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Bized - Glossary of developing countries
Category: People and society > developing countries
Date & country: 11/10/2007, UK
Words: 232

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 capital
The accumulated skill, knowledge and expertise of workers

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

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

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:

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.

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

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

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.

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 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:

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

Income not passed on by consumers in the circular flow e.g. savings, taxation or money spent on imports. Leakages are sometimes called withdrawals.

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

Life expectancy
The average length of time that people in a country are expected to live

Loan Principal
The sum of money that a country borrows

Long run average cost curve
Shows the minimum unit cost of producing each level of output, allowing the size of plant to vary.

Lorenz curve
A graph showing the difference between a country's actual income distribution and perfect equality of income distribution

Macroeconomic stabilisation
Government policy to stabilise inflation, budget deficits, trade deficits and money supply

Marginal Cost
The amount spent on producing one extra unit. The marginal cost is the increase in total cost when one more unit is produced.

Marginal Product
The addition to total product following the employment of an extra unit of a variable factor, e.g. labour

Marginal Propensity to Consume
The proportion of each extra pound of disposable income spent by households. For example, if a person earns £1 more and consumes 60p of it, then the MPC is 0.6

Marginal Propensity to Import
The proportion of each extra pound of income spent on imports. An MPI of 0.4 would mean that 4 Kwacha more was spent on imports when 10 Kwacha extra was earned.

Marginal Propensity to Save
The proportion of each extra pound of disposable income not spent by households

Marginal Propensity to Tax
The proportion of each extra pound of income taken by the government. An MPT of 0.2 would mean that 2 Kwacha more was taken in tax when 10 Kwacha extra was earned.

Market Failure
Market failure occurs when the price mechanism results in an inefficient or grossly unfair allocation of resources.

Marshall Lerner condition
States that a devaluation improves the current account balance if the combined price elasticities of demand for exports and imports are greater than 1.

Land and other family assets are passed down the female line of succession

More developed countries

Merit goods
A product, such as education, which consumers may undervalue but which the government believes is `good` for consumers. Merit goods would be under-provided in a pure free-market economy. This is because they have external benefits that people would not take into account when they made their decisions about how much to consume. An example is vaccinations. As a result of people being vaccinated we keep disease out of the country, but if it was left just to the market many people might choose to take the risk and not pay for vaccinations. This could have negative effects for society.

A group of economists who believe that changes in the money supply are the most effective instrument of government economic policy, and the main determinant of the price level.

Multi-Fibre Agreement
A set of bilateral quotas imposed by industrialised countries on the exports of textiles from less developed countries

Multinational Enterprise
An international or transnational enterprise which has productive capacity in several countries

The multiplier is concerned with how national income changes as a result of a change in an injection, for example investment. The multiplier was a concept developed by Keynes that said that any increase in injections into the economy (investment, government expenditure or exports) would lead to a proportionally bigger increase in National Income. This is because the extra spending would have knock-on effects creating in turn even greater spending. The size of the multiplier would depend on the level of leakages. It can be measured by the formula 1/(1-MPC) where the MPC is the marginal propensity to consume.

Native Reserve Land
Land which was set aside by the Colonial Administration for use by African farmers

Native Trust Land
Land where property rights were extended to European farmers

Natural rate of population growth
The growth in population due to changes in the birth and death rates

Negative externalities
Impacts on `outsiders` that are disadvantageous to them and for which they receive no compensation. The externalities are occurring where the actions of firms and individuals have an effect on people other than themselves. In the case of negative externalities the external effects are costs on other people. They are also known as external costs. There may be external costs from both production and consumption. If these are added to the private costs we get the total social costs. An example of negative externalities would be the side effects of production processes e.g. the pollution (noise, dust, vibration) endured by people living next to a quarry.

Neo classical theory
The view that markets operate efficiently and that the way to increase output and employment is to raise aggregate supply.

Net Investment
investment over and above that needed to replace worn out capital (depreciation)

Net property income from abroad
The difference between incomes earned and incomes paid abroad

Niche marketing
A niche market is a specialist area of the market. Niche marketing is therefore selling to that area of the marketing. It demands a very different approach to mass marketing of goods and services.

Official Exchange Rate
The rate at which the Central Bank will exchange the local currency for foreign currency

Organisation of Petroleum Exporting Countries

Opportunity Cost
The decision to produce or consume a product involves giving up another product. The real cost of an action is the next best alternative forgone.

Outward oriented development
Government policy that attempts to achieve development by encouraging free trade and the unrestricted movement of labour and capital

Parallel economy
The production that takes place outside of the declared and formal circular flow of income.

Large state owned enterprises

Pareto Optimal
When no one can be made better off without someone else being made worse off, following a reorganisation of production or distribution.

Paris Club
A group formed by certain industrialised countries that are owed substantial amounts of debt by less developed countries

Physical Quality of Life Index
A composite indicator of development composed from life expectancy, literacy rate, and infant mortality

A system where a husband can have more that one wife

Population pyramid
Graph showing the age structure of the population

Positive externalities
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. These are also known as external benefits. 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

Price band
A range within which a price is able to move. This will result from intervention in a market that sets minimum and maximum prices.

Price ceiling
A maximum limit for a price above which it is prevented from moving

Price elasticity of demand
Measures the responsiveness of demand to a given change in price. It is calculated by taking the percentage change in demand and dividing by the percentage change in price.

Price floor
A minimum limit for a price below which it is prevented from moving

Primary education
The first level of education that usually provides the basic elements of education

Primary industry
That part of the economy concerned with agriculture and the extraction of raw materials

Primary products
Commodities produced by the extractive industries such as farming, fishing, forestry, and mining

The process of moving activity from the public sector to the private sector. Often used to describe the process of floating shares in nationalised industries to return them to private ownership.

Producer surplus
The difference between the minimum price a producer would accept to supply a given quantity of a good and the price actually received

Production possibility curve
A graph that shows the combination of two goods that a country can produce using all of its resources in the most efficient way

Production quota
A limit on the amount of a good produced

Productive efficiency
When a firm produces at the lowest unit cost i.e. where MC = AC.

The efficiency with which the factors of production are used. It can be calculated by taking total output and dividing by the number of factors of production. The higher this figure, the more productive the factors of production are.

Property Rights
These are the rights to ownership of an asset such as land

The practice of taking steps to protect what one sees as one's own interests. Most commonly used to describe steps taken by countries to protect their domestic industries from foreign competition.

Public goods
Items which can be jointly consumed by many consumers simultaneously without any loss in quantity or quality of provision e.g. a lighthouse. Public goods are therefore goods that would not be provided in a pure free-market system. This is because they display two particular characteristics:

Purchasing power parity
At the PPP rate the GDP of a country has been adjusted so that it reflects the internal purchasing power of the currency

Limits on the amount of a good produced, imported, exported or offered for sale.

A period of negative economic growth at the trough of the trade cycle. A recession is usually defined as two consecutive quarters of negative economic growth.

Relative Poverty
The level of poverty in a country expressed in term of certain level of income such as half of the average wage

The value of the exchange rate increasing due to market forces

Rural urban migration
The migration of people from rural areas to urban areas

That part of disposable income (income less direct taxes plus state benefits) not spent on goods and services. Savings are therefore any income that is not spent, but put aside. In an economic sense we would also include buying shares or securities as part of this. Savings are a leakage or withdrawal from the circular flow.

Secondary industry
That part of the economy concerned with the manufacture of goods

Soft loan
A loan made to a country on a concessionary basis such as a lower rate of interest

Soil erosion
Loss of topsoil often resulting from deforestation and wind or water erosion

Special Drawing Rights
Special drawing rights are a form of international money created by the IMF which is acceptable in settlement of debts between countries.

Concentrating in the production of one good or service.