An overvalued exchange rate sets the official exchange rate higher than the real market rate. This makes imports artificially cheap and exports artificially expensive, which can lead to trade imbalances and the need for exchange rate controls.

1. exchange rate An official exchange rate set at a level higher than its real or shadow value--for example, 7 Kenyan shillings per
ay, 10 shillings per dollar. Overvalued rates cheapen the real cost of imports while raising the real cost of exports. They often lea
control.
petition: A market situation characterized by the existence of very many buyers and sellers of homogeneous goods or services w
nd free entry so that no single buyer or seller can influence the price of the good or service.
e budget is a budget format that relates the input of resources and the output of services for each organizational unit individually
sed synonymously with program budget. It is a budget wherein expenditures are based primarily upon measurable performance
nomy The attempt to merge economic analysis with practical politics--to view economic activity in its political context. Much o
was political economy, and today political economy is increasingly being recognized as necessary for any realistic examination o
problems.
vestment Financial investments by private individuals, corporations, pension funds, and mutual funds in stocks, bonds, certificat
notes issued by private companies and the public agencies of LDCs. See also private foreign investment.
: The sum of the difference between the poverty line and actual income levels of all people living below that line.
: A level of income below, which people are deemed poor. A global poverty line of $1 per person per day was suggested in 1990
This line facilitates comparison of how many poor people there are in different countries. But, it is only a crude estimate becaus
ognize differences in the buying power of money in different countries, and, more significantly, because it does not recognize oth
an the material, or income poverty.
monetary or real value of a resource, commodity, or service. The role of prices in a market economy is to ration or allocate resour
with supply and demand; relative prices should reflect the relative scarcity of different resources, goods, or services.
ity of demand: The responsiveness of the quantity of a commodity demanded to a change in its price, expressed as the percenta
emanded divided by the percentage change in price.
ity of supply: The responsiveness of the quantity of a commodity supplied to a change in its price, expressed as the percentage
plied divided by the percentage change in price.
uota is a physical limitation on the quantity of any item that can be imported into a country, such as so many automobiles per yea
llocating limited school places by noncompetitive means--for example, by income or ethnicity.
This is one of the credit management tools used by the Reserve Bank to regulate liquidity in South Africa (customer spending). T
ney from the Reserve Bank to cover its shortfall. The Reserve Bank only makes a certain amount of money available and this det
the bank requires more money than what is available, this will increase the repo rate - and vice versa.
penditure: This is expenditure on recurring items, including the running of services and financing capital spending that is paid f
This is meant for normal running of governments' maintenance expenditures, interest payments, subsidies and transfers etc. It is c
which does not result in the creation of assets. Grants given to State governments or other parties are also treated as revenue exp

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