- Industry: Economy; Printing & publishing
- Number of terms: 15233
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The fruit of economic activity: whatever is produced by using the factors of production.
Industry:Economy
A cartel set up in 1960 that wrought havoc in industrialized countries during the 1970s and early 1980s by forcing up oil prices (which quadrupled in a few weeks during 1973–74 alone), resulting in high inflation and slow growth. A lot of productive capital equipment that had been viable at lower oil prices proved to be unprofitable to run at the higher prices and was shut down. Some economists reckon that market forces would have driven up oil prices anyway and that OPEC merely capitalized on the opportunity. Since the early 1980s, OPEC's influence has waned. Many firms have switched to production methods that need less oil, or less energy altogether. Non-OPEC producers such as the UK have brought new oil fields on stream. And some individual members of the cartel have broken ranks by failing to restrict their oil production, resulting in lower oil prices.
Industry:Economy
A Paris-based club for industrialized countries and the best of the rest. It was formed in 1961, building on the Organization for European Economic Co-operation (OEEC), which had been established under the Marshall plan. By 2003, its membership had risen to 30 countries, from an original 20. Together, OECD countries produce two-thirds of the world’s goods and services. The OECD provides a policy talking shop for governments. It produces forests-worth of documents discussing public policy ideas, as well as detailed empirical analysis. It also publishes reports on the economic performance of individual countries, which usually contain lots of valuable information even if they are rarely very critical of the policies implemented by a member government.
Industry:Economy
As good as it gets, given the constraints you are operating within. For the concept of optimum to mean anything, there must be both a goal, say, to maximize economic welfare, and a set of constraints, such as an available stock of scarce economic resources. Optimizing is the process of doing the best you can in the circumstances.
Industry:Economy
A geographical area within which it would pay to have a single currency. An optimal currency area can come in many sizes. Some may span several countries and others may be smaller than an individual country. The benefits of having one currency are lower foreign exchange and currency hedging costs and more transparent pricing (because every price is expressed in the same currency). But unless the single currency is used within an optimal currency area, these benefits may be dwarfed by the costs. A single currency means a single monetary policy and no opportunity for one part of the currency area to change its exchange rate with the other parts. This can be a big problem if a country or region is likely to suffer from asymmetric shocks that affect it differently from the rest of the single-currency area, because it will no longer be able to respond by loosening its national monetary policy or devaluing its currency. This may not be an insuperable problem if workers in the affected country are able and willing to move freely to other countries; if wages and prices are flexible and can adjust to the shock; or if fiscal policy can shift resources to areas hurt by a shock from areas that are not hurt. For a currency area to be optimal, ideally asymmetric shocks should be rare, implying that the economies involved are on similar business cycles and have similar structures. Moreover, the single monetary policy should affect all the constituent parts in the same way (an interest rate cut should not, say, reduce unemployment in one part and increase inflation in another). There should be no cultural, linguistic or legal barriers to labor mobility across frontiers; there should be wage flexibility; and there should be some system for transferring resources to regions that are suffering. In practice, few of the parts of the world that have a single currency are optimal currency areas, probably including the Euro zone, although having a single currency often makes them become gradually more alike and thus more optimal.
Industry:Economy
The true cost of something is what you give up to get it. This includes not only the money spent in buying (or doing) the something, but also the economic benefits (utility) that you did without because you bought (or did) that particular something and thus can no longer buy (or do) something else. For example, the opportunity cost of choosing to train as a lawyer is not merely the tuition fees, price of books, and so on, but also the fact that you are no longer able to spend your time holding down a salaried job or developing your skills as a footballer. These lost opportunities may represent a significant loss of utility. Going for a walk may appear to cost nothing, until you consider the opportunity forgone to use that time earning money. Everything you do has an opportunity cost (see shadow price). Economics is primarily about the efficient use of scarce resources, and the notion of opportunity cost plays a crucial part in ensuring that resources are indeed being used efficiently.
Industry:Economy
Central banks buying and selling securities in the open market, as a way of controlling interest rates or the growth of the money supply. By selling more securities, they can mop up surplus money; buying securities adds to the money supply. The securities traded by central banks are mostly government bonds and treasury bills, although they sometimes buy or sell commercial securities.
Industry:Economy
An economy that allows the unrestricted flow of people, capital, goods and services across its borders; the opposite of a closed economy.
Industry:Economy
One of the best-known fallacies in economics is the notion that there is a fixed amount of work to be done – a lump of labor – which can be shared out in different ways to create fewer or more jobs. For instance, suppose that everybody worked 10% fewer hours. Firms would need to hire more workers. Hey presto, unemployment would shrink. In 1891, an economist, D. F. Schloss, described such thinking as the lump of labor fallacy because, in reality, the amount of work to be done is not fixed. Government-imposed restrictions on the amount of work people may do can actually reduce the efficiency of the labor market, thereby increasing unemployment. Shorter hours will create more jobs only if weekly pay is also cut (which workers are likely to resist) otherwise costs per unit of output will rise. Not all labor costs vary with the number of hours worked. Fixed costs, such as recruitment and training, can be substantial, so it will cost a firm more to hire two part-time workers than one full-timer. Thus a cut in the working week may raise average costs per unit of output and cause firms to buy fewer total hours of labor. A better way to reduce unemployment may be to stimulate demand and so increase output; another is to make the labor market more flexible, not less.
Industry:Economy
When we are all dead, according to Keynes. Unimpressed by the thrust of classical economics, which said that economies have a long-run tendency to settle in equilibrium at full employment, he wanted economists to try to explain why in the short run economies are so often in disequilibrium, or in equilibrium at high levels of unemployment.
Industry:Economy
