A comprehensive dictionary of economics (gnv64)

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A comprehensive dictionary of economics, for understanding economics basic terminology...............

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A comprehensive dictionary of economics (gnv64)

  1. 1. _axL_(OMPREHENJIVE[)ICTI()~Al2"~~~~(Jf~~~~ECONOMICS Chief Editor & Compiler: Nelson Brian ~ ABHISHEK
  2. 2. All rights reserved. No part of this book may be reproduced in anyform, electronically or otherwise, in print, photoprint, micro film orby any other means without written permission from the publisher.ISBN : 978-81-8247-031-6ISBN 8/ -8247-03 /-5Copyright PublisherFirst Edition 2009 2004Published byABHISHEK PUBLICATIONS,S.C.O. 57-59, Sector 17-C,CHANDIGARH-1600 17 (India)Ph.-2707562,Fax-OI72-2704668Email: abhpub@yahoo.comConcept & Design byXact Ad N Art Studio, DelhiPri1lted at : Balaji Offset, Naveen Shadra, Delhi-32
  3. 3. PrefaceEconomics is the science that deals with the production,distribution and consumption of wealth. It studies thevarious problems oflabour, finance, taxation, etc. and triesto find a solution or the best possible way to tackle theseproblems. The subject not only deals with the present andfuture growth of a countrys economy at the micro level,like the consumption of a household or an individual [trm,but also studies the same at a bigger and more complexlevel or the macro level, like the national income or theproduction of an industry. The job of the economists is toidentify the economic problems of a countrys economyand find solutions for the same, thereby promoting a healthyand smooth economic growth.There are two schools of thoughts in economics, viz. theClassical and the Modern. The economists belonging tothese two schools have contributed a lot in the field ofeconomics through a number of theories. But, as the hu-man wants are endless, so are the economic problems un-ending and therefore, economists are continuously work-ing towards finding solutions for these new problems.The dictionary is made with the intent of providing thereaders with a handy referral for the terminology used in
  4. 4. the subject. The dictionary covers almost all the termsthat form a part and parcel of economics in simple andeasily comprehensible language. In order to enhance thereaders knowledge and bring about more relevance, manyexamples and pictures have been used along with the defi-nitions of the terms.
  5. 5. II a foir trader / foir traders I accelera~ t:lepreciation 5- a fair trader / fair traders ~ and government) of a country,contrasted with free trader, a ; in contrast to the total demandfair trader is a holder of the ~ for that countrys output.point of view that ones countrys : _ absorption approachgovernment must prevent ~or- ~ a way of understanding the fac-eign companies from havmg ; tors of the balance of trade,artificial advantages over do- : noting that it is equal to themestic ones. l b : earnings less a sorptIon.- abilene principle ~ _ abstinencea description of a groups inabil- ~ the giving up of the current con-ity to solve their disagreement. ; sumption in order to increaseNobody wants to reach a par- : the future consumption. It isticular destination (Abilene), ~ often characterised by directingfor fear of offending or contra- ; the available resources towardsdicting each other. : the production of capital goods.- absolute advantage ~ Due to this, the future produc-1. a term used in the interna- ; tion of the consumer ..., goods willtional trade theory, as per which ~ increase.a country specialises in produc- : _ abundant factoring such goods and services that ~ the factor which is available init is able to produce more ~ffi- ~ abundant supply in a countryciently (more output per urut of ; relative to other countries. Caninput) than any other country : be defmed both with respect to2. the ability of a country to pr?- ~ quantity and price.duce a good at lower cost, m i l d d . . tionterms of real resources, than : - acce ~ra~e epreclaano ther cuntry In a Ricardian . depreCIatlOn d h new asset o. I . of a hmodel, cost is in term of only ; over a peno t at ISalmTuchIa bour. . the norm. I e . shorter than . th d I firms operatIng m e eve op-- absorption : ing areas usually. follow this I .the sum-total of demands for : method of depreCIatIOn.goods and services by all resi- Idents (consumers, producersEconomics======= II
  6. 6. ",,6===========~tinginJlatUm I accepting house II• accelerating inflation I • accelerator co-efficienta sudden inflation rate increase. I states that any increase in theIt is the result of the output is always accompaniedgovernments efforts to hold the by a corresponding increase inemployment level below its I the capital, like machinery etc.,natural rate. that is used to produce it. The incremented capital output ra- I tio depicts the amount of capi- tal that should be increased in order to raise an additional unit I of output. I • accelerator principle • acceleration principle; I states that the aggregate net accelerator investment level is dependent indicative of a relationship be- on the expected change in out- I put ..tween income and output and the investment effects associ- I • acceptance credit ated with the changing output. a way of payment in interna- The size of the accelerator de- tional trade. In case the accept- pends on the marginal capital/ I ing house finds the credit of a output (C/O) ratio (i.e. how I foreign import merchant satis- much new investment is needed factory, it may open an accep- in response to the changing de- I tance credit for him in say New mand for output) and on a va- I York. riety of other factors influenc- ing investment decisions. I • accepting house the establishments whose busi-• accelerator ness is to accept or guaranteethe process in which demand I bills of exchange. Such establish-change for the consumer goods ments may also be involved ·inleads to an even larger demand several other services and func-change for the capital equip~ I tions.ment used to produce them.II ========E&onomics
  7. 7. IIIICUSS / accessibility I accounts receiV:============7• access / accessibility ~ cepted or endorsed to maketerm expressing the ease with ; some cash available for a shortwhich a location can be reached : term, without receiving anyand interacted with from other ~ goods in return. The sole pur-locations. ~ pose of this is of discounting• acc~sion rate ; • accommodation endorse-also known as the hiring rate, I menti.e. the total number of employ- : the endorsing of a note or anyees added to the payroll in a ~ other bill of credit by one indi-given period of time. It acts as ; vidual to another in order toan important indicator of the : grant him the right to obtain afuture business conditions. I loan. ~ • accounts payable I the amount that a business : owes to its suppliers and other ~ parties, generally a period of 10 I to 90 days is taken as standard . to pay for the goods already transported . ... ---_ ... _- ...... ..... ~ ~ _1Aow. ..... c.- ___ Il" "" ..... ,..- ...... __ " : .: ~ ....• accessions taxthe tax on the receiver of gifts Iand inherited property, it is lev-ied by the government.• accommodating move- mentsthe transferring of gold and con- I • accounts receivablevertible currency aboard by a ; the amount that a business iscountry in order to meet its bal- : entitled to receive from its cus-ance of payment deficits. ~ tomers, generally a period of• accommodation bill ; 10 to 90 days is taken as stan-that bill, which is drawn, ac- I: dard to receive payments forE&onomics======= I
  8. 8. 8 accounts ;eiVIJble (finance) I active circulation "the goods already transported. I and Pacific less developed coun- I tries that were included in the• accounts receivable (fi- Lome Convention and now the nance) I Cotonou Agreement.the entitlement of a firm to re-ceive application of money I • across-the-board tarifffrom its debtors for obtaining I changesfunds to fincnce the current op- a change of all tariffs in a coun-erating expenses or some other try. They are raised or loweredexpense. I by an equal percentage.• accrual basis I • action laga method of accounting in I the delay between the formula-which the income and expenses tion of a policy decision and itsare not charged until the time execution.they are actually earned or in- I • actionable subsidycurred. I a subsidy which is not prohib-• accrued ited by the World Tradethe earnings, sales, expenses or Organisation (WTO), but thatother items of income or expen- I member countries are permit-diture, which are already made ted to levy compensating dutiesor incurred and are outstand- agamst.mg. • active balance• accrued expenses a term to indicate a balance ofan accounting entry ,,,herein a I payments that is favourable forliability is recorded when the a country, when the revenuecost of a service used but not earned from exports is higherpaid for is observed. I than the expenditure incurred on tl1e import of goods and ser-• accumulation VICes.the acquisition of an increasing Iquantity of something. • active circulation I at any given time, the part of• ACP countries I the RBIs issue which is in cir-a group of Mrican, Caribbean culation.II ========Eetmomies
  9. 9. 1 actiPe tnllritet I addition rule 9 *================- active market ~ of its effects on trade, price ormarket for a specific set of stock ; some other measure, to a nonor shares traded quite fre- : tariff barrier. Iquently and regularly. : - ad valorem tariff_ activity rate : tariff defined as the percentagethe percentage of people in a I of the value of an importedgiven population age group that ~ good.are employed, but not in the ~ - ad valorem taxdefence forces of the country. a t<LX or duty calculated on the- actual protection rate I basis of the value of a transac-implicit tariff. I tion. It is taken as a percentage of price at the selling or produc-_ actuals tion stage.the items that are bought withthe intention of immediate de- ~ - adaption & adoptionlivery in a stock exchange. . dichotomy a constituent of A.A. Alchians- ad valorem and Charles M . Tiebouts1. in proportion to the value. A I rationalisation of classical eco-term used to refer to the taxes nomic theory. The argument isand duties levied on goods, etc. that active, deliberately optimalas a percentage of their value. I (adaptive) behaviours are not I needed for the viability of .- A. V.a--.Per Capita Ass. . . . . • LN<f"""" : optimising theories, since eco- ._""""" ;~ adopted by the competitive 0 80 l"MTc:. eLtOt 0""""""" nomic actors would be either .000000Y-...ot .W5lPAUIIIItACH 0 ......... : environment or would fail. I2. per unit of value i.e. divided : - addition rule Iby the price. a rule for the determination of I the derivative of a function with- ad valorem equivalent respect to a variable, where thethe ad valorem tariff which function constitutes the linearwould be equivalent, in terms I sum of two or more differentEeonomics======== II
  10. 10. peg""l=O=========ad=rjust;le I ad71ancedepositrequirement 1/functions of the variable. I • adjustment lags• adjustable peg I the time taken by a variable, likean exchange rate which is I ccpital stock to adjust to tjepegged, but for which it is lID- changes in its determinants.derstood that the par value will • adjustment mechanismbe changed occasionally. Such I the theoretical process throughsystem can be subject to ex- which a market changes in dis-treme speculative attack and fi- equilibria, moving toward equi-nancial crisis, as speculators I librium if the process is stable.may easily anticipate thesechanges. I • administered protection I protection resulting from the• adjustment assistance application of anyone of sev-a government program to as- eral provisions that respond tosist those workers and/or firms I specified market circwnstanceswhose industry has declined, or events, usually as determined l·r""~ """ ._ tlar f..mw¥ TJlMAnm"JoY<2 by an administrative agency. (HR. "oo~. f~0¥.1Yw.IO • administrative lag I a delay between the time of I implementation and the effect of a monetary policy. It refers I to the elapsed time between the recognition by the authoritieseither because of competition that action is necessary and thefrom imports (trade adjust- actual implementation of thement assistance) or from other I action. The duration of this timecauses. Such programs usually depends upon how efficient thehave two (conflicting) goals, authorities are in implementingwhich include, to lessen hard- I the policies formulated.ship for those affected and tohelp them change their I • advance deposit require-behaviour. ment a requirement where a percent- age of the value of imports orII = = = = = = = E & o n o m i & s
  11. 11. II tulT1l1ncerefunding I Rtl!flomerlltWn ec:;m~:Y~~~~~~~~~~l~lof import duties should be de- ~ of the view that the employeesposited prior to the payment, ; should be free to decide aboutwithout competitive interest : joining a union or not and thosebeing paid. ~ who state that the employees ; should not be allowed to enjoy- advance refunding : the benefits of a union withoutto exchange those bonds whose ~ paying for them.expiry date is approaching for Inew bonds on advantageous : - agenda 21terms. ~ a plan of action adopted at the,_ adverse selection ; Rio Summit for promoting sus- : tainable development.the tendency for insurance to be Ipurchased only by those per- : - agglomerationsons who are most likely to I 1. geographical concentrationneed it, thus raising its cost and I of people and/or activities.reducing its benefits. 2. a phenomenon of economic_ adverse terms of trade activity congregating in or closea term of trade which is consid- I to a single location, rather thanered unfavourable relative to I being spread out uniformlysome benchmark or to past ex- I over space.penence. : - agglomeration economies I (of Scale or Scope)- advicenote sent by one merchant to I benefits, savings or drop in av-another, requesting him to de- : erage cost resulting from theliver the ordered goods. ~ clustering of activities. Gener- ~ ally, the concept of agglomera-- agency shop ; tion economies refers to savingsthe mandatory requirement for : or benefits derived from thea prospective employee joining ~ clustering of activities externala firm to pay the union dues ; to the firm and are therefore awithout being a part of the trade : part of external economjes.union. T~is kind of arrange- I : - agglomeration economyment is generally found in theUS between the ones who are I any benefit which accrues toEeonomics======= II
  12. 12. =12==========WfYiJ==a;concentration I"IJ8"t94tetxpmditun IIeconomic agents as a result of ~ aggregate demand curve relateshaving large numbers of other .agents geographically close tothem, thus tending to lead to Iagglomeration.• aggregate concentrationthe state in which the goodsproduced in one sector of theeconomy or the whole is con- Icentrated around a few large the level of real national incomecorpora tions. (GDP) demanded (the total I quantity of goods and services• aggregate demand demanded) to the price level (asthe total demand In the measured by the GDP defla-economy. It takes into account I tor).the total of all the desired ex-penditure at any time by all I • aggregate expendituregroups in the economy. The I in macroeconomic theory, ag-main groups who spend are gregate expenditure is sum-to Aggregateconsumers (consumption), Expenditure (AE)firms (who spend on invest- I Ement), government (govern-ment expenditure) and over-seas (exports). A t A. Price level (P) ADzPyR o Yo Y1 RGDP =C+ 1+ G + NX I tal of the amount of desired spending by consumers, gov- ernments, private investors and AD .---+: I foreign buyers (net of spending o VOR vf Reallncome on imports) at each level of real ((II.. RGDp) national income (GDP).• aggregate demand curvein macroeconomic theory, theII ========B&onomks
  13. 13. II tI9!J1VJRte meRSUn ofsupport I RllocRted cost 13 *==============~• aggregate measure of ~ ing the same. support . 1 • aggregationt h e measure of subsidy to ag- .riculture used by the WTO as ~ 1. the puttmg together of the pri-the basis for commitments to 1 mary data. For example, the ag-reduce the subsidisation of : ~egate demand is an aggregate,agricultural products . It in- ~ m ~on~~t with the demand ofeludes the value of price sup- ~ an mdiVldual. .ports and direct subsidies to . 2. the amalgatlon of two or morespecific products, as well as ~ ki~ds of an economic entity intopayments which are not prod- ~ a sm~le category. For macroeco-uct specific. ; no~c purposes, all goods and : ~ervI~es are usually aggregated• aggregate supply 1 mto Just one.it is the total quantity supplied ~ • aggregative modelat every price level, i.e. the to Price Lovel (P) ; a model used in econometrics AS O : where the creation of variables ~ is. done by using groups of indi- 1 VIdual variables. ; • agio : it refers to the fee that is paid Real Income 1 • (YR. RGDp) : for exchangmg one currency fortal of ~ goods and services pro- ~ another, or for a foreign bill ofduced m an economy in a given ; exchange.time period. ; • agistment• aggregcte supply curve : to feed or take care of the cattlein macroeconomic theory, the ~ with the intention of getting ashort run aggregate supply 1 reward.c~rve relates the total quan- ; • allocated costmy of goods and services sup- . thpiled and the price level (as; e.allocation of expenditures to : vanous accounts.measure d by the GDP defla- 1tor) and with all else remain-E&onomics======= II
  14. 14. 14 alloctJrion I angel inPUtor II=================*• allocationan assignment of economic ;resources to uses. In general :equilibrium, an assignment of ~factors to industries produc- Iing goods and services, to- ~gether with the assignment of : distort production and trade.resulting final goods and ser- I • American Depositoryvices to consumers, within a Receipt (ADR)country or throughout the I a document given to a share-world economy. holder and issued by the US• allocative efficiency . Bank in response to the depositthe best possible allocation of ; of shares by the shareholder.resources. I • amortisation• allonge this term is U5ed in relation toa sheet of paper to provide an the payment of a loan in ad-additional space for endorse- I vance, over a specified time pe-ments, usually attached to a bill riod. Such fund can also be cre-of exchange. ated when equated instalments I are deposited at regular inter-• all-or-none order (US) I vals of time, so as to accumu-a limited price order for buy- late an amount equivalent to theing or selling of shares and I amount of debt including inter-stocks, with the condition of : I est.being executed entirely or none :at all. I • AMS Aggregate Measure of Support.• amber boxthe category of subsidies in the I • angel investorWTO Agriculture Agreement, a venture capitalist with a so-the total value of which is to be I cial conscience. They are likereduced. It includes most do- I other venture capitalists~ in themestic support measures that sense that angels are looking for higq.growth potential withII = = = = = = = ; ; ; ; : ; : ; ; ; : : ; : ; E & o n o m i c s
  15. 15. 15 *================a five-to-ten-year cash-out. An- ~ - anticipationgel investors often look for psy- , in accounting parlance is, tochic income beyond just bal- : record the earnings or profitance sheet and income state- ~ before they are actually realised.ment- the chance to help otherentrepreneurs, assist with inner ~ - antitrust legislationcity problems ... for example. ~ a law that targets healthy com- ; petition amongst all the players- anglo-saxon bias : in a particular industry and thusWalter Isards characterisation ~ restricts monopolistic practicesof the 19th century in a spatial ; followed by a private b~iness.economic theory in Britain, incontrast to the Germanic Bias ; - anti-trust policyin the development of the clas- : the U.S. term for competition , li : po cy.sical location theory. ,- annuity : -ANZCERTAis a type of life insurance con- ~ Australia-New Zealand Closertract that gives periodic pay ; Economic Relations Trade --- : Agreement. ··· ··1 , : _APM ~- , I_" " . .. ~ Average Propensity to Import. -- .. .- . ft : - appellate body I ~ the standing committee of the . . . . .. .. .. ill I. ca. A .... .. .T_ .. _II .. Q II .. . . • .. • .... .. .. - • ~~m~ ······:1 ,.. " ··ments to the insured at some , :::.:::?,/ .~-=.future time, usually retirement. ""-:~~r"·; S;· !(···· l- antedateearlier dating of a document, fi~~F~such as a life insurance policy, , -~!.l.than what is current, so that it ~~~~1~;~:matures or takes effect sooner. ~ WTO which reviews decisions&tmomit:s======= II
  16. 16. 16 applied economics I arbitration II=================*of dispute settlement panels. Can You Keep It?• applied economicsa branch of economics that stud- Iies practical problems and usesthe principles and tools of eco-nomic analysis. Is It a Buslaes.?• applied tariff ratethe effective actual tariff rate at • appropriationa countrys border. in accounting, money or tnate- I rials set aside or spent for a spe-• appreciation cific purpose or allocating thea rise in the value of a countrys resources between the numer-currency on the exchange mar- I ous uses.ket, relative to a particular othercurrency or to a weighted aver-age of other currencies. The Icurrency is said to appreciate.• appreciative theory (Nelson)attempts to structure qualitative Inotions about the nature of a Ifirm and its activities, in a man-ner that is less straining but I • ar bO Itragericher at the formal level. I the simultaneous buying of cur- rency, securities or goods from• appropriability problem one market for the purpose ofproblems associated with the I selling in another market at aability of the firm to capture higher price.acceptable levels of benefits, Iassociated with the exploitation • arbitrationof its own technological inno- is a way of settling a disputevations through confidentiality, I between two parties, by a thirdpatents, etc. I person who has interest in that matter.II = = = = = = = = E c o n o m i c s
  17. 17. 1 argumentforprotection I asymmetric;fo"","","tI."",""",tion========"",1"",7 ~ A has given a loan to Mr. B, ; then he can authorise another : person to recover loan from ~ Mr. B. ~ • assignment problem I this is aimed at using macroeco- nomic policies to achieve both internal balance and external• argument for protection I balance, specifically, with onlythe reason given for restricting monetary and fiscal policiesimports by tariffs. available under fixed exchange .• armington assumption rates.the assumption in which inter- ~ • assimilative capacitynationally traded products are I the ambit to which the environ-differentiated by the country of : ment carl accommodate or tol-ongm. I : erate pollutants.• articles of association . • asslsted areas I •an official document legally re- ~ those relatively backward areasquired to be filed with the reg- ; which are recognised by the con-istrar by the promoters of a cerned administration or thepublic limited company. ~ government as being eligible to• ar~baito ; receive special assistance.part-time work. ; • associated company• asset stripping : the connection or relation of anthe selling of those assets by a ~ independent company with an-company that are not required I other independent company.in its day to day functioning. ~ • asymmetric information• assignment ; the failure of two parties to athe right of transference of : transaction to have the samebenefit of loan that a person I relevant information.is entitled to receive from an- Iother person, for instance Mr.Economus======= II
  18. 18. =1",,8=========== ;:mPtotic distribution I autarkyprice "• asymptotic distribution I • at sightthe probability distribution to- I the payment of a bill of eX-Iwards which a statistic moves change or promissory note asor inclines at the point when and when demanded.the sample size reaches infin- I • at the marketity. Generally used in econo-metrics in assessing the large I an instruction given by a clientsample properties of its esti- I to his stockbroker for buying ormators. selling stocks or shares, and I permitting the broker to buy or• at best I sell at a price that is around thein relation to the stock market, market price prevailing at thean abbreviation used to indicate time.the lowest possible price in re- I • ATespect of a buying order, and thehighest possible price in respect I Agreement on Textiles andof a selling order. Clothing. • atomistic competition• at discretionan instruction given by a client market structure characterised byto his stockbroker for buying or I a large number of firms, whoselling stocks or shares and I compete independently.granting the broker to exercise I • autarkyhis own judgement for the price 1. self-sufficiency and indepen-at which to buy. dence of a nation in economic• at limit I terms.an instruc tion given by a cli- I 2. the situation of disengage-ent to his stockbroker for buy- ment in international trade, self-ing or selling stocks or shares, sufficiency.but placing a limit on the high- I • autarky priceest price that may be paid or I price in autarky, i.e. the price ofthe lowest price for making a something within a countrysale. when it is not traded by that I country.II ========Eeonomics
  19. 19. II"uthorised cllpitlllillutoregnssion * ==========1=9• authorised capital I lined or can be avoided withoutthe maximum amount of capi- I any specific effon of the govern-tal that can be raised by a pub- I ment.lic limited company through the : • autonomous expenditurespublic issue of shares. This ~ those expenditures which re-amount is also stated in the I main unaffected by the level ofmemorandum of association, ~I~I)which is filed along with the Iarticles of association with theregistrar.• authority constraintsas and when individual orjoint activities occur and who I c:JJ-~Bcan participate in such activi- t:-"- ~(7ties is constrained by author- t ~- - - I ~J -8.7 Iity constraints, which are re- Ilated to who controls the par-ticular piece of time-space:working hours, land owners Iproperty rights, zoning, cur- income, in the income expendi-few, public transportation ture model. For example, gov-schedules and routes, office I ernment expenditure, mvest-hours of governments and I ment expenditure, etc.organisations, etc. I • autoregression• automatic stabiliser a set of data wherein the value1. government spending pro- I of each observation is partiallygrams that respond to changes Iin the level of national income insuch a way as to offset those - --..... ==-- _ . . . . . . 01_changes.2. are the ways through whichthe fluctuations in the different " . lie til ...... fit I " ulleconomic variables are stream-&onomics======= II
  20. 20. 20 A11er;e Fixed Cost (APC) Ibackbonefirms " dependendent on the value of ~ ing, average revenue product is the observation that immedi- ; the total revenue divided by the ately precedes it. number of units of the factor • Average Fixed Cost (AFC) I employed. 1. The average flxed cost is in- I • average tariff versely proportional to the out- I an average of a countrys tar- put. This is because as output iff rates. It can be calculated increases the fixed costs are in several ways, none of which spread further and further. I are ideal for representing how 2. in the theory of the flrm, I protective the countrys tariffs flxed costs are the costs of pro- are. duction that are constant, what- • Average Total Cost (ATC) ever the level of output. Aver- I the amount spent for produc- age flxed costs are total flxed ing each unit of output. The costs divided by the number of ~ average cost is calculated by di- units of output, that is, flxed I viding the total cost by the num- cost per unit of output. I ber of units produced. The av- erage total cost comprises of lBB two elements, the average flxed I cost and the average variable cost . • Average Variable Cost-- 0 5aa8 (AVC) • average propensity to I the variable cost per unit of out- import I put. It is obtained by dividing is the ratio of the aggregate I the average variable cost by the value of goods and services that number of units of output pro- a country impons in a year to I duced. the national income. I • backbone firms • average revenue product Japanese concept to describe as per the theory of factor pric- medium-sized flrms which ex- / II = = = = = = = = & _ I & S
  21. 21. II backhaul transportation I balance of;~h.=IJ=nd=ue=·=trtule========2=1hibit the effects of strong entre- I • backward linkagespreneurial leadership and vital- I linkages to suppliers of inputs. Airy. In such firms, strategies are : useful concept to differentiateshaped by technological innova- ~ direction of flows in complextion, marketing and attention I economies.given to skilled and participa- ._.~_. __ ... __ _tory workforces .• backhaul transportationutilisation of otherwise empty Icargo space on the return trip,after a primary transport ac-tivity has taken place. Since Ithe primary transport function Imay have paid for the partialor full cost of return transpor- Itation, the price of backhaul I • balance of merchandiseutilisation may be relatively tradelow. the value of a countrys mer-• backward bending chandise exports minus thea curve which reverses direc- I value of its merchandise im-tion, usually if, after moving I ports.out away from an origin oraxis, it then turns back to- Iwards it. The term is used I 81Bion. of u.s. daHII,. OO~---- ____________ ~most frequently to describe 50 ------ ~~-~-~--- . .----_ o . -~.-------,.-----.--.--,-----._-======_supply curves for which the Iquantity supplied declines asprice rises above some point,as may happen in a labour sup- 1190 1911 19112 19113 9114 __997 1_ply curve, the supply curve for Iforeign exchange, or an offercurve.Economics======= II
  22. 22. ""22=====b""I1a=1IU=ofJ""paymen==""tS=tuijustmen==t",,mec=h="n=ism==,=bl=11=nced==budo==et= II• balance of payments *. I • balance on current ac- adjustment mechanism countany proceSs, especially (any au- a countrys receipts minus pay-tomatic one, by which a coun- ments for current accounttry with a payments imbalance I transactions. It is equal to themoves towards balance of pay- balance of trade plus net in-ments equilibrium. flows of transfer payments.• balance of payments kl.-a on o..n-ftIt Account. <Itlliorw or DoU .. :r) argument for protectiona common reason for restrict- Iing imports, particularly underfixed exchange rates, when acountry is losing internationalreserves due to a trade deficit. I • balanced budget• balance of payments I such budget rises where the surplus government receives the samea number summansmg the I amoum of money from ta.xationstate of a colmtrys international I as it is spending. Classicaltransactions, usually equal tothe balance on current account I Balanced Budget Plan ~plus the balance on capital ac- I COMPOSrroNOfFMNCI&.LASSETScount.• bal~nce on capital accounta countrys receipts minus pay 1_ 2000 lIOCI2 200l 201M 3JCII 2010 CAPITAl. ACCOUNT BAlANCE (lJ " , 0 _ C-1IIodYe) economists argued that this I should always be the aim of I government policy. Keynesians on the other hand said that in - ..... - ..... -.- I times of low economic activity,ments for capital account trans- I the government should run aactions. deficit (spending more than itsII ========Economics
  23. 23. II balancedgrowth I Bayesiananalysis . . ==========",,2=3revenue) to boost the economy ~ which acts as a bank for centrciland when the economy is I banks, fostering cooperationbooming, they can run a surplus among them and with other(spending less than revenue). In I agenCies.this wa); they can balance the l b • arrters to entrybudget in the long-run. I factors that prevent firms from• balanced growth entering a market, such as gov-a macroeconomics model that ernment rules or patentsexhibits balanced growth if con- I • base moneysumption, investment and capi-t·al grow at a constant rate while I monetary base.hours of work per time period I • basic balancestays constant. lone of the more frequently used• balanced trade measures of the balance of pay-1. a balance of trade equal to ments surplus or deficit under I pegged exchange rates, the basiczero. balance is equal to the current2. the assumption that the bal- I account balance plus the balanceance of trade must be zero in I of long-term capital flows.equilibrium, as would be the casewith a floating exchange rate and I • basing-point pricingno capital flows. I a pricing method in which• Bank for International prices arc quoted to include Settlements transportation from one (or I more) given point(s), regard-an international organisation less of the location from which actual shipment IS I made. I • Bayesian analysis developed to provide a subjec- tively- rational framework for I decision-making under uncer- I tainty.Economi.s====================== II
  24. 24. ,;,,24=========== ;w ar thy neighbqur I bill ofe:x:change II I • bid price (or rent) func- Bayesian Analysis tion poster1or IkeIhood pIIor a set of combinations of land P(9,A.ix,I) = P(xI9,A.,I)P(9, A.II) " J P(xI9,A.,I)P(9,A.II) prices and distances, among 8.A I which the individual (or firm) mwglnllliza10n is indifferent. It describes P( ~ x,l) =JP( 9, A.I x,l) prices which the household 1 is the prior Infennalon A I (firm) would be willing to pay at varying locations and for• beggar thy neighbour varying amounts of land, infor a country to use a policy for I order to achieve a given levelits own benefit which harms I of satisfaction (utility/ prof-other countries. Examples are its) .optimal tariffs and, in a reces- Ision, tariffs and/or devaluation • bid/ask spreadto create employment. the difference between the I price which a buyer must pay• benign neglect on a market and the price thatdoing nothing about a problem, I a seller will receive for thehoping that it will not be seri- I same thing. The differenceous or will be solved by others. covers the cost of and provides• bequest savings motive profit for the broker or otherpeople save so that they can I intermediary, such as a bankleave an inheritance to their chil- I on the foreign exchange mar-dren. ket.• bicycle theory I • bill of exchangewith regard to the process of : a contract entitling an exportermultilateral trade liberalisation, I to receive immediate paymentthe theory which if ceases to I in the local currency for goodsmove forward (i.e., achieve fur- that would be shipped else-ther liberalisation), will collapse I where.(i.e., past liberalisation will be Ireversed)."II = = = = = = = = E & o n o m i c s
  25. 25. II Bts Iinuleet surplus 25 *================ ~ such as a bank in a foreign-ex- ; change transaction. ; • bubble economy ~ term for an economy where : the presence of one or more I bubbles in its asset markets is : a dominant feature of its per- formance. Japan was said to .• BIS -- _ _ _ c.. .... ro.......nc ~ be a bubble economy in the ; late 1980s .Bank for International Settle- ; • budget deficitments. : the negative of the budget sur- I : plus, thus the excess of expen-• blue box I diture over income.a special category of subsidiespermitted under the WTO I ~ ..~-.­Agriculture Agreement. It in- I .., ..eludes payments which arelinked to production but with Iprovisions to limit productionthrough production quotas orrequirements to set aside landfrom production.• border tax adjustment ; • budget surplusrebate on indirect taxes (taxes : in general, an excess of income I dOon other than direct income, : over expen lture, but usuallysuch as a sales tax or VAT) on ~ refers specifically to the govern-exported goods and levying of ; ment budget, where it is thethem on imported goods. : excess of tax revenue over ex- ~ penditure (including transfer• brokers fee ; payments).the fee for a transaction chargedby an intermediary in a market,E&tmomics===================== II
  26. 26. ",,26============*businesscycle I capability constraints II I cable or telegraph rather than BillionNOK through mail. The payee is then 120 120 80 80 notified about the arrival of the .0 .0 I payment by the correspondent I bank. -40 -40 -80 a4 88 sa liM) 82 8.C eEl 88 00 02 -80 • CACM ..... MII... Central American Common• business cycle Market. Founded in 1960, pre-the pattern followed by macro- I ceded by Organisation of Cen-economic variables, such as GDP I tra! American States.and unemployment that rise and • cain rulefall irregularly over time, relative a rule used to determine theto trend. I derivative of a function in rela- Boom I tion to a variable, where the function consists of another C,VP u~swing / . Dovnswing function. • call I in the stock exchange terminol- ogy, an option to purchase a• business services specific amount of some stockservices that are forwardly I at a quoted price, known as thelinked to other business activi- I striking price, within a specifiedties. Such services tend to per- period of time.form functions, which are more Iefficiently externalised by the I • call loandient firms, i.e. cannot be effi- a loan that can be concluded orciently performed in-house. I called at any point of time byFor example banking, lfiSur- I the creditor or the debtor.ance, etc. • capability constraints• cable transfer constraints on human activitiesin the context of foreign trade, I in time and space, imposed bya bank draft which is sent by I nature or available tools. Part of Hagerstrands time-geo-II = = = = = = = = E c o n o m i c s
  27. 27. II capital I capital structure 27 *================graphic conceptualisation. I tion than in labour.• capital ~ • capital intensity1. monetary capital: the money I the amount of capital per unitused for investment purposes. of labour input.2. real or invested capital: the A._... l_~"_eo.kII"""-""" ,......-......capital goods needed for the Iproduction of goods and ser-vlCes.• capital account , .... ~ . . . .. . . . - - . . . . . . . . . . A •• . . . . . . . _.. •• .,a part of the balance of pay-ments where flows of savings, Iinvestment and currency arerecorded.• capital consumption I • capital marketin national accounts, capital con- I the market in which savings aresumption is the amount by I made available to investors.which gross investment exceeds • capital ratiothe net investment. It is the I a measure of a banks capitalsame as replacement lllvest- I strength used by the U.S. regu-ment. latory agencies.• capital deepening Banks core capital ratioan addition in capital intensity, 14 • Dc __ rcW . . . . . . 1M1. . ..... " "normally in a macro context, I " Iwhere it is measured by some- Ithing analogous to the capital Istock available per labour hour I :I " " 85 " .7 •• H H 1.spent. In a micro context, it I ..... _ ...could mean the amount of capi-tal available for a worker to use, I • capital structurebut this use is rare. Capital I of a firm is broadly made up ofdeepening is a macroeconomic its amounts of equity and debt.concept, of a faster-growingmagnitude of capital in produc- I&onomics======= II
  28. 28. 28 capi-tatUm I chaebol II=================*• capitation I early 1970s by Eugene Famaa system of payment for each I among others. The data therecustomer served, rather than by was so much more convenientthe service performed. I than alternatives that it drove I the study of security prices for• causation decades afterward. It did notrelationship which results when I have volume data, which meanta change in one variable is not I that volume/volatility tests wereonly correlated with, but actu- rarely done.ally causes the change in an- Iother one. • certainty equivalent the amount of payoff (e.g .• CBI I money or utility) which anConfederation of British indus- agent would have to receive, totry. be indifferent between that pay-.CD I off and a given gamble is calledCertificate of Deposit I that gambles certainty equiva- lent. For a risk averse agent (as most are assumed to be), the I certainty equivalent is less than --- - the expected value of the -- - - --- I gamble because the agent pre- fers to reduce uncertainty. --- --- ---- I • ceteris paribus --- ~ ~........ all other things remaining the same. • chaebol• Center for Research in one of a small number of very Security Prices (CRSP) I large, highly diversified anda standard database of finance I centralised Korean firms,information at the University of : owned and controlled by theChicago. It has daily informa- I founding patriarchs family bytion of NYSE, AMEX, and a central holding company.NASDAQ stocks. Started inII ========E&tmomics
  29. 29. II chained I eIF 29 *================ Still go rging ".. " . ~ tions or customs can or should ", , ,,,,, ~ :" .. t· ; maintain the value of money, : not intrinsic content of valuable ~ metal. ~ • chi-square distribution ; a continuous distribution, with• chained : natural number parameter r. Itan index number which is fre- Iquently reweighted . An ex- , .ample is an inflation index . . . . ~ .:made up of prices weighted bythe frequency with which they Iare paid and the frequent re- • computation of weights makesit a chained index. . --- is the distribution of sums of• chaotic ~ squares of r standard normala description of a dynamic sys- I variables. Mean is r, variance istem which is very sensitive to ~ 2r, and moment-generatinginitial conditions and may : function (mgt) is (1-2 t) -r/2 .evolve in wildly different ways, I .from slightly different initial : • chOIceconditions. ~ economic choices involving the ; alternative uses of scarce re-• characteristic equations : sources.a polynomial whose roots are Ieigenvalues. : • choke price ~ the rock bottom price where the• characteristic roots ~ quantity demanded is zero.is a synonym for eigenvalues. l.elF• chartalism ~ Cost, Insurance and Freight. Aalso known as state theory of : price quotation which covers themoney - 19th century mon- ~ merchandise cost, the shippingetary theory, formulated more ; insurance and the freighton the idea that legal restric- : charges to a particular landing IE&unomu:s=~=~=~~ II
  30. 30. 30 circuit I cluster II=================*place. I • Clayton Act I a 1914 U .S. law on the subject• circuit of antitrust and price discrimi-description of a network with I nation.one or more loops, creating al-ternative paths between nodesand thus creating network re- Idundancy. • clears in this context it is a verb. A I market clears if the vector of• circular flow I prices for goods is such that thethe manner in which funds excess demand at those pricesmove through the capital, is zero. That is, the quantitylabour and product markets I demanded of every good atbetween households, firms, the those prices is met.government and the foreignsector. • cliometrics the study of economic history. · Houu·· holds - The Circular Flow ·.................... . In(:omes . I • closed I/O model an input-output model is ei- ther open or closed with re- spect to certain sectors or ac- •• classical - ·....................... . [Kpend i1ur~$"according to Lucas (1998), a I tivities. • cluster a concept associated with Michael Porters work, a clus-classical theory would have no I ter is a geographically proxi-explicit reference to prefer- I mate group or geographic con-ences.II = = = = = = = = & o n o m i c s
  31. 31. II coase theorem Icoefficient ofspecialisa; 31centration of interconnected I tion and outputs from produc-companies, specialised suppli- I tion will be chosen by agents,ers and service providers, firms regardless of how propertyin related industries and as- I rights over the inputs were as-sociated institutions linked I signed to the agents.by commonalities and I • Cobb-Douglas Productioncomplementarities . The geo- Functiongraphic scope of a cluster can Irange from a single city or relate s the productivity ofstate to a country or even a I labour to the capital intensitygroup of neighbouring coun- I (capital-labour ratio) under thetnes . condition of a constant profit wage ratio. ti- - .... - _ ~ ---• coase theorem • Cochrane-Orcutt Estima-informally, the theorem says tionthat in the presence of complete I an algorithm aimed at estimat- I ing a time series linear regres- sion in the presence of auto cor- related errors. The implicit ci- I tation is to Cochrane-Orcutt (1949) . • coefficient of specialisation this coefficient is calculated just I like the coefficient ofcompetitive markets and the I localisation, except that regionsabsence of transactions costs, an become industries and indus-efficient set of inputs to produc- I tries become regions.Econornics====================== II
  32. 32. .ient ojllamtWn I concentratWn ratio""3""2==========""C,,,,oeffic= II• coefficient of variation I • collusionan attribute of a clistribution, I an agreement between partiesi.e. its standard deviation di- to refrain in participating in anvided by its mean. activity which they normally Coefficient of Variation I would in order to reduce com- %CV Definition = Sl.Dc x 100 petition and gain higher prof- MEAN its. /CV=l O ( • com~act sets I CV=.l.O !;.~ a closed and bounded set. : LM~N J" "- I Crucial in establishing: I • competitive equilibrium • Ahgmnent • AUldic st.1 bility price • SlalOmJ! of cell, the price at which the quantity• cohort supplied and the quantity de-a group of persons experienc- I manded are equal to each other.ing the Sartle event during the I • complement I a good for which demand de- creases when the price of a I closely related good increases. I • concavity of distribution functions a property of a distribution fimc-same period of time. Cohort I tion-utility function pair. Theanalysis traces those persons I assumption is to hold in someborn during the same time pe- principal-agent models so as toriod, as they age and live make certain conclusions pos-through common time-specific I sible.experiences and life stages. Themost important experiences of ~ • concentration ratioan aging cohort are the cohort I a way of measuring the concen-birth rates and cohort death tration of market share held byrates. particular suppliers in a market. I It is the percentage of total market sales accounted for byII = = = = = = = = = E & o n o m i & s
  33. 33. II conceptual framework for economicge:;aphy I conditional foetor demands 33a given number of leading I the smallest characteristicfirms. I root is S (both being pre-• conceptual framework for sumed to be positive here, that I is, the matrix being diagnosed economic geography I is presumed to be positivethe structure that serves to hold definite), then the conditionthe conceptual parts (concepts) I number is:together and within which the I gamma = (L/S)·sideas, facts, principles, insightsand circumstances of Economic ; Values larger than 20, accordingGeography exist and are related : to Greene (93), are observed ifto each other. ~ and only if the matrix is nearly I singular .• condition numbera measure of how close a ma- I • conditionaltrix is to being singular. Rel ; it has a special use in finance, ,-------- v •--------, : when used without other Condition It., . S Ize f.r 1ul.u • .,1. HUla ~ modifiers. Often means con- ; ditional on time and previous : asset returns. In that context, ~ one might read returns are ; conditionally normally distrib- 1_.,•. 110000 10000 1000 100 10 I : uted. L===========~Ievant in estimation if the ma- : • conditional factor de- Itrix of regressors is nearly sin- mandsgular, the data are nearly col- I a collection of functions whichlinear and (a) it will be hard to ; give the optimal demands formake an accurate or precise in- : each of the several inputs as averse (b) a linear regression will ~ function of the output expectedhave large standard errors. ; and the prices of inputs. OftenThe condition number is cal- : the prices are taken as given andculated from the characteris- ~ incorporated into the functionstic roots or eigenvalues of the ; and so they are only functionsmatrix. If the largest charac- : of the output. Iteristic root is denoted LandEconomiel========= II
  34. 34. ",,34===========* conformable I consumer strPereignty II • conformable I and local opinion indicates that generally used in conjunction I there is support for the compo- with matrices . A matrix may nent areas. not have the right dimension or shape to fit into some particu- lar operation with another ma- I I trix. Take matrix addition - the matrices are supposed to have I _N --. the same dimensions to be summed. If they dont, we can - • • - * - - - - - - - - - @!!!!!!.... I say that they are not conform- I • Constant Relative Risk able for addition. The most I Aversion (CRRA) common application of this : term comes in the context of ~ a property of some utility func- tions, also said to have isoelastic multiplication. form. CRRA is a synonym for • consistent estimators ICES. an estimator for a parameter is I • constant returns to scale consistent if the estimator con- when all inputs are increased verges in probability to the true I value of the parameter. by a certain proportion, out- I put increases by the same pro- • Consolidated Metropoli- I portion. tan Statistical Area Capital an(:~:~hiCh meets the re- 1 quirements for recognition as a ;: ". :t ~r~: 300 _. -~-~400 : ~::H Metropolitan Statistical Area 200 _~. : B. _~ __ :_ : _.: , , " X - JOO (MSA) and also has a popula- I 100 . A :. __ , . -~ . . : .. : : X-l , X-200 tion of one million or more can I 0 100 200 400 600 LUor be recognised as a CMSA if : • consumer sovereignty separate component areas can I when resources are allocated as be identified within the entire I per the wishes · of consumers, area by meeting statistical cri- i.e. in a perfectly free market. teria specified in the standards, I II ========Economics
  35. 35. II consumer surplus I contractionary7=ry""P""OI""ic""=======,,,,3=5• consumer surplus ~ • contingent valuationsthe difference between what a ; the use of questionnaires aboutperson would be willing to pay : valuation, to estimate the will-and what he actually ha,s to pay ~ ingness of respondents to payfor buying a certain amount of I for public projects.a good. I • contract curve• consumption the same as the Pareto set, withthe individuals and corporations the implication that it is drawnwhich buy products and ser- I in an Edgeworth box.vices. In economics, consump- I • contractionary fiscal policytion refers only to consumingthat involves a monetary trans- I a government policy of reduc-actIon. ing the spending and raising taxes.• consumption function Visual Contractlonary Fiscal Polleythe relationship between dis-posable income and consump- LRAS SRAStion. Q --.. - : : : . . : : : . : -:- ..... ~~":.~_ 0,,_ .......... ..., .... CI .. ::..";.!"~ <--- ................... ~- ........ - ""~--- r.~:!.~=--- AD, AD, Real NatloNl OUtput (GOP)• contingency theory US!.nd describe ,Iv. . .clion"he government could take in order Co decrease aggregate denWldregards the design of an effec _ I from AD, AD, 1.0tive organisation, as necessarily • contractionary monetaryhaving to be adapted to cope policywith the contingencies that ~ a government policy of raisingderive from the circumstances I interest rates charged by theof environment, technology, : central bank. In the texts ofscale, resources, work task and I some ftrst courses in macroeco-other factors. I nornics, it shifts the LM curve II
  36. 36. ~3~6===========. controlvariabJes I corporatewelfon II(liquidity/money curve) to the I for each data point, how far itleft. I is from the means of the in- dependent variables and the -::::"l-.. ~---- Jk~ A ~ I dependent ·variable. If it is far . I." I.~· _ ~. I from the means of the inde- -.. .. &M;" ~ _ pendent variables, it may be :~~ very influential and one can I consider whether the regres- . sion results are similar with- out it.• control variablesa variable in a model controlledby an agent in order to optimise Isomething.• convergence in quadratic meana kind of convergence of randomvariables. If Xc converges in qua- I 12 3 - 458789101112 • cCHJperative game a structure where the playersdratic mean, it converges in prob- I have the option of planning asability but it does not necessarily a group, in advance of choos-converge. ing their actions.• convolution • corporate welfarethe convolution of two functions I when a government givesU(x) and V(x) is the function: I money or a monetary breakU*V(x) = (integral from 0 to X (like tax cuts or subsidies) to aof) U(t)V(x-t) dt. I business. Governments give• ~CHJks I>istance I money to businesses which area metric for determining very profitable to keep themwhether a particular point from moving to other provincesalone affects regression esti- I or countries.mates much. After a regres-sion is run, one can consider,II = = = = = = = &__us
  37. 37. 11 CostAndFmght(CAF) Icountenrad:~~~~=~~~~~3~7_ Cost And Freight (CAF) ~ _ costate variablesa price quotation that includes I a Lagrangian multiplier orboth the merchandise cost and ~ Hamiltonian multiplier.the freight charges- for its ship-ment to a given destination. : , - cost-of-living index : measures the changing cost of- cost curve ~ a constant standard of living.a graph of total COStS of produc- ; The index is a scalar measuretion as a function of total quan- : for each time period. Usually,tity produced. ~ it is a positive number, that Toral Cost Curves ; rises over time to indicate that : I there was inflation. Two in- . : comes can be compared across I time by seeing whether the in- ; comes changed as much as the ~ index did. oMlCMc.e. ............. _ , ___ __ . ______ :I!"_~~ ------- .. ---- cost functiona function of input prices and Ioutput quantity. Its value is the Icost of making that output,given those input prices. ~ - cost-push inflation ; inflation whose initial cause is : a rise in production costs. C = ")X I : - countable additivity ~ property 0, . ~ the third of the properties of a ; measure. ~ - countertrading : the bilateral international trad- y, l> y, Y. Y ~ ing relationships between com- I parnes.Eeonomics======= II
  38. 38. 38 countrrvailing power I Cowles CommissUm II=================,*================• countervailing power I functions are assumed to be theJ.K.Galbraith thesis of the ten- I same for all firms.dency of market (monopoly) I • covariance stationarypower to be reduced by the a stochastic process is covari-emergence of countervailing I ance stationary, if neither itsgroups and forces. mean nor its autocovariances• coupling constraints I depend on the index t.the need to join with other .: Covariance Stationary I . Class of processes X(t}, t .. o. 1, 2 • .. _. that have::people, organisations or capital .: .•. ;.~:::::~::, . I~~: .ur]investments (as bundles) to I .. ""~"".".."jkl · ElIX,·",(X..• ·"}J·F.I,,~, · ,,rJ (11.11 ;.I,.!:~ud • .-rJly 011 I.:accomplish an objective. . We mume the oulocorrel.tion ho, the form ,k l - It; f l!ti.;:)us I. - .,,~ ,• Cournot Duopolya pair of firms which split a • Cowles Commissionmarket, modelled as in the I a: 1950s panel on econometrics,Cournot Game. that focused attention on the Coumot Duopoly • In the Coumolmodd each of the two finnspick Ihe quantities i and Q2 to ~ pro.tJced • Each finn laIC .. the other linn s oUlpul as giva! and choo ... the ootput Ulf rriaxidtizes its profits • The price lhat emerges clears the market (demand =supply) •• Cournot Modelsa generalisation of the CournotGame, for describing the indus- IlIlulfllarthcSo..,oIls..:"-fft.eRuIJdinllh:• . IQ4" rtlprvw: J ....nbColKft.try structure. Each of the N I ~::;;:., K",1oIY "","" row ..... ""~ Kkm.""" f<"". I.e"firms will choose a quantity of ; problem of simultaneous equa-output. Price is a commonly- : tions. In some tellings of theknown decreasing function of ~ history, this had an impact ontotal output. All firms know N ; the field - other problems suchand take the output of the oth- as errors-in-variables (mea-ers as given. Each firm has a cost surement errors in the indepen-function cj(q} Usually, the cost I dent variables), were set asidefunctions are treated as com- or given lower priority else-mon knowledge. Often the cost where too because of the pres-II-==========&onomics
  39. 39. II CronbachsAJpha I currmtaccount;~nc=e==========3~9tige and influence of the Cowles I errors made in predicting eachCommission. I data point, by using a kernel : regression on the others.• Cronbachs Alpha Ia test for a model or surveys : .CSOinternal consistency. It is some- ~ Central Statistical Office.times called .a scale reliability I .• CTTcoefficient. Cronbachs alphaassesses the reliability of a rat- ~ Capital Transfer Tax.ing, summarising a group of I • current accounttest or survey answers, which I a part of balance of payments,measure some underlying fac- where payments for the pur-tor (e.g., some attribute of the I chase and sale of goods and ser-test-taker). A score is computed I vices are recorded.from each test item and theoverall rating called a scale is I • current account balancedefined by the sum of these I the difference between ascores over all the test items. countrys savings and its in-Then reliability is defined to be I vestment. If the current ac-the square of the correlation I count balance is positive, itbetween the measured scale measures the portion of aand the underlying factor that I countrys saving investedthe scale was supposed to mea- I abroad and if it is negative, itsure. measures the portion of the domestic investment financed• cross-section data I by foreigners savings.is the parallel data on manyunits such as individuals, house- Iholds, firms or governments. Developmenta in the CUITODt IIOOOOII1t belance,• cross-validation .. I overnment net lending and real dispooable income g _ c..ntflllk"COl.... ~. pefttnl.1gl"GOPa way of choosing the window ElJ ",,*MC!Of . ~~ d GCP t. t. 14 t.width for a kernel estimation.The method is, to select, from a Iset of possible window widths, t ... 2000one that minimises the sum of&onomit:s======= II
  40. 40. 40 current balance I deductive II=================*• current ba1anc~ I decision or choice.difference between total exports I 2. a mapping from the ex-and total imports. pressed preferences of each of• CWO a group of agents to a group I decision.Cash With Order. The first is more relevant to• de minimis decision theory and dynamica legal term for an amount I optimisation, while the secondwhich is small enough to be ig- I is relevant to game theory.nored, too small to be taken I • decoupleseriously. Used to restrict legalprovisions, including laws re- I provision of support to an en-garding international trade, to terprise, usually a farm, in aamounts of activity or trade that I manner that does not provide "are not tflVlally sm all . an incentive to increase produc- tion . Farm subsidies that are• deadweight loss I decoupled are included in thethe net loss in economic welfare I green box and are thereforewhich is caused by a tariff or permitted by the WTo.other source of distortion, de- I • deductionfmed as the total losses to those I also known as deductive reason-who lose, minus the total gainsto those who gain. Usually iden- I ing. A process of inference, which leads from general prin-tified in a supply-and-demand Idiagram in terms of change in ciples or universal premises via I logical reasoning to expecta-consumer and producer sur- tions or conclusions about par-plus, together with government Irevenue. The net of these ap- ticular cases.pears as one or two welfare tri- • deductiveangles. I characterises a reasoning pro-• decision rules I cess of logical reasoning from1. a function which maps from I the stated propositions.the current state to the agentsII ========&onomics

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