Cambridge International as and a level Economics Ebook

SUMMARY
280
Cambridge International AS and A Level Economics

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Index
accelerator theory
as element of income determination 
252–3
accounts, fi nancial
causes of defi cit of 
93
signifi cance as balance of payments 
element 
90–94
actual economic growth 
219–20
ad valorem tax 
60
administration
bureaucracy of as method of protection 
109
advantage, trade
absolute and comparative 
102–4
agent, principle
challenge of problem of 
182
aid, economic
types 
258
autonomous investment 
251
allocation, resource
externalities and ineffi
cient 
135–6
in diff erent economies 
20–25
allocative effi
ciency 
130
, 
132
analysis, cost-benefi t
framework of and use as aid decision 
making 
137–42
appreciation, exchange rate 
100
areas, free trade 
105
average propensity to save 
248
average propensity to spend 
247
balances
active 
254
idle 
257
balance, of payments 
see
 
payments, balance of
banks
government spending fi nanced by 
borrowing from 
255
role as source of money supply 
254–5
see also particular e.g
. 
World Bank
behaviours
ethical as objective of fi rms 
181–2
of oligopolistic fi rms 
182–4
rationality of consumer 
146
benefi ts
defi nition and use of private, external and 
social 
136
of economic growth 
223
reducing inequality and redistributing 
wealth 
201
blocs, trade 
105–7
broad money 
253
budget lines 
146–7
budgets 
115–16
bureaucracy 
of administration as method of 
protection 
109
businesses 
see
 
fi rms
canons, of taxation 
70
capital accounts
signifi cance as balance of payments 
element 
92
capital-output ratio 
253
cartels 
169–70
,
 176–8
central bank
expenditure fi nanced by borrowing 
from 
255
see also
 
International Monetary fund
see also name e.g.
World Bank
‘ceteris paribus’ 
16
change
eff ect on consumer choices of 
income 
148–9
income eff ect of price 
148
choice
choice costs 
15
, 
16
equilibrium and effi
ciency in 
104
signifi cance for expenditure switching 
and dampening 
120
signifi cance for macroeconomics 
125
circular fl ow
in closed and open economies 
245
closed economies 
245
companies 
see 
fi rms
competition
imperfect 
160
monopolistic 
160
,
 165–6
perfect 
160–65
,
 171–2
see also
 
entry, industry
complement 
42
confl ict, policy
problem of for microeconomic 
failures 
213–14
consumer price index 
86
consumers and consumption
aggregate expenditure and 
247–8
defi nition and characteristics 
14
eff ect of income change on choices 
of 
148–9
extent of rational behaviours of 
146
indiff erence curves and 
wishes of 
147–8
marginal propensity to 
247
surpluses of 
63–4
see also
 
demand;
 
supply
contestable markets 
172–3
controls, price
signifi cance as government 
intervention 
68–70
corruption
role and impact on economic 
development 
260–61
cost-benefi t analysis (CBA) 
137–42
costs
choice and opportunity 
15
, 
16
consequences of infl ation for 
88–9
defi nition and use of private, external and 
social 
135–6
economic growth 
223
of production in long run 
154–5
short-run production 
152–3
see also factors aff ecting e.g.
 
margin, the;
 
scale, 
economies and diseconomies of;
 
time
creation, trade 
characteristics and eff ects 
107
credit multiplier 
254
creeping infl ation 
86
cross elasticity of demand 
(XED) 
48–9
,
 52
current accounts
causes of defi cit of 
93
consequences of defi cit and 
surplus of 
94
signifi cance as balance of payments 
element 
90–92
curves, aggregate demand 
81–2
curves, aggregate supply 
82–4
curves, demand
causes of shift s in 
56–9
examples of usefulness 
40–41
kinked demand curves 
183
curves, indiff erence
and wishes of consumers 
147–8
use in deciding income and substitution 
eff ect 
148
curves, production 
27–31
curves, supply 
causes of shift s in 
59–62
examples of construction of 
42–3
infl uencing factors 
59–60
curves, trading possibility 
104–5
customs unions 
105–6
cycles
poverty 
233
trade 
221–2
virtuous fi nancial 
259
cyclical budget defi cits 
116
cyclical unemployment 
242
dampening
of balance of payments 
disequilibrium 
119–20
debt and indebtedness
classifi cation of economies according to 
external 
234
impact of external on economic 
development 
260
national 
229–30
decisions, making of
use of cost-benefi t analysis 
137–42
decreasing returns to scale 
156
defi cits, budget 
116
defl ation
and disinfl ation 
89–90
policies to correct 
125–6
demand
defi nitions 
39–40
factors infl uencing 
41–2
for and supply of labour 
204
income elasticity of demand 
48
, 
51–2
interaction with supply 
55–6
see also
curves, demand;
elasticity
; 
price elasticity of demand
 
281
Index
 

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equality and inequality
and regulation 
77
government policies reducing 
201–3
see also factors impacting e.g
. 
effi
ciency
equilibrium and disequilibrium
and effi
ciency 
39
, 
56
, 
85
causes and impact of changes in 
61–2
in scarcity and choice 
104
macroeconomic policies to correct balance 
of payment 
118–26
of balance of payments 
93–4
of markets 
55–6
of prices 
55
, 
59–62
see also factors aff ected e.g.
demand
; 
elasticity
; 
supply
equilibrium income 
246–7
equimarginal principle 
146
equity
and regulation 
68
, 
69
, 
74
intergenerational 
203
vs. effi
ciency as driver for government 
intervention 
199
see also factors impacting e.g
.
 effi
ciency
errors and omissions
signifi cance as balance of payments 
element 
92–3
ethics
as objective of fi rms 
181–2
exchange
control of as method of protection 
109
in production of goods 
19
see also
 
rates, exchange
exit, market
barriers to 
167
expenditure
average propensity to spend 
247
fi nanced by borrowing from central 
banks 
255
role as measure of GDP 
225–6
switching and dampening policies 
of 
119–20
expenditure, aggregate
and government expenditure 
248–9
and investment
248
defi nition and characteristics 
247–9
see also
 
determination, income
; 
quantity 
theory of money 
exports
aggregate expenditure and net 
249
voluntary export restraints 
109
external costs and benefi ts 
135–6
external economies of scale 
156
externalities
and ineffi
cient resource allocation 
135–6
defi nitions 
134–5
government intervention to 
correct 
192–8
problems created by 
136–7
failures, information
in relation to goods 
35
see also results of e.g
. 
hazard, moral;
 
selection, adverse
failures, market
as justifi cation for government 
intervention 
68
concept of deadweight loss in 
understanding 
191–2
economic unions 
106–7
economies of scale 
154
, 
155–8
economists and economies
characteristics of developed, developing 
and emerging 
23–9
defi nition 
2
multiplicity of subjects addressed 
by 
13
types 
22–5
see also
 
development, economic;
macroeconomics and macroeconomy
; 
microeconomics and microeconomy;
performance, economic
see also features e.g.
 
change;
enterprise;
labour
; 
resources
; 
transition
see also processes e.g.
 exchange;
 
specialisation
economies, developing
classifi cation of according to external 
trade 
238
defi nition and characteristics 
130–34
, 
232–9
dependency as problem for 
258
open and closed economies 
245
purpose and role of international trade 
and FDI 
258–9
purpose and role of multinational 
investment in 
259–60
shadow economies 
227
see also
 
development, economic;
macroeconomics and macroeconomy
; 
microeconomics and microeconomy; 
performance, economic
see also features e.g.
change; enterprise;
labour
; 
resources
;
 transition
see also processes e.g.
 
exchange; 
specialisation
eff ective demand 
40
eff ects, income and substitution
use of indiff erence curves in 
deciding 
148
effi
ciency 
and notion of equilibrium and 
disequilibrium 
39
, 
56
, 
85
defi nition and characteristics of 
economic 
130–34
in scarcity and choice 
104
vs. equity as driver for government 
intervention 
199
see also
factors impacting e.g. 
externalities
; 
failures, market
see also tools e.g.
 
cost-benefi t analysis
elasticity
cross elasticity of demand 
48–9
, 
52
examples of concept 
44
income elasticity of demand 
48
, 
51–2
price elasticity of demand 
44–7
, 
49–52
price elasticity of supply 
53–4
unit elasticity 
46
embargoes 
109
employment
full employment 
241
see also
 
labour;
 
unemployment
enterprise
role in modern economy 
26–7
enterprises, small and medium (SMEs) 
159
entry, industry
barriers to 
160
, 
161
, 
166–8
demand, aggregate
components 
80
interaction with aggregate supply 
84–5
see also
 
curves, aggregate demand
demerit goods 
35–6
dependency
as problem for developing economies 
258
ratios of 
236
depreciation
consequence of changing foreign exchange 
rates 
98–9
derived demand 
204
determination, income
accelerator theory of 
252–3
autonomous and induced investment as 
element of 
251–3
infl ationary and defl ationary gaps 
250–51
devaluation
consequence of changing foreign exchange 
rates 
98–9
development, economic
comparison of performance over time and 
between countries 
226–8
defi nition and characteristics 
218–19
impact of corruption and legal 
frameworks 
261
impact of external debt 
260
indicators of 
230–32
role of IMF and World Bank 
260–61
role of multinationals, investment and 
international trade 
258–60
role of statistics in measuring 
224–5
signifi cance for macroeconomics 
125
see also
 aid, economic
;
 growth, economic
; 
sustainability
see also factors impacting e.g.
 
gross domestic 
product; gross national income
;
 gross 
national product
; 
income;
 
performance, 
economic; standards, living
development, human
human development index (HDI) 
231
diminishing marginal utility 
146
diminishing returns 
151
direct taxes 
70
discretionary fi scal policy 
115
discrimination, price 
184–5
diseconomies of scale 
154
, 
155–8
disequilibrium 
see 
equilibrium and 
disequilibrium
disinfl ation
and defl ation 
89–90
disposable income 
247
dissaving 
247
distribution, income
classifi cation of economies according 
to 
237–8
diversifi cation, fi rm 
175–6
diversion, trade 
characteristics and eff ects 
107–8
drag, fi scal 
88–9
dumping
trade and economic protection of 
110
dynamic effi
ciency 
133–4
earnings, transfer
and economic rent in labour 
markets 
209–10
economic rent 
209–10