Glossary (F - I) [ Biz/ed Virtual Developing Country ]


Glossary

[ A B C D E F G H I J K L M N O P Q R S T U V W X Y Z ]

F

  • Factors of production - The factors of production are the resources that are necessary for production. They are usually classified into 4 different groups:

    1. Land - all natural resources (minerals and other raw materials)

    2. Labour - all human resources

    3. Capital - all man-made aids to production (machinery, equipment and so on).

    4. Enterprise - entrepreneurial ability. The rate of economic growth that an economy can manage will be affected by the quantity and the quality of the factors of production they have.

  • Family planning - The process whereby parents plan and regulate their family size

  • Fertility rate - The number of children born alive per thousand fertile women per year

  • Fixed exchange rate - A fixed exchange rate system is one where the value of the currency against other currencies remains exactly the same. A fixed exchange rate doesn't stay fixed on its own. Governments have to hold large stocks of foreign exchange, so that they can actively intervene to hold the value of the currency stable. Monetary and fiscal policies will also have to be directed to keeping the rate constant.

  • Floating exchange rate - A currency exchange rate that is determined by buyers and sellers without government intervention. A floating exchange rate system is where the external value of the currency is allowed to find its own value against other currencies. The value will be determined by supply and demand in the foreign exchange market. The value will then rise or fall according to changes in supply and demand.

  • Foreign Aid - The international transfer of public and private funds in the form of loans or grants from donor countries to recipient countries

  • Foreign Capital Flows - Financial and capital assets that flow between countries

  • Foreign Direct Investment - Overseas investment by multinational enterprises

  • Foreign exchange gap - When a country's balance of payments on current account deficit is greater than the value of capital inflows

  • Free market economy - A system where resources are owned by households: markets allocate resources through the price mechanism; and income depends upon the value of resources owned by an individual.

  • Freehold land - A land tenure arrangement where the land is permanently owned and not leased

G

  • GATT - the General Agreement of Tariffs and Trade set up in 1947 to reduce barriers to free trade

  • GDP - A measure of economic activity. Gross Domestic Product (GDP) is a measure of National Income. It is the total value of all goods and services produced over a given time period (usually a year) excluding net property income from abroad. It can be measured either as the total of income, expenditure or output.

  • GNP - A measure of economic activity. Gross National Product (GNP) is a measure of National Income. It is the total value of all goods and services produced over a given time period (usually a year) including net property income from abroad. It can be measured either as the total of income, expenditure or output.

  • Gini Coefficient - A numerical measure of income inequality ranging from 0 (absolute equality) to 1( absolute inequality)

  • Goods in competitive supply - Good that can be produced using the same factors of production

  • Grant - A form of foreign aid that involves a direct transfer payment from one country to another.

  • Gross Domestic Product - A measure of economic activity. Gross Domestic Product (GDP) is a measure of National Income. It is the total value of all goods and services produced over a given time period (usually a year) excluding net property income from abroad. It can be measured either as the total of income, expenditure or output.

  • Gross National Product - Gross National Product (GNP) is a measure of National Income and therefore economic activity. It is the total value of all goods and services produced over a given time period (usually a year) including net property income from abroad. It can be measured either as the total of income, expenditure or output.

H

  • HIV - Human Immune Deficiency Virus

  • Hard currency - A currency of an industrialised country that has general convertibility

  • Hard loan - A loan where commercial rates of interest are changed and no concessions made to the debtor.

  • Harrod-Domar growth model - An economic model which maintains that the growth rate of GDP depends upon the level of savings and the capital output ratio

  • Household income - The total level of income earned by all the households in the economy. This will be a significant part of the overall level of National Income.

  • Human Development Index - A composite index based on real GDP per capita (PPP), life expectancy at birth and educational achievement that measures socio-economic development

  • Human Poverty Index - A composite index that measure human deprivation

  • Human capital - The accumulated skill, knowledge and expertise of workers

I

  • IBRD - The International Bank for Reconstruction and Development is a branch of the World Bank that lends money to countries specifically for development projects

  • IMF - The International Monetary Fund is an international multilateral organisation that attempts to monitor the global financial system and to offer assistance to countries that are experiencing balance of payments problems

  • Import Substitution - A government policy when the government attempts to replace imports with domestically produced goods

  • Imports - Goods, services and capital assets purchased from overseas countries. The purchase of imports results in the loss of foreign exchange to pay for the goods and is recorded as debits on the balance of payments accounts.

  • Income elasticity of demand - This measures the responsiveness of demand to a given change in income. It is an important piece of information to a firm as it helps them to predict how much the demand for their product will grow as the economy grows. We calculate the income elasticity from the following formula:

    Income elasticity of demand = % change in demand / % change in the level of income

    If the figure is greater than one then the product is described as 'income-elastic' or income-sensitive. This means that demand will grow by more than the level of income. If the figure is less than one, then the product is described as 'income-inelastic' and the demand will grow less than the level of income.

  • Industrialisation - The process of expanding the country's capacity to produce secondary goods and services

  • Infant industry - Sunrise industries. That is industries that are at an early stage of their development.

  • Infant mortality rate - The rate at which children being born in a country are dying. Infant mortality is often used as a measure of how well developed the health system of a country is.

  • Inflation - The rise in general prices and the reduction in value of money. Inflation is a sustained increase in the general price level. In other words it is the rate at which prices are increasing. It can be measured either monthly, quarterly or annually. It is usually measured by a Consumer Price Index.

  • Informal sector - The sector of the economy, normally comprising of small businesses, which is unregistered with the tax authorities

  • Infrastructure - The underlying amount of physical and financial capital that is embodied in the transport, communication, energy and public services e.g. roads, railways, powerstations, and schools

  • Injections - An addition to the income of firms which does not normally arise from the expenditure of households e.g. changes in investment, government spending or exports.

  • International Bank for Reconstruction and Development - Also known as the World Bank. It is a multinational institution set up in 1947 following the Bretton Woods conference in 1944. The bank aims to encourage capital investment for reconstruction and development in member countries.

  • International Development Association (IDA) - The International Development Association is a branch of the World Bank that offers concessionary loans to less developed countries

  • Intervention price - The price at which a government or the authorities managing a commodity agreement agree to purchase or sell stocks to maintain a particular price

  • Investment - Investment is the purchase of capital equipment. i.e. the purchase of machines, equipment, factories etc. that firms need to enable them to produce. It is usually split into two parts:

    1. Replacement investment - this is where companies buy new machinery and equipment that simply replaces something they had already that was worn out or inefficient. Depreciation is often used as an approximation for this.

    2. Net investment - this is where companies buy new machinery or equipment. It is this type of investment that actually adds to the capital stock of the economy.

    Investment can also refer to changes in the level of stocks.

  • Invisible balance - The difference between a country's income and expenditure on services such as tourism and banking together with profits earned and interest payments received from overseas.

  • Inward oriented development - Government policy that attempts to achieve development by stimulating domestic industry and import substitution behind trade barriers