increased density of human-created structures in comparison to the areas surrounding it. Urban areas are extremely dense population areas. An urban area is more frequently called a city or metropolitan area. The main types of communities in urban areas can be: a metropolis (metropolitan area) (pop. usually over a 1,000,000) or a city (pop. over 100,000.) Suburban: A residential area on the outskirts of a city. Suburban areas have lower population density than inner city neighborhoods. Suburban areas are dense to semi-dense population areas. A suburban area is frequently a large community. Populations in suburbs, a suburban area or a suburb in a nearby metropolitan area can vary from 10,000 to over a 1,000,000. Rural: Rural areas are settled places outside towns and cities. Such areas are distinct from more intensively settled urban and suburban areas. These areas are mostly sparsely populated areas. Inhabitants live in villages, hamlets, on farms and in other isolated dwellings. The main types of communities in rural areas can be: a village (pop. 200-800 people) or a hamlet (pop. fewer than 200 people.) or an isolated dwelling (which is just 1 or 2 buildings with families in it.) Populations in Rural communities/areas are usually under 10,000 people.

Gold Standard

a monetary standard under which the basic unit of currency is defined by a stated quantity of gold