Friday, March 29, 2024
11:55 AM (GMT +5)

Go Back   CSS Forums > CSS Optional subjects > Group I > Economics

Reply Share Thread: Submit Thread to Facebook Facebook     Submit Thread to Twitter Twitter     Submit Thread to Google+ Google+    
 
LinkBack Thread Tools Search this Thread
  #41  
Old Wednesday, August 06, 2008
Faraz_1984's Avatar
Banned
 
Join Date: Apr 2008
Location: Alone
Posts: 590
Thanks: 768
Thanked 286 Times in 200 Posts
Faraz_1984 is infamous around these parts
Default T

  • TANGIBLE ASSETS
  • ASSETS you can touch: buildings, machinery, GOLD, works of art, and so on. Contrast with INTANGIBLE ASSETS.
  • TARIFF
  • Often used to describe a tax on goods produced abroad imposed by the GOVERNMENT of the country to which they are exported. Many countries have reduced such tariffs as part of the process of freeing up world trade.
  • TAX ARBITRAGE
  • Creating FINANCIAL INSTRUMENTS or transactions that allow the parties involved to exploit loopholes in or differences between their tax exposures, so that all involved pay less tax.
  • TAX AVOIDANCE
  • Doing everything possible within the law to reduce your tax bill. Learned Hand, an American judge, once said: “There is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible … nobody owes any public duty to pay more than the law demands.” Contrast with TAX EVASION.
  • TAX BASE
  • The thing or amount to which a tax rate applies. To collect INCOME TAX, for example, you need a meaningful definition of INCOME. Definitions of the tax base can vary enormously, over time and among countries, especially when tax breaks are taken into account. As a result, a country with a comparatively high tax rate may not have a high TAX BURDEN if it has a more narrowly defined tax base than other countries. In recent years, the political unpopularity of high tax rates has lead many governments to lower rates and at the same time broaden the tax base, often leaving the tax burden unchanged.
  • TAX BURDEN
  • Total tax paid in a period as a proportion of total INCOME in that period. It can refer to personal, corporate or national income.
  • TAX COMPETITION
  • Low-tax policies pursued by some countries in the hope of attracting international businesses and CAPITAL. Economists usually favour COMPETITION in any form. But some say that tax competition is often a beggar-thy-neighbour policy, which can reduce another country’s TAX BASE, or force it to change its mix of taxes, or stop it taxing in the way it would like.
  • Economists who favour tax competition often cite a 1956 article by Charles Tiebout (1924–68) entitled "A Pure Theory of Local Expenditures". In it he argued that, faced with a choice of different combinations of tax and government SERVICES, taxpayers will choose to locate where they get closest to the mixture they want. Variations in tax rates among different countries are good, because they give taxpayers more choice and thus more chance of being satisfied. This also puts pressure on governments to be efficient. Thus measures to harmonise taxes are a bad idea.
  • There is at least one big caveat to this theory. Tiebout assumed, crucially, that taxpayers are highly mobile and able to move to wherever their preferred combination of taxes and benefits is on offer. But many taxpayers, including the great majority of workers, are not able to move easily. Tax competition may make it harder to redistribute from rich to poor through the tax system by allowing the rich to move to where taxes are not redistributive.
  • TAX EFFICIENT
  • From the point of view of the taxpayer, the way of undertaking an economic activity that results in the lowest (legitimate) tax bill.
  • TAX EVASION
  • Paying less tax than you are legally obliged to. Contrast with TAX AVOIDANCE. There may be a thin line between the two, but as Denis Healey, a former British chancellor, once put it, “The difference between tax avoidance and tax evasion is the thickness of a prison wall.”
  • TAX HAVEN
  • A country or designated zone that has low or no taxes, or highly secretive BANKS, and often a warm climate and sandy beaches, which make it attractive to foreigners bent on TAX AVOIDANCE or even TAX EVASION.
  • TAX INCIDENCE
  • Where a tax really bites. Who ultimately pays a tax is often different from who the taxman collects the tax from, because the cost of the tax can be passed on. For example, by demanding higher WAGES if INCOME TAX rises, workers can transfer some of the TAX BURDEN to their employer’s customers or shareholders.
  • TAXATION
  • Prostitution may be the oldest profession, but tax collection was surely not far behind. In its early days, taxation did not always involve handing over money. The ancient Chinese paid with pressed tea, and Jivara tribesmen in Brazil stumped up shrunken heads. As the PRICE of their citizenship, ancient Greeks and Romans could be called on to serve as soldiers and had to supply their own weapons. The origins of modern taxation can be traced to wealthy subjects paying money to their king in lieu of military service.
  • The other early source of tax revenue was trade, with tolls and customs duties being collected from travelling merchants. The big advantage of these taxes was that they fell mostly on visitors rather than residents.
  • INCOME TAX, the biggest source of GOVERNMENT funds today in most countries, is a comparatively recent invention, probably because the notion of annual INCOME is itself a modern concept. Governments preferred to tax things that were easy to measure and on which it was thus easy to calculate the liability. This is why early taxes concentrated on tangible items such as LAND and property, physical goods, commodities and ships, as well as things such as the number of windows or fireplaces in a building.
  • In the 20th century, particularly the second half, governments around the world took a growing share of their country’s NATIONAL INCOME in tax, mainly to pay for increasingly more expensive defence efforts and for a modern WELFARE state. INDIRECT TAXATION on CONSUMPTION, such as VALUE-ADDED tax, has become increasingly important as DIRECT TAXATION on income and wealth has become increasingly unpopular.
  • But big differences among countries remain. One is the overall level of tax. For example, in United States tax revenue amounts to around one-third of its GDP, whereas in Sweden it is closer to half. Others are the preferred methods of collecting it (direct versus indirect), the rates at which it is levied and the definition of the TAX BASE to which these rates are applied. Countries have different attitudes to PROGRESSIVE and REGRESSIVE TAXATION. There are also big differences in the way responsibility for taxation is divided among different levels of government.
  • Arguably, any tax is a bad tax. But PUBLIC GOODS and other government activities have to be paid for somehow, and economists often have strong views on which methods of taxation are more or less efficient. Most economists agree that the best tax is one that has as little impact as possible on people’s decisions about whether to undertake a productive economic activity. High rates of tax on LABOUR may discouragepeople from working, and so result in lower tax revenue than there would be if the tax rate were lower, an idea captured in the LAFFER CURVE. Certainly, the MARGINAL rate of tax may have a bigger effect on incentives than the overall TAX BURDEN.
  • LAND TAX is regarded as the most efficient by some economists and tax on expenditure by others, as it does all the taking after the wealth creation is done.
  • Some economists favour a neutral tax system that does not influence the sorts of economic activities that take place. Others favour using tax, and tax breaks, to guide economic activity in ways they favour, such as to minimise pollution and to increase the attractiveness of employing people rather than CAPITAL. Some economists argue that the tax system should be characterised by both HORIZONTAL EQUITY and VERTICAL EQUITY, because this is fair, and because when the tax system is fair people may find it harder to justify TAX AVOIDANCE and TAX EVASION. However, who ultimately pays (the TAX INCIDENCE) may be different from who is initially charged, if that person can pass it on, say by adding the tax to the price he charges for his OUTPUT. Taxes on companies, for example, are always paid in the end by humans, be they workers, customers or shareholders.
  • TECHNICAL PROGRESS
  • A crucial ingredient of economic GROWTH. Economists often used to take a certain rate of technological progress for granted, but in new ENDOGENOUS growth theory they make more effort to measure accurately and better understand what causes differences in the rate of technical change.
  • TERMS OF TRADE
  • The weighted average of a country’s export PRICES relative to its import prices.
  • THIRD WAY
  • An economic philosophy espoused by some leftish political leaders in the late 20th century, including Bill Clinton and Tony Blair. According to the rhetoric, it is not CAPITALISM and not SOCIALISM, but a third (pragmatic) way. Many have therefore found it rather hard to pin down. It was earlier used to describe Sweden’s economic model.
  • TICK
  • The minimum PRICE change possible in a financial marketplace.
  • TIGER ECONOMIES
  • The fast-growing developing economies of Asia, at least before their crisis in the late 1990s.
  • TIME SERIES
  • Several measurements of a variable taken at regular intervals, such as daily, monthly, quarterly, and so on. They are often used by economists in search of trends that they hope will let them predict future movements in the variable.
  • TIME VALUE OF MONEY
  • The idea that a dollar today is worth more than a dollar in the future, because the dollar in the hand today can earn INTEREST during the time until the future dollar is received.
  • TOBIN, JAMES
  • A Nobel prize-winning economist, James Tobin (1918-2002) theorised that FIRMS would continue to invest as long as the value of their SHARES exceeded the replacement cost of their ASSETS. The ratio of the market value of a firm to the net REPLACEMENT COST of the firm’s assets is known as “Tobin’s Q”. If Q is greater than 1, then it should pay the firm to expand, as the PROFIT it should expect to make from its assets (reflected in the share PRICE) exceeds the cost of the assets. If Q is less than 1, the firm would be better off selling its assets, which are worth more than shareholders currently expect the firm to earn in profit by retaining them.
  • Tobin also gave his name to the “Tobin tax”, a (so far unimplemented) proposal to reduce speculative cross-border flows of CAPITAL by levying a small tax on foreign exchange transactions.
  • TOTAL RETURN
  • The sum of all the different benefits from investing in an ASSET, including INCOME paid to the investor and any change in the market value of the asset. The total return is often expressed as a percentage of the amount invested.
  • TRADE
  • See FREE TRADE.
  • TRADE AREA
  • In a globalising economy, it is perhaps surprising that countries increasingly trade with their nearest neighbours. One explanation is geography: as countries have lowered their TARIFF barriers, the relatively greater importance of transport costs makes proximity matter more. According to NEW TRADE THEORY, this also produces gains from ECONOMIES OF SCALE. But another reason for the fast growth in trade among nearby countries may be less benign. The proliferation of regional trade agreements may be causing neighbours to trade with each other when it would be more efficient for them to export to and import from afar.
  • In the past 50 years more than 150 regional trade agreements have been notified to the GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT) or the WORLD TRADE ORGANISATION (WTO), most of which are still in force. Roughly half of these, including some revisions of previous deals, have been set up since 1990. The best-known are the EUROPEAN UNION, the North American Free-Trade Agreement (NAFTA) and Mercosur in South America. There are dozens of other examples.
  • Economists have generally been unenthusiastic about regionalism, for two reasons. First, they worry that preferential tariffs will cause trade to flow in inefficient ways, a process known as trade diversion. In a perfect world, trade patterns should be determined by COMPARATIVE ADVANTAGE: the comparative cost of making different goods yourself as opposed to buying them from various countries. If the United States imports Mexican televisions merely because the Mexican goods are tariff-free, even if Malaysia has a comparative advantage in television manufacturing, the main benefit of trade will be lost.
  • The second concern is that regionalism will impede efforts to liberalise trade throughout the world. One prominent critic, Jagdish Bhagwati, an economist at Columbia University in New York, has famously said that regional trade areas are “stumbling blocks” rather than “building blocks” in the freeing of global trade. There is no clear-cut theoretical answer to the question of whether regional trade agreements are good or bad, and the empirical findings are hotly disputed. In general, though, it seems likely that it is better to have regional groups that are open to the rest of the world than groups that are closed.
  • TRADE CYCLE
  • See BUSINESS CYCLE.
  • TRADE DEFICIT/SURPLUS
  • An excess of IMPORTS over EXPORTS is a trade deficit. An excess of exports over imports is a trade surplus. (See BALANCE OF PAYMENTS.)
  • TRADE UNIONS
  • See UNIONS.
  • TRADE-WEIGHTED EXCHANGE RATE
  • A country’s EXCHANGE RATE with the currencies of its trading partners weighted by the amount of trade done by the country in each currency.
  • TRAGEDY OF THE COMMONS
  • A 19th-century amateur mathematician, William Forster Lloyd, modelled the fate of a common pasture shared among rational, UTILITY-maximising herdsmen. He showed that as the POPULATION increased the pasture would inevitably be destroyed. This tragedy may be the fate of all sorts of common resources, because no individual, firm or group has meaningful PROPERTY RIGHTS that would make them think twice about using so much of it that it is destroyed.
  • Once a resource is being used at a rate near its sustainable capacity, any additional use will reduce its value to its current users. Thus they will increase their usage to maintain the value of the resource to them, resulting in a further deterioration in its value, and so on, until no value remains. Contemporary examples include overfishing and the polluting of the atmosphere. (See PUBLIC GOODS and EXTERNALITY.)
  • TRANSACTION COSTS
  • The costs incurred during the process of buying or selling, on top of the PRICE of whatever is changing hands. If these costs can be reduced, the PRICE MECHANISM will operate more efficiently.
  • TRANSFER PRICING
  • The PRICES assumed, for the purposes of calculating tax liability, to have been charged by one unit of a multinational company when selling to another (foreign) unit of the same firm. FIRMS spend a fortune on advisers to help them set their transfer prices so that they minimise their total tax bill. For instance, by charging low transfer prices from a unit based in a high-tax country that is selling to a unit in a low-tax country, a firm can record a low PROFIT in the first country and a high profit in the second. In theory, however, transfer prices are supposed to be set according to the arm’s-length principle: that they should be the same as would be charged if the sale was to a business unconnected in any way to the selling firm. But when there is no genuinely independent market with which to compare transfer prices, what an arm’s length price would be can be a matter of great debate and an opportunity for firms that want to lower their tax bill.
  • TRANSFERS
  • Payments that are made without any good or service being received in return. Much PUBLIC SPENDING goes on transfers, such as pensions and WELFARE benefits. Private-sector transfers include charitable donations and prizes to lottery winners.
  • TRANSITION ECONOMIES
  • Former communist economies that, with varying degrees of enthusiasm, have embraced CAPITALISM.
  • TRANSMISSION MECHANISM
  • The process by which changes in the MONEY SUPPLY affect the level of total DEMAND in an economy.
  • TRANSPARENCY
  • A buzz word for the idea that the more INFORMATION is disclosed about an economic activity the better. Many regulators, private lenders, politicians and economists reckoned that the Asian economic crisis of the late 1990s would not have been so severe, or even have happened, had Asian governments, BANKS and other companies made available more and better data about their financial condition. Likewise, the collapse of ENRON provoked demands for greater transparency, to help improve corporate governance in the United States and other industrialised countries. Some economists reckon that transparency is one of the most effective methods of REGULATION. Rather than risk REGULATORY CAPTURE, why not simply maximise disclosure and leave it to the market to decide whether what the information reveals is acceptable?
  • TREASURY BILLS
  • A form of short-term GOVERNMENT DEBT. Treasury bills usually mature after three months. They are used for managing fluctuations in the government’s short-run cash needs. Most government borrowing takes the form of longer-term BONDS.
  • TROUGH
  • The transition point between economic RECESSION and recovery.
  • TRUST
  • One of the most valuable economic ASSETS, hard to create but easy to destory - a crucial ingredient of a country's SOCIAL CAPITAL. People are more likely to do business together when they trust each other. Trust can reduce MARKET FAILURE that otherwise results from ASYMMETRIC INFORMATION. When there is a lack of trust, people may have to spend heavily on monitoring others' behaviour to ensure they do what they say they will do. This cost may be so high that it is not worth going ahead with a business deal. When trust is absent, people may be less flexible in their dealings with each other. Countries can overcome some of the problems of a lack of trust by passing laws requiring good behaviour, but only to the extent that people trust that the laws will be enforced. One way in which companies seek to demonstrate that they can trust is by investing heavily in a BRAND.
Reply With Quote
  #42  
Old Wednesday, August 06, 2008
Faraz_1984's Avatar
Banned
 
Join Date: Apr 2008
Location: Alone
Posts: 590
Thanks: 768
Thanked 286 Times in 200 Posts
Faraz_1984 is infamous around these parts
Default U

  • UNCERTAINTY
  • See information.
  • UNDERGROUND ECONOMY
  • See BLACK ECONOMY.
  • UNEMPLOYMENT
  • The number of people of working age without a job is usually expressed as an unemployment rate, a percentage of the workforce. This rate generally rises and falls in step with the BUSINESS CYCLE--cyclical unemployment. But some joblessness is not caused by the cycle, being STRUCTURAL UNEMPLOYMENT. There are also VOLUNTARY UNEMPLOYMENT and involuntary unemployment. Some people who are not in work have no interest in getting a job and probably should not be regarded as part of the workforce. Others choose to be out of work briefly while they look for, or are waiting to start, a new job. This is known as FRICTIONAL UNEMPLOYMENT. In the 1950s, the PHILLIPS CURVE seemed to show that policymakers could reduce unemployment by having higher INFLATION. Economists now say there is a NAIRU (non-accelerating inflation rate of unemployment). In most markets, PRICES change to keep SUPPLY and DEMAND in EQUILIBRIUM; in the LABOUR market, wages are often sticky, being slow to fall when demand declines or supply increases. In these situations, unemployment often increases. One way to tackle this may be to boost demand. Another is to increase LABOUR MARKET FLEXIBILITY.
  • UNEMPLOYMENT TRAP
  • When unemployed people who receive benefits, either from the GOVERNMENT or from private CHARITY, are deterred from taking a new job because the reduction or removal of benefit if they do will make them worse off. Also known as the POVERTY TRAP, it can be addressed, to an extent, by continuing to pay benefit for a while to unemployed people returning to work. (See WELFARE TO WORK.)
  • UNIONS
  • In developed countries, at least, trade union membership and influence has declined over the past three decades. Fewer WAGES are now set by collective bargaining, and far fewer working days are lost to strikes. Unions, which are in effect a CARTEL of workers, probably make UNEMPLOYMENT higher than it would be without them, as collective bargaining often pushes wages above the level that would bring LABOUR SUPPLY and DEMAND into EQUILIBRIUM. These higher wages increase supply and reduce demand, with the result that there are more jobless people. Unions thus deepen a conflict between those in the labour market who are insiders, that is, union members, and those who are outsiders, typically non-unionised, poorly paid or jobless people. However, unions can combat the excessive market power of some FIRMS, particularly when the firms (or a GOVERNMENT) dominate a particular job market. They can support workers who are badly treated by management. They may sometimes provide an efficient, and thus valuable, channel for communication between workers and managers, particularly in countries such as Germany, where conflict between management and unions is viewed as unhealthy.
  • USURY
  • Charging INTEREST, or, at least, an exorbitant rate of interest. Plato and Aristotle reckoned that charging interest was “contrary to the nature of things”; Cato considered it on a par with homicide. For many centuries, the Catholic Church regarded as sinful the charging of any interest by lenders and it was not allowed in Catholic countries, although Jews were exempted, provided they did not charge excessive rates. According to Pope Benedict XIV, in 1745, interest should be regarded as a sin because "the creditor desires more than he has given".
  • In most modern economies, interest is recognised as a crucial part of the economic system, a reward to the lender for the RISK taken in making a loan. Even so, most developed countries have some form of usury law imposing limits on how high interest charges can be. These aim to protect borrowers from being exploited by unscrupulous loan sharks.
  • UTILITY
  • Economist-speak for a good thing; a measure of satisfaction. (See also WELFARE.) Underlying most economic theory is the assumption that people do things because doing so gives them utility. People want as much utility as they can get. However, the more they have, the less difference an additional unit of utility will make – there is diminishing MARGINAL utility. Utility is not the same as utilitarianism, a political philosophy based on achieving the greatest happiness of the greatest number.
  • A tricky question is how to measure utility. MONEY does not (entirely) capture it. You can get richer without becoming more satisfied. So some economists have tried to calculate broader measures of happiness. They have found that people with jobs are much happier than unemployed people. Low INFLATION also makes people happier. Extra INCOME increases happiness a bit, but not much. In many countries incomes have risen sharply in recent years, but national surveys of subjective well being have stayed flat. Within countries, comparing people across the income distribution, richer does mean happier, but the effect is not large. Married people are often happier than single people; couples without children happier than couples with; women happier than men; white people happier than black people; well-educated people happier than uneducated people; the self-employed happier than employees; and retired people happier than economically active people. Happiness generally decreases until you are in your 30s, and then starts rising again. Other economists are dismissive of such studies. They argue that people are rational maximisers of their own utility, so, by definition, whatever they do maximises their utility.
Reply With Quote
  #43  
Old Wednesday, August 06, 2008
Faraz_1984's Avatar
Banned
 
Join Date: Apr 2008
Location: Alone
Posts: 590
Thanks: 768
Thanked 286 Times in 200 Posts
Faraz_1984 is infamous around these parts
Default V

  • VALUE ADDED
  • This usually refers to FIRMS, where it is defined as the value of the firm’s OUTPUT minus the value of all its inputs purchased from other firms. It is therefore a measure of the PROFIT earned by a particular firm plus the wages it has paid. As a rule, the more value a firm can add to a product, the more successful it will be. In many countries, the main form of INDIRECT TAXATION is value-added tax, which is levied on the value created at each stage of production. However, it is paid, ultimately, by whoever consumes the finished product.
  • Another definition of value added refers to the change in the overall economic value of a company. This takes into account changes in the combined value of its SHARES, ASSETS, DEBT and other liabilities. Part of the pay of company bosses is often linked to how much economic value is added to the company under their management.
  • VALUE AT RISK
  • Value at risk models, widely used for RISK MANAGEMENT by BANKS and other financial institutions, use complex computer algorithms to calculate the maximum that the institution could lose in a single day’s trading. These models seem to work well in normal conditions but not, alas, during financial crises, which is arguably when it is most necessary to know how much value is at RISK.
  • VARIABLE COSTS
  • Part of a firm’s production costs that changes according to how much OUTPUT it produces. Contrast with FIXED COSTS. Examples include some purchases of raw materials and workers’ overtime payments. In the long run, most costs can be varied.
  • VELOCITY OF CIRCULATION
  • The speed with which MONEY whizzes around the economy, or, put another way, the number of times it changes hands. Technically, it is measured as GNP divided by the MONEY SUPPLY (pick your own definition). It is an important ingredient of the QUANTITY THEORY OF MONEY.
  • VENTURE CAPITAL
  • PRIVATE EQUITY to help new companies grow. A valuable alternative source of finance for ENTREPRENEURS, who might otherwise have to rely on a loan from a probably RISK AVERSE bank manager. The United States has by far the world’s biggest venture capital industry. Some economists reckon that this is why more innovative new firms have become successful there. As legend has it, with a bright idea, a garage to work in and some venture capital, anybody can create a Microsoft. However, the bursting of the dotcom BUBBLE in 2000 threw American venture capital into a severe RECESSION, damaging its reputation for financing profitable INNOVATION.
  • VERTICAL EQUITY
  • One way to keep TAXATION fair. Vertical equity is the principle that people with a greater ability to pay should hand over more tax to the GOVERNMENT than those with a lesser ability to pay. (See EQUITY and HORIZONTAL EQUITY.)
  • VERTICAL INTEGRATION
  • Merging with a company at a different stage in the production process, for instance, a car maker merging with a car retailer or a parts supplier. Unlike HORIZONTAL INTEGRATION, it is likely to raise ANTITRUST concerns only if one of the companies already enjoys some MONOPOLY power, which the deal might allow it to extend into a new market.
  • VISIBLE TRADE
  • Physical EXPORTS and IMPORTS, such as coal, computer chips and cars. Also known as merchandise trade. Contrast with INVISIBLE TRADE. (See BALANCE OF PAYMENTS.)
  • VOLATILITY
  • The most widely accepted measure of RISK in FINANCIAL MARKETS is the amount by which the price of a security swings up and down. The more volatile the price, the riskier is the SECURITY. Not least because there is no obvious alternative, economists often use past volatility to forecast the future risk of a security. However, as the saying goes, past results are not necessarily guides to future performance.
  • VOLUNTARY UNEMPLOYMENT
  • Unemployment through opting not to work, even though there are jobs available. This is the joblessness that remains when there is otherwise FULL EMPLOYMENT. It includes FRICTIONAL UNEMPLOYMENT as a result of people changing jobs, people not working while they undertake JOB SEARCH and ¬people who just do not want to work.
Reply With Quote
  #44  
Old Wednesday, August 06, 2008
Faraz_1984's Avatar
Banned
 
Join Date: Apr 2008
Location: Alone
Posts: 590
Thanks: 768
Thanked 286 Times in 200 Posts
Faraz_1984 is infamous around these parts
Default W

  • WAGE DRIFT
  • The difference between basic pay and total earnings. Wage drift consists of things such as overtime payments, bonuses, PROFIT share and performance-related pay. It usually increases during periods of strong GROWTH and declines during an economic downturn.
  • WAGES
  • The PRICE of LABOUR. In theory, wages ought to change so that the SUPPLY and DEMAND in the labour market are always in EQUILIBRIUM. In practice, wages are often sticky, especially in a downward direction: when demand for labour falls, wages do not fall. In this situation, the fall in demand results in higher involuntary UNEMPLOYMENT. Trade UNIONS may use collective bargaining to keep wages above the market-clearing rate. Furthermore, many governments impose a MINIMUM WAGE that employers must pay.
  • FIRMS may choose to pay above the equilibrium wage to increase the PRODUCTIVITY of workers. Such so-called EFFICIENCY WAGES may make workers less likely to join another firm, so cutting the employer’s hiring and training costs. They may encourage workers to do a better job. They may also attract a higher quality of worker than wages at the market-clearing rate; better workers may have a higher RESERVATION WAGE (the lowest wage for which they are willing to work) than the market-clearing equilibrium.
  • In recent years, employers have tried to reduce wage stickiness by increasing the proportion of pay that is linked to the performance of their firm. Thus if falling demand reduces the employer’s PROFIT the pay of its employees falls automatically, so it does not have to lay off as many workers as it otherwise would. Performance-related wages can also reduce AGENCY COSTS by giving hired hands a stronger incentive to do a good job.
  • WEALTH EFFECT
  • As people get wealthier, they consume more. This wealth effect has important consequences for MONETARY POLICY. When there is an INTEREST RATE increase, future INCOME from ASSETS such as EQUITIES must be discounted at a higher rate than before. As a result their owners feel poorer and spend less. A cut in interest rates has the opposite effect. Economists disagree on the wealth ELASTICITY of CONSUMPTION: how much consumer spending would rise if wealth increased by, say, 1%. Different consumers may have different wealth elasticity. If most of the increase in wealth goes to poorer people this may have a different wealth effect than if most of it went to people who are already wealthy. The source of the wealth increase may also matter. If SHARE PRICES rise or interest rates fall, consumers may be slow to spend out of their increased wealth if they think the increase may be temporary. However, if they think a sharp rise in share prices is permanent and the stockmarket then tumbles, the result may be that consumption falls by enough to cause a RECESSION. The wealth effect of rising HOUSE PRICES is particularly uncertain.
  • WEALTH TAX
  • In most countries, the majority of wealth is concentrated in a fairly small number of hands. This makes a wealth tax appealing to politicians, as it should allow substantial amounts of revenue to be raised from comparatively few people, allowing the TAX BURDEN on the majority of the POPULATION to be kept down. It also appeals because it promotes meritocracy by making it harder to be born with a silver spoon in your mouth. A wealth tax reduces the disparities in wealth rather than INCOME that are the biggest determinant of how the scales are weighted for succeeding generations. What could be better than a tax that produces lots of money for the GOVERNMENT and strikes most voters as being extremely fair?
  • Alas, as critics point out, wealth taxes may cause inefficiency by discouraging wealth-creating economic activities. Moreover, the revenue collected may prove disappointing. The wealthiest people are often the most skilled at TAX AVOIDANCE, not least because they can afford good tax accountants. Despite the enormous concentration of wealth in a small part of the population, on AVERAGE across the OECD wealth taxes account for less than 2% of total tax revenue.
  • A wealth tax can achieve HORIZONTAL EQUITY and VERTICAL EQUITY (so that people of similar means pay the same and those with more pay more) in ways that INCOME TAX cannot. For instance, neither a poor person nor a rich person with no income would pay income tax, and only the rich person would pay the wealth tax.
  • Wealth taxes come in two main forms. CAPITAL transfer taxes are levied when wealth changes hands, either at death (inheritance tax) or through donation (gift tax). Annual wealth taxes are levied each year as a fraction of the taxpayer’s net worth. Some people regard CAPITAL GAINS tax as a wealth tax, but, strictly speaking, it is a tax on the income earned on capital, rather than a wealth tax on the capital itself.
  • WEIGHTLESS ECONOMY
  • At the start of the 21st century, the total OUTPUT of the American economy weighed roughly the same as it did 100 years earlier. Yet the value of that output, in REAL TERMS, was 20 times greater. Output is increasingly weightless, produced from INTELLECTUAL CAPITAL rather than physical materials. Production has shifted from steel, heavy copper wire and vacuum tubes to microprocessors, fine fibre-optic cables and transistors. SERVICES have increased their share of GDP. This weightless or dematerialised economy, most economists agree, is not just lighter but also more efficient.
  • WELFARE
  • Americans use welfare as shorthand for GOVERNMENT handouts to the poor. Economists use it to describe the well being of an individual or society, as in “Are tax cuts welfare-enhancing?”. This is economist-speak for “Will tax cuts improve the overall well being of the country?” (See UTILITY.)
  • WELFARE ECONOMICS
  • Economics with a heart. The study of how different forms of economic activity and different methods of allocating scarce resources affect the well being of different individuals or countries. WELFARE economics focuses on questions about EQUITY as well as EFFICIENCY.
  • WELFARE TO WORK
  • Active LABOUR market policies, in which GOVERNMENT handouts to the unemployed come with strings attached, designed to get the recipient off welfare and back to work as quickly as possible.
  • WINDFALL GAINS
  • INCOME you do not expect, such as winning a lottery prize. Economists have long argued about whether people are likely to save such windfalls or spend them. According to the PERMANENT INCOME HYPOTHESIS, favoured by most economists, people save the lion's share of windfall gains. But real life often contradicts this; ask any lottery winner.
  • WINDFALL PROFIT
  • A controversial concept, often used by politicians to justify imposing a TAX on PROFIT that in theory is earned unexpectedly, through circumstances beyond the control of the company concerned, and is thus deemed undeserved and ripe for the taking by the tax authorities. As the profits were neither expected nor a result of the efforts of the firm, taxing them should not harm the firm’s incentives to maximise future profits. The problem comes when greedy politicians start claiming that profits are windfalls when in fact they are deserved and expected. Then taxing them sends a signal to FIRMS that they should not try too hard to make profits, as if they do too well they will not get to keep the profits anyway. If this became widely believed, effort would probably decline and economic GROWTH would be slower.
  • WINNER-TAKES-ALL MARKETS
  • No time for losers. In certain jobs, the market pays individuals not according to their absolute performance but according to their performance relative to others. The INCOME of window cleaners depends upon how many windows they clean, but investment bankers’ pay may depend upon their performance ranking. Slightly more talented window cleaners will make only a small difference to the transparency of their customers’ windows, but in the markets for selling BONDS that slight edge can mean everything. Rewards at the top are therefore disproportionately high, and rewards below the top are disproportionately low. People in these professions are often willing to work for very little just to have the chance to compete for the top job and the jackpot that comes with it.
  • This sort of economics has long been prevalent in celebrity-dominated businesses such as entertainment and sport. But this reward structure is spreading to more and more occupations, including journalism, the law, medicine and corporate management. GLOBALISATION has expanded the market for skills, increasing the opportunities for the rich to become even richer.
  • In a normal market, sumptuous superstar incomes would attract competition from more applicants to do the jobs that pay them. This would then bring salaries down to less exotic levels. In a winner-takes-all market, this does not happen. An investment BANK wants the best analysts and dealers; second best will not do. It can also afford to pay. Some economists believe that because of more liberalised markets there will be growing INEQUALITY in most professions and the emergence of a winner-takes-all society.
  • WITHHOLDING TAX
  • A tax that is collected at source, before the taxpayer has seen the INCOME or CAPITAL to which the tax applies. In other words, that part of the income or capital due in tax is withheld from the taxpayer, who therefore cannot easily avoid paying the tax. Withholding taxes are frequently imposed on INTEREST and DIVIDENDS.
  • WORLD BANK
  • An institution created with the IMF at BRETTON WOODS in 1944 and opened in 1946. The World Bank has three main branches: the International Bank for Reconstruction and Development (IBRD), the International Development Agency (IDA) and the International Finance Corporation (IFC). Collectively, it aims to promote economic development in the world’s poorer countries through advice and long-term lending, averaging $30 ¬billion a year, spread around 100 countries.
  • Critics of the World Bank say that it often worsens the problems facing DEVELOPING COUNTRIES. Its advice has often been guided by economic fashion, which led it to support a centrally planned brand of DEVELOPMENT ECONOMICS in the 1960s and 1970s, before switching to PRIVATISATION and STRUCTURAL ADJUSTMENT in the 1980s and then to promoting democracy and economic TRANSPARENCY, and attacking CRONY CAPITALISM, in the late 1990s. Until recently, it has generally supported big, ¬high-profile projects rather than more economically useful smaller schemes. It has often failed to ensure that its loans have been spent on the intended project. Its willingness to pump money into struggling countries creates a potential MORAL HAZARD, in which politicians may have little incentive to govern well because they believe that, if they do a bad job, the World Bank will come to the rescue. The increase in private-sector lending to and INVESTMENT in emerging markets has led to growing discussion of whether the World Bank is any longer needed.
  • WORLD TRADE ORGANISATION
  • Bête noire of anti-GLOBALISATION protesters. The World Trade Organisation is the governing body of international trade, setting and enforcing the rules of trade and punishing offenders. Established during the Uruguay Round of talks under the GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT), it opened for business in 1995 with a membership of 132 countries (rising to 146 by 2003). Countries used to break GATT rules with impunity. They seem to be finding it harder to do so under the WTO. Even so, protestors complain that it does not promote FAIR TRADE but does promote the interest of rich countries over poorer one. Supporters of FREE TRADE, including The Economist, reckon that all countries are better off as part of a well-regulated international trading system, and that the WTO is the most likely source of the good REGULATION that is needed.
Reply With Quote
  #45  
Old Wednesday, August 06, 2008
Faraz_1984's Avatar
Banned
 
Join Date: Apr 2008
Location: Alone
Posts: 590
Thanks: 768
Thanked 286 Times in 200 Posts
Faraz_1984 is infamous around these parts
Default X

  • X-EFFICIENCY
  • Producing OUTPUT at the minimum possible cost. This is not enough to ensure the best sort of economic EFFICIENCY, which maximises society’s total CONSUMER plus PRODUCER SURPLUS, because the quantity of output produced may not be ideal. For instance, a MONOPOLY can be an X-efficient producer, but in order to maximise its PROFIT it may produce a different quantity of output than there would be in a surplus-maximising market with PERFECT COMPETITION.
Reply With Quote
  #46  
Old Wednesday, August 06, 2008
Faraz_1984's Avatar
Banned
 
Join Date: Apr 2008
Location: Alone
Posts: 590
Thanks: 768
Thanked 286 Times in 200 Posts
Faraz_1984 is infamous around these parts
Default Y

  • YIELD
  • The annual income from a SECURITY, expressed as a percentage of the current market PRICE of the security. The yield on a SHARE is its DIVIDEND divided by its price. A BOND yield is also known as its INTEREST RATE: the annual coupon divided by the market price.
  • YIELD CURVE
  • Shorthand for comparisons of the INTEREST RATE on GOVERNMENT BONDS of different maturity. If investors think it is riskier to buy a bond with 15 years until it matures than a bond with five years of life, they will demand a higher interest rate (YIELD) on the longer-dated bond. If so, the yield curve will slope upwards from left (the shorter maturities) to right. It is normal for the yield curve to be positive (upward sloping, left to right) simply because investors normally demand compensation for the added RISK of holding longer-term SECURITIES. Historically, a downward-sloping (or inverted) yield curve has been an indicator of RECESSION on the horizon, or, at least, that investors expect the CENTRAL BANK to cut short-term interest rates in the near future. A flat yield curve means that investors are indifferent to maturity risk, but this is unusual. When the yield curve as a whole moves higher, it means that investors are more worried that INFLATION will rise for the foreseeable future and therefore that higher interest rates will be needed. When the whole curve moves lower, it means that investors have a rosier inflationary outlook.
  • Even if the direction (up or down) of a yield curve is unchanged, useful information can be gleaned from changes in the SPREADS between yields on bonds of different maturities and on different sorts of bonds with the same maturity (such as government bonds versus corporate bonds, or thinly traded bonds versus highly liquid bonds).
  • YIELD GAP
  • A way of comparing the performance of BONDS and SHARES. The gap is defined as the AVERAGE YIELD on equities minus the average yield on bonds. Because shares are usually riskier investments than bonds, you might expect them to have a higher yield. In practice, the yield gap is often negative, with bonds yielding more than equities. This is not because investors regard equities as safer than bonds (see EQUITY RISK PREMIUM). Rather, it is that they expect most of the benefit from buying shares to come from an increase in their PRICE (CAPITAL appreciation) rather than from DIVIDEND payments. Bond investors usually expect more of their gains to come from coupon payments. They also worry that INFLATION will erode the REAL VALUE of future coupons, making them value current payments more highly than those due in years to come. Moreover, the usefulness of the dividend yield as a guide to the performance of shares has declined since the early 1990s, as increasingly companies have chosen to return cash to shareholders by buying back their own shares rather than paying out bigger dividends.
Reply With Quote
  #47  
Old Wednesday, August 06, 2008
Faraz_1984's Avatar
Banned
 
Join Date: Apr 2008
Location: Alone
Posts: 590
Thanks: 768
Thanked 286 Times in 200 Posts
Faraz_1984 is infamous around these parts
Default Z

  • ZERO-SUM GAME
  • When the gains made by winners in an economic transaction equal the losses suffered by the losers. It is identified as a special case in GAME THEORY. Most economic transactions are in some sense positive-sum games. But in popular discussion of economic issues, there are often examples of a mistaken zero-sum mentality, such as “PROFIT comes at the expense of WAGES”, “higher PRODUCTIVITY means fewer jobs”, and “IMPORTS mean fewer jobs here”.
Reply With Quote
  #48  
Old Wednesday, August 06, 2008
Aarwaa's Avatar
Senior Member
CSP Medal: Awarded to those Members of the forum who are serving CSP Officers - Issue reason: CSS 2007Medal of Appreciation: Awarded to appreciate member's contribution on forum. (Academic and professional achievements do not make you eligible for this medal) - Issue reason:
 
Join Date: Mar 2005
Posts: 802
Thanks: 141
Thanked 292 Times in 153 Posts
Aarwaa has a spectacular aura aboutAarwaa has a spectacular aura aboutAarwaa has a spectacular aura about
Default

@ Faraz_1984

In future, give the source of information in ur posts.
__________________
Regards

Aarwaa

Pakistan is ruled by three As - Army, America and Allah.
Reply With Quote
The Following 2 Users Say Thank You to Aarwaa For This Useful Post:
Faraz_1984 (Wednesday, August 06, 2008), yasirkhanid (Sunday, January 15, 2012)
  #49  
Old Wednesday, August 06, 2008
Faraz_1984's Avatar
Banned
 
Join Date: Apr 2008
Location: Alone
Posts: 590
Thanks: 768
Thanked 286 Times in 200 Posts
Faraz_1984 is infamous around these parts
Default Dear Aarwaa

this Glossary of book
M L jhingan ( indian author)
K K dewett
A H Shaid
Paul Samuleson

and with help of Babylon Dictionary

Thank you
Reply With Quote
The Following User Says Thank You to Faraz_1984 For This Useful Post:
Aarwaa (Thursday, August 07, 2008)
Reply

Thread Tools Search this Thread
Search this Thread:

Advanced Search

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are On
Pingbacks are On
Refbacks are On


Similar Threads
Thread Thread Starter Forum Replies Last Post
World Wide Economics Surmount Humorous, Inspirational and General Stuff 0 Friday, April 03, 2009 09:38 PM
Economics Notes Sureshlasi Economics 0 Friday, September 12, 2008 12:02 PM
An Introduction To Economics In 5,000 Words Faraz_1984 Economics 1 Saturday, May 17, 2008 07:39 PM
Economics an overview Naseer Ahmed Chandio Economics 0 Wednesday, December 13, 2006 09:40 AM
Economics Of Cows Yasir Hayat Khan Humorous, Inspirational and General Stuff 1 Saturday, May 06, 2006 12:44 AM


CSS Forum on Facebook Follow CSS Forum on Twitter

Disclaimer: All messages made available as part of this discussion group (including any bulletin boards and chat rooms) and any opinions, advice, statements or other information contained in any messages posted or transmitted by any third party are the responsibility of the author of that message and not of CSSForum.com.pk (unless CSSForum.com.pk is specifically identified as the author of the message). The fact that a particular message is posted on or transmitted using this web site does not mean that CSSForum has endorsed that message in any way or verified the accuracy, completeness or usefulness of any message. We encourage visitors to the forum to report any objectionable message in site feedback. This forum is not monitored 24/7.

Sponsors: ArgusVision   vBulletin, Copyright ©2000 - 2024, Jelsoft Enterprises Ltd.