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Bized - Glossary of developing countries
Category: People and society > developing countries
Date & country: 11/10/2007, UK
Words: 182

Absolute advantage
Exists when a country can produce more of a product per resource unit than another country. It is a basis for trade. A country with an absolute advantage is producing more efficiently than another.

African Development Bank
A regional bank started in 1966 to support the development of Independent African states through loans and assistance

Autoimmune Deficiency Syndrome

Allocative efficiency
Allocative efficiency refers to the efficiency with which markets are allocating resources. A market will be allocatively efficient if it is producing the right goods for the right people at the right price. An allocatively efficient market is therefore one which has no imperfections. This will be true when marginal cost is equal to average revenue in the market. It occurs where a firm produces at MC = AR (marginal cost pricing).

The paying off of a loan principal

Appropriate technology
A technology that complements the factor endowments of the country.

Balance of payments
A record of the income and expenditure transactions between UK residents and persons abroad. The balance of payments accounts record all flows of money in and out of the UK. These flows might result from the sale of exports (an inflow or credit) or from the UK purchasing imports from overseas (an outflow or debit). They might also arise from other countries investing in the UK (inward investment

Balance of trade
The difference between the value of visible exports and visible imports.

The direct exchange of goods and services without the use of money.

Bilateral aid
Official development assistance that takes place between a donor country and a recipient country

A variety of life forms that exist within an ecosystem

Black market
Created when buyers and sellers meet to negotiate the exchange of a prohibited or illegal good. More generally any unofficial market in which prices are inordinately high.

Buffer stock scheme
A buffer stock scheme is a form of intervention to try to stabilise the price of a commodity. Stocks of the commodity are kept and sold when the price is high to try to reduce it. When the price is low further stocks of the commodity are bought.

Capital account
That part of the balance of payments accounts that measures the flows of capital in and out of the country

Capital flight
The movement of financial assets out of a country in response to an unfavourable domestic circumstances.

Capital Output Ratio
The ratio that shows the amount of units of capital that are needed to produce a certain level of output

Cash Crops
Crops that are produced only for the market

A form of slash and burn shifting cultivation

Circular Flow of Income
The flow of income and payments between economic agents in an economy. The key agents are households and firms and the circular flow shows how money moves between them. There may also be leakages from the circular flow and injections into it.

The process of a country being taken over and becoming a colony of another

Command or planned economy
An economic system where the State owns and then allocates resources through some form of planning process

Commercial bank
A commercial organisation that provides a variety of banking services such as loans and savings schemes

Common market
A customs union which permits the free movement of capital and labour between member states

Comparative advantage
This exists when a country produces a good or service at a lower opportunity cost than its trading partners

Concessional terms
A loan that is made at more favourable terms that could be obtained commercially

Consumer surplus
This occurs when people are able to buy a good for less than they would be willing to pay. They enjoy more utility than they had to pay for

Expenditure by households on goods and services which satisfy current wants. It is a key component of aggregate demand.

Cost benefit analysis
A method of assessing investment projects which takes into account social costs and benefits

Cost push inflation
When a cost of production (e.g. wages) increases and firms put up prices to maintain profits. Cost increases may happen because wages have gone up or because raw material prices have increased. It is important not to muddle cost-push with demand-pull inflation. Cost-push inflation happens when costs have risen independently of demand.

Creditor nation
Those nations that have a balance of payments surplus

Crude birth rate
The number of children born alive each year per 1000 of the population

Crude death rate
the yearly number of deaths per 1000 of the population

Current account balance
A record of a country's earnings from the sale of visible and invisible items minus its expenditure on visible and invisible items from abroad.

Current account deficit
When a country spends more on visible and invisible items from abroad than it earns from the sale of visible and invisible items.

Customary Law
A land tenure arrangement where there is communal ownership of land.

Customs union
A group of countries which removes tariff barriers between member countries and also imposes common external tariffs on non-members

Death rate
The number of deaths per thousand of the population in a year

Debt for equity swap
A mechanism where indebted LDCs swap shares in domestic firms for private foreign debt

Debt for nature swap
A mechanism where foreign debt is exchanged for domestic debt enabling resources to be released to finance environmental conservation

Debt service
The total amount of interest payments and repayments of principal on external public debt

Debt service ratio
The ratio of interest and principle payments as a proportion of exports for a given year

Debt servicing
The repayment of interest and principle to external creditors

Debtor nation
A country with a balance of payments deficit

Deflationary policy
Policies designed to reduce aggregate demand

The clearing of forested land

Demographic transition
Changes in population growth rates over time due to changes in birth and death rates

Dependency ratio
The ratio of dependent population (the young and the elderly) to the working age population

The removal of controls on a particular market aimed at improving the economic efficiency of that market and therefore the performance of the economy at the microeconomic level. Deregulation is generally considered a supply side policy. An example would be the abandonment of a licensing system for taxis.

Occurs when the government lowers the value of the exchange rate from one fixed rate to another

The process of improving the quality of all people lives within a country

Development trap
The vicious cycles of poverty that prevent a country from developing

The transfer of financial resources and or good and services from a donor to a recipient country

A firm increasing the range of products it produces

Dual exchange rate
A system where there is a fixed official exchange rate and an illegal market determined parallel exchange rate

The sale of goods in a foreign country at a price below that charged in the home market.

Economic Growth
Typically refers to an increase in a country's output of goods and services. It is usually measured by changes in real GDP.

European Investment Bank
The European Investment Bank is the largest financial institution in the world. It gives loans for regional development particularly in the less developed areas of Europe.

Exchange control
A government policy where the amount of foreign currency available to domestic firms and citizens is controlled

Exchange rate mechanism
An adjustable peg system which involved EU countries maintaining the value of their currencies within limited margins but being allowed to float their currencies against non member currencies. The ERM was the forerunner to the implementation of the Euro.

Export promotion
The government attempts to stimulate exports by giving incentives to exporting firms

External benefits
These are also known as positive externalities. They are impacts on `outsiders` that are advantageous to them and for which they do not have to pay. Externalities occur where the actions of firms and individuals have an effect on people other than themselves. In the case of positive externalities the external effects are benefits on other people. There may be external benefits from both production and consumption. If these are added to the private benefits we get the total social benefits. An example of positive externalities would be the side effects of production processes.

External debt
the total amount of private and public foreign debt owed by a country

The spillover effects of production or consumption for which no payment is made. Externalities can be positive or negative. For example all fax users gain as new users become connected (positive); and smoke from factory chimneys (negative).

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

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

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

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

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

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

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

Human Immune Deficiency Virus

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 Poverty Index
A composite index that measure human deprivation

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

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

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:

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.

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

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

J curve effect
The tendency for a fall in the value of the currency to worsen the balance of trade before it improves the position.

Labour productivity
The Level of output per unit of labour

Land tenure
The system of land ownership

Leasehold land
Land which is owned by the government or a landowner and then leased to a tenant for a fixed period of time

Least Developed Countries
The very poorest of the Less Developed Countries

Less Developed Countries (LDCs)
Countries who are generally characterised by low levels of GDP and income per head. LDCs usually have a heavy dependence on the primary sector of the economy. In the case of Zambia this is true with dependence on agriculture and copper and cobalt mining.

The opening up of markets to the free market forces of supply and demand