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39 Cards in this Set

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Comparative Advantage
The idea that economic agents are most efficiently employed in activities in which their relative efficiencies are superior to others. The importance of comparative advantage is that it suggests that, even if someone is very bad at some activity, perhaps even worse than anyone else at it, it would be profitably efficient for him/her to pursue it, if he/she is even more inept at other activities.
Multilateral Environmental Agreements-International environmental agreements made to protect the environment in different ways, many of which are legally binding, e.g., the Kyoto accord.
The World Trade Organization was set up in Geneva in 1995 following the conclusion of the Uruguayan round of trade negotiations. It replaced the GATT. The WTO is charged with further development of, and policing of the multi-lateral trading system along the principles followed by the eight rounds of trade negotiations concluded under the GATT. It provides the resources and the legal status for the resolution of trade disputes through independant disputes panels. A member may appeal to the WTO appeals tribunal but it must accept its ruling. The failure of a member country to accept the the WTO ruling would subject it trade sanctions. The WTO is financed by "contributions from its member states based on their shares of international trade.
Infant Industry Argument
An argument in support of the retention of a protective import tariff to promote the creation of local industry. It is held to apply in cases in which an industry cannot operate at an optimum least-cost output until it has reached a sufficient size to obtain significant economies of scale. A new industry, therefore, in a developing country will always be in a competitively vulnerable position vis-a-vis an established industry in an advanced country. The argument concludes that protection is necessary in some cases until the industry has reached its optimum size. Critics of this argument claim that the stage of growth at which the industry (or country) can take off industrially will be postponed indefinitely
Economies of Scale
Economies of Scale refer to the phenomena of decreased per unit cost as units of production increase. The initial investment in capital is diffused through and increase in production, and the marginal cost of producing a good or service decreases when each additional unit of production is added.
Post hoc ergo propter hoc
Latin for "after this, therefore because of this." It is often shortened to simply post hoc. Some philosophy books translate the Latin to simply: "If, then therefore, because." Post hoc, also known as "coincidental correlation" or "false cause", is a logical fallacy which assumes or asserts that if one event happens after another, then the first must be the cause of the second. It is a particularly tempting error because temporal sequence is integral to causality — it is true that a cause always happens before its effect. The fallacy lies in coming to a conclusion based only on the order of events, which is not an accurate indicator. That is to say, it is not always true that the first event caused the second event.
Import Substitution
Import substitution industrialization also called ISI is a trade and economic policy based on the premise that a developing country should attempt to substitute products which it imports, mostly finished goods, with locally produced substitutes. The theory is similar to that of mercantilism in that it promotes high exports and minimal imports to increase national wealth. The policy has three major tenets: an active industrial policy to subsidize and orchestrate production of strategic substitutes, protective barriers to trade (namely, tariffs), and a monetary policy that keeps the domestic currency overvalued. Hence import substitution policies are not favored by advocates of absolute free trade. The policy began to fail in the early 1980s, as a result of overspending by the governments involved, mostly from spending government reserves trying to keep the currency stable.
Import Substitution (cont'd)
As the Latin American governments failed, they began to default on their debts and were forced to turn to the International Monetary Fund for help. The failure of ISI led to the rise of the Washington Consensus. However, some economists have pointed out that the failure of import substitution should not necessarily be taken as an endorsement of globalization. They note that most East Asian countries while rejecting import substitution also maintained high tariff barriers. The strategy followed by those countries was to focus subsidies and investment on industries which would make goods for export. The focus on export markets allowed them to create competitive industries. Although these policies later created inefficiencies and other problems, as seen during the Asian financial crisis. By the end of the 1990's, the Washington consensus was being questioned. Nevertheless, there has not been a return to import substitution as a developmental strategy
The Washington Consensus-1
The Washington Consensus is a set of policies believed to be the formula for promoting economic growth in Latin America (although not for all countries). It was first presented in 1989 by John Williamson, an economist from the Institute for International Economics, an international economic think tank based in Washington, D.C., United States.
The Washington Consensus-2
Most Latin American countries continue to struggle with high poverty, unemployment, and underemployment, though Chile has been a Consensus success story, and countries such as El Salvador and Uruguay have shown some positive signs of economic development. However it can be also be shown that the Chile success story owes a lot to the state ownership of key industries and currency interventions stabilizing capital flows, as Joseph Stiglitz states.
The Washington Consensus-3
The consensus included reforms that should be undertaken from 1989 (these reforms were also summarized by the World Bank in its year 2000 Poverty Report): Fiscal policy discipline; Redirection of public spending toward education, health and infrastructure investment; Tax reform – Flattening the tax curve: Lowering the tax rates on proportionally high tax brackets (typically above median income), and raising the tax rates on the proportionally low tax brackets (typically below median income); lowering the marginal tax rate; Interest rates that are market determined and positive (but moderate) in real terms; Competitive exchange rates; Trade liberalization – replacement of quantitative restrictions with low and uniform tariffs; Openness to foreign direct investment; Privatization of state enterprises; Deregulation – abolition of regulations that impede entry or restrict competition, except for those justified on safety, environmental and consumer protection grounds, and prudential oversight of financial institutions; Legal security for property rights
Export-oriented Industrialization
A trade and economic policy aiming to speed-up the industrialization process of a country through exporting goods for which the nation has a comparative advantage. Export-led growth implies opening domestic markets to foreign competition in exchange for market access in other countries. Reduced tariff barriers, floating exchange rate (devaluation of national currency is often employed to facilitate exports), and government support for exporting sectors are all an example of policies adopted to promote EOI, and ultimately economic development. Export- oriented Industrialisation was particularly characteristic of the development of the national economies of Japan, South Korea, Taiwan and Singapore in the post World War 2 period. The purpose of international institutions such as the World Trade Organization, work in favour of such trade strategies and promote multilateral trade policy rules to put every nation on the same playing field.
(b. 1946)-As economy minister in the early '90s, Domingo Cavallo guided Argentina's economic policy of deregulation and privatization and designed the Convertibility (Convertibilidad) Plan, which created a currency board that fixed the dollar-peso exchange rate at 1 peso per dollar, being able to sustain it because of the influx of funds that the Bonex plan brought into the State coffers, through the mandatory subscription of long term bonds to all bank depositors. Cavallo had full success on curbing inflation and he also had made some progress opening new prospects for foreign investment in Argentina through massive privatization. He returned as economy minister in 2000, and resigned in December 2001 when when the argentine currency collapsed.
Domingo Cavallo
Chaebol refers to the several dozen large, family-controlled Korean corporate groups, assisted by government financing, which have played a major role in the South Korean economy since the 1960s. The position of the Chaebol in the economy is overwhelming. In 1983, e.g., the combined sales of the top 30 chaebol equaled about three-quarters of S. Koreas's output of goods and services. Several have become well-known international brand names, such as Samsung, Hyundai and LG. Hyundai has played a role in the slight thawing of relations between North and South Korea since 2000.
Major-General Park Chung Hee (September 30, 1917 – October 26, 1979) was President of South Korea from 1961 to 1979. He is today almost universally considered the architect of modern South Korea and the country's greatest president--though controversies regarding his rule fester in certain, primarily leftist, circles due to its authoritarian legacy. During Park's tenure, per capita income increased twentyfold, and South Korea's rural, undeveloped economy had transformed into an industrial powerhouse.
Park Chung Hee
(October 31, 1887 – April 5, 1975) A Chinese military and political leader who assumed the leadership of the Kuomintang (KMT) after the death of Sun Yat-sen in 1925. He commanded the Northern Expedition to unify China against the warlords and emerged victorious in 1928 as the overall leader of the Republic of China (ROC). Chiang led China in the Second Sino-Japanese War, during which Chiang's stature within China weakened but his international prominence grew. During the Chinese Civil War (1926–1949), Chiang attempted to eradicate the Chinese Communists but ultimately failed, forcing his government to retreat to Taiwan, where he continued serving as the President of the Republic of China and Director-General of the KMT for the remainder of his life. Despite the democratic constitution, the government under Chiang was a repressive and authoritarian single-party state consisting almost completely of non-Taiwanese mainlanders.
Chiang Kai-shek
East-Asian Tigers
Also known as Asia's Four Little Dragons, originally refered to the economies of Hong Kong, Singapore, South Korea and Taiwan. These territories and nations were noted for maintaining high growth rates and rapid industrialization between the early 1960s and 1990s. Over time, the term Tiger has become synonymous with nations that achieve high growth by pursuing an export-driven trade strategy. More recently, the Southeast Asian nations of Indonesia, Malaysia, Philippines and Thailand have often been considered Tigers.
A set of views concerning the determination of national income and monetary economics. It focuses on the supply and demand for money as the primary means by which economic activity is regulated. Monetary theory focuses on money supply and on inflation as an effect of the supply of money being larger than the demand for money. It is concerned primarily with the macroeconomic effects of the supply of money and central banking. Formulated by Milton Friedman, it argues that excessive expansion of the money supply is inherently inflationary, and that monetary authorities should focus solely on maintaining price stability.
The Pareto Principle
Also known as the 80-20 rule, or the law of the vital few, states that for many phenomena 80% of consequences stem from 20% of the causes. The idea has rule-of-thumb application in many places, but it is commonly misused. The principle was suggested by management thinker Joseph M. Juran. It was named after the Italian economist Vilfredo Pareto, who observed that 80% of property in Italy was owned by 20% of the Italian population. The assumption is that most of the results in any situation are determined by a small number of causes. This idea is often applied to data such as sales figures: "20% of clients are responsible for 80% of sales volume."
Pareto Efficiency
Also known as Pareto Optimality, is a central theory in economics with broad applications in game theory, engineering and the social sciences. Given a set of alternative allocations and a set of individuals, a movement from one alternative allocation to another that can make at least one individual better off, without making any other individual worse off is called a Pareto improvement or Pareto optimization. An allocation of resources is Pareto efficient or Pareto optimal when no further Pareto improvements can be made. A strongly Pareto optimal (SPO) allocation is one such that the allocation is strictly preferred by one person, and no other allocation would be as good for everyone. A weakly Pareto optimal (WPO) allocation is one where a feasible reallocation would be strictly preferred by all agents.
Macroeconomic Stability
Macroeconomic Stability is defined by stable prices with low inflation (internal stability), and a stable foreign exchange rates. It was contended that such a stabilization programme, which was adopted by most
developing countries under the aegis of the Bretton Woods institutions, would induce higher private sector participation, and enhance investment and growth. It is now fairly well
established that these stabilization policies, which may have resulted in some static gains,
have not necessarily yielded sustained levels of investment and growth.
Kim Dae-jung
(born December 3, 1925)a South Korean politician. Long an opposition leader, he became president (after Kim Young-sam) in 1998 and remained in office until 2003. He was born in Haui-do, South Jeolla Province, an island off the South Korean Coast.
Kim Jong-il
(born February 16, 1941) Chairman of the National Defense Commission of the Democratic People's Republic of Korea (North Korea), Supreme Commander of the (North) Korean People's Army, and General Secretary of the Korean Workers' Party (a Communist party which has controlled the country since 1945). Like his father Kim Il-sung, Kim Jong-il is the center of a very extensive personality cult within North Korean society, in which Kim is constantly praised and honored as a hero, great statesman, and a "peerlessly great man".
Kim Il-sung
(15 April 1912 – 8 July 1994) Leader of North Korea from its founding in 1948 until his death, when he was succeeded by his son Kim Jong-il. He held the posts of Prime Minister from 1948 to 1972 and President from 1972 to his death, in addition to General Secretary of the Korean Workers' Party. North Korea officially refers to him as the "Great Leader" and he is designated in the constitution as the country's "eternal President." His birthday and the day of his death are public holidays in North Korea.
Deng Xiaoping
(August 22, 1904—February 19, 1997) was a revolutionary elder in the Communist Party of China (CPC) who served as the de facto ruler of the People's Republic of China from the late 1970s to the early 1990s, forming the core of the "second generation" CPC leadership. Under his tutelage, China developed one of the fastest growing economies in the world while the Communist Party retained tight control over the country.
The Gang of Four
A group of Communist Party leaders in the People's Republic of China who were arrested and removed from their positions in 1976, following the death of Mao Zedong, and were blamed for the events of the Cultural Revolution. The group included Mao's widow Jiang Qing and three of her close associates, Zhang Chunqiao, Yao Wenyuan, and Wang Hongwen. Two other men who were already dead in 1976, Kang Sheng and Xie Fuzhi, were named as having been part of the "gang." The removal of this group from power marked the end of the Cultural Revolution, which had been launched by Mao in 1966 as part of his power struggle with leaders such as Liu Shaoqi, Deng Xiaoping and Peng Zhen.
Zhōnghuá Rénmín Gònghéguó Zhǔxí (abbrev. Guojia-Zhuxi)
Head of state of the People's Republic of China. The office was created by the 1982 Constitution.
Wen Jiabao
(born September 1942) Premier of the State Council of the People's Republic of China. He serves as a member of its Leading Party Members' Group and Secretary of the Financial Work Committee of the CPC Central Committee. Since taking office in 2003, Wen has overseen China's economic reforms and has been involved in shifting national goals from economic growth at all costs to growth which also emphasizes more egalitarian wealth, along with other social goals, such as public health and education.
Zhū Róngjì
(born October 1, 1928) 9th Premier of the People's Republic of China State Council (March 1998-March 2003), and was a Standing Committee member of the Politburo of 15th CPC Central Committee. As premiere Zhu enacted tough macroeconomic control measures. Favoring healthy, sustainable development, Zhu expunged low-tech, duplicated projects and sectors that would result in "a bubble economy" and projects in transport, energy and agricultural sectors, averting violent market fluctuations. He focused on strengthening agriculture, still the economic base of the developing country and on continuing a moderately tight monetary policy.
constitutive freedoms
(also called instrumental freedoms), refer to those substantive freedoms which "include such elementary capabilities like being able to avoid such deprivations such as starving, undernourishment, escapable morbidity, and premature mortality, as well as the freedoms that are associated with being literate and numerate, enjoying political participation and so on." (Sen, 36) These freedom are in a sense "null" or nothing-less-than freedoms, insomuch as they are themselves constitutive of our ontological freedom, thus they are the means to what one might call freedom in any legitimate sense.
P. V. Narasimha Rao
(June 28, 1921 – December 23, 2004) The ninth Prime Minister of the Republic of India, and led one of the most important administrations in India's modern history that oversaw major economic transformation and checked national security crises.
Adjsuted for purchasing power, Chinas has grown to be ___% richer than India.
aggregate demand
In economics, aggregate demand is the total demand for goods and services in the economy (Y) during a specific time period. It is often called effective demand. Put another way, it is the demand for the gross domestic product of a country (the total new production sold through the market). This demand consists of four major parts, which can be stated in either nominal or "real" terms:

a) personal consumption expenditures (C) or "consumption," demand by households and unattached individuals; its determination is described by the consumption function.

b) gross private domestic investment (I), demand by business firms and some individuals, for new factories, machinery, computer software, housing, other structures, and inventories.

c) gross government investment and consumption expenditures (G).

d) net exports (NX), i.e., net demand by the rest of the world for the country's output.
aggregate demand: Marxian critique
In Marxian economics, the equation of aggregate demand with GDP is rejected as false, on conceptual and statistical grounds. Firstly, GDP as a measure of value added excludes purchases of all intermediate goods used up in production. Secondly, Gross Output from which GDP is derived by deducting intermediate expenditures, encompasses only those flows of income or expenditure regarded as related to production. Property income in the form of certain types of interest, land rents and realised capital gains from asset sales are excluded from gross output and GDP. Therefore, if the amount of property income increases, although GDP remains constant, the national income can nevertheless increase, and consequently aggregate demand can also increase. Thirdly, Gross fixed capital formation measures only investment in productive fixed assets and does not constitute total investment, which includes also purchases of financial assets. Thus, it is argued, the catch-all Keynesian notion of aggregate demand:

a) obscures the distribution of income between social classes with different propensities to save, consume and invest, and...

b) fails to differentiate appropriately between different kinds of investment expenditure.

The implication is that restraining consumption and a higher savings rate does not automatically imply more investment, and lower investment does not automatically mean higher consumption expenditure. Funds may be hoarded in some form, diverted to luxury consumption, used for speculation or spent on arms procurement for example.
The ratio of wages for the average worker to the pay of the average CEO rose from...
113 to 1 in 1991 under Bush-1 to 449 to 1 when Clinton left office in 2001.
The National Bureau of Economic Research is a "private, nonprofit, nonpartisan research organization" dedicated to studying the science and empirics of economics, especially the American economy. It is "committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic community." It publishes NBER Working Papers and books. The NBER is located in Cambridge, Massachusetts with branch offices in Palo Alto, California, and New York City. The NBER was founded in 1920.

Due to its work on national accounts and business cycles, the NBER is well-known for providing start and end dates for recessions.
Aggregate Demand
In economics, aggregate demand is the total demand for goods and services in the economy (Y) during a specific time period. It is often called effective demand. Put another way, it is the demand for the gross domestic product of a country when, and only when, it is in equilibrium (the total new production sold through the market). This demand consists of four major parts, which can be stated in either nominal or "real" terms; personal consumption expenditures (C) or "consumption," demand by households and unattached individuals; its determination is described by the consumption function.
Gross private domestic investment (I), demand by business firms and some individuals, for new factories, machinery, computer software, housing, other structures, and inventories.
Gross government investment and consumption expenditures (G). Net exports (NX and sometimes (X-IM)), i.e., net demand by the rest of the world for the country's output.
Kondratiev Cycles
In economics, Kondratiev waves, also called cycles or surges, occasionally also referred to as the K-waves, are the term for a regular S-shaped cycle in the modern (Capitalist) world economy. Fifty to sixty years in length, it consists of an alternation of periods of high sectoral growth with periods of slower growth. The pattern is more visible in international production data than in individual national economies and concerns output rather than prices. Some economists divide the Kondratiev wave into two 'seasons'; the Kondratiev Fall and the later part, the Kondratiev Winter. A bull market is associated with 'fall' and a bear market with 'winter'. More common today is the division into four periods with a turning point (collapse) between the first and second two.

The following four types of Kondratiev waves have been identified - going through four phases of boom-recession- depression-recovery: 1) The Industrial Revolution (1787-1842) is the most famous Kondratiev wave: the boom began in about 1787 and turned into a recession at the beginning of the Napoleonic age in 1801 and, in 1814, deepened into a depression. The depression lasted until about 1827 after which there was a recovery until 1842. As is obvious, this Kondratiev rode on the development of textile, iron and other steam-powered industries. 2) The Bourgeois Kondratiev (1843-1897): After 1842, the boom reemerged and a new Kondratiev wave began, this one as a result of the railroadization in Northern Europe and America and the accompanying expansion in the coal and iron industries. The boom ended approximately in 1857 when it turned into a recession. The recession turned into a depression into 1870, which lasted until about 1885. The recovery began after that and lasted until 1897. 3) The Neo-Mercantilist Kondratiev (1898-1950?): The boom began about 1898 with the expansion of electric power and the automobile industry and lasted until about 1911. The recession which followed turned into depression in about 1925 which lasted until around 1935. We can assume, that this third wave entered into a recovery immediately afterwards the which one might suspect lasted until around 1950. 4) The Fourth Kondratiev (1950?- 2010?). There has been much debate among believers on the dating the Fourth Wave - largely because of the confusions generated by the low fluctuation in price levels and the issue of Keynesian policies and hence this debate is yet to be resolved. Perhaps the most acceptable set of dates is that the boom began around 1950 and lasted until about 1974 wherein recession set in. When (and if) this recession fell into its depression phase may be more difficult to ascertain (c.1981?), but what has been more or less agreed upon is that 1992 (or thereabouts) the recovery began and has been projected to give way to a boom and thus a new Kondratiev wave around 2010 or so.
General Equilibrium Theory
A branch of theoretical microeconomics. It seeks to explain production, consumption and prices in a whole economy.

General equilibrium tries to give an understanding of the whole economy using a bottom-up approach, starting with individual markets and agents. Macroeconomics, as developed by so-called Keynesian economists, uses a top-down approach where the analysis starts with larger aggregates. Since modern macroeconomics has emphasized microeconomic foundations, this distinction has been slightly blurred. However, many macroeconomic models simply have a 'goods market' and study its interaction with for instance the financial market. General equilibrium models typically model a multitude of different goods markets. Modern general equilibrium models are typically complex and require computers to help with numerical solutions.

Under capitalism, the prices and production of all goods are interrelated. A change in the price of one good, say bread, may affect another price, for example, the wages of bakers. If bakers differ in tastes from others, the demand for bread might be affected by a change in bakers' wages, with a consequent effect on the price of bread. Calculating the equilibrium price of just one good, in theory, requires an analysis that accounts for all of the millions of different goods that are available.