Economic Terms

Short-term money flows between financial assets caused by institutions attempting to generate profits by trading foreign currency, commodities and financial assets. Profits arise from successful speculation (investing when there is an expectation that prices will rise and produce a profit) and arbitrage (making a profit by identifying opportunities to buy an asset in one market and immediately sell it in another market at a higher price).

Capital flows moving to countries with higher interest rates and changes in exchange rates. For instance if the interest rates of a country rise higher relative to that of other countries, investors will implace their money in the financial sector of that country to maximise the return on their investment. These flows occur very quickly and will also cause the exchange rate to strengthen too. If the interest rates cut capital would flow out of the economy and cause the domestic currency to weaken.

The productive potential of a single or group of workers. The value of human capital is equal to the future value of earnings and production.

A summary measure of average achievement in key dimensions of human development i.e. a long and healthy life, being knowledgeable and having a decent standard of living. This measure is then used to rank countries into four tiers of human development: low, medium, high or very high.

Below is a table to illustrate how five different countries rank in these key dimensions of human development and therefore the meausre of human development for those countries. As can be seen from the table the UK is classed as having a very high level of human development as the HDI measure is over 0.8. Whereas Nigeria has medium level of human development as the HDI measure is below 0.7.

 

 

Are fundamental for human survival purpose. Therefore is something you should have and you cannot do without e.g. water and food.

Are a human desire to get something additional. Wants are unlimited.

Large and very rapid increases in the price level which undermine the value of money and discourage economic activity. Defined as periods when the monthly inflation rate exceeds 50%. Usually associated with extreme political instability or war.

When factors of production cannot be easily applied to another use e.g. a hospital cleaner would not be able to be reassigned to perform heart surgery or it may not be easy to encourage unemployed Spanish workers to fill vacancies in Germany.

A market where a small number of large suppliers can set the prices for their products.

Where either firms or individuals are not aware of all the information that is relevant to make decisions about the supply and consumption of products. The most commonly used example of this is the secondary cars market, in which car buyers cannot determine whether the cars they are being sold are of good quality or of bad quality (lemons). This is a specific form of imperfect information called adverse selection.