Phillips curve
In the late 1950s, the British economist A.W. Phillips demonstrated an inverse statistical association between annual changes in average wage rates andthe rate of unemployment . When the annual wage growth rates and unemployment rates for Great Britain for each of the years from 1861 to 1957 were plotted as points on a two-dimensional graph,they rather neatly approximated a shallow hyperbola-shaped curve convex to the origin of the graph. That is, in years when unemployment rates were low, averagemoney wages tended to grow rapidly; but in years when unemployment rates were high, average money wages tended to grow little or even to decline. Other economists soon repeated Phillips's procedures with similardata from a number ofother industrialized countries and mostly found similar statistical relationships.
At the time, many Keynesian economists reasoned from this finding as follows: Because unemployment rates and wage increase rates are inversely related, the traditional government goals of maintaining both low inflation and low unemployment would seem to be inconsistent. Because wages are such a large share of the costs of production, rapid increases in average wages are bound to push up the general price level.
Sunday, 21 October 2012
Fiscal policy (FP)
Fiscal policy
That part of government policy which is concerned with raising revenue through taxation and with deciding on the amounts and purposes of government spending. Keynesian economic theorists believe that government can, and should, regulate the overall pace of activity in the national economy through fiscal policy, principallyby deliberately having government borrow to spend more than it takes in (running a budget deficit ) to increase total demand for goods and services in times of high unemployment and economic slowdown (the deficit being created either by cutting taxes or by increasing spending or both). Similarly, Keynesian theorists would advocate havinggovernment spend less than it takes in (running a budget surplus ) to cool down the national economy when too great an expansion of total demand has pushed production to its physical limits and threatens to bring on excessive inflation .
That part of government policy which is concerned with raising revenue through taxation and with deciding on the amounts and purposes of government spending. Keynesian economic theorists believe that government can, and should, regulate the overall pace of activity in the national economy through fiscal policy, principallyby deliberately having government borrow to spend more than it takes in (running a budget deficit ) to increase total demand for goods and services in times of high unemployment and economic slowdown (the deficit being created either by cutting taxes or by increasing spending or both). Similarly, Keynesian theorists would advocate havinggovernment spend less than it takes in (running a budget surplus ) to cool down the national economy when too great an expansion of total demand has pushed production to its physical limits and threatens to bring on excessive inflation .
GDP; Gross Domestic Product
Gross Domestic Product (GDP)
An estimate of the total money value of all the final goods and servicesproduced in a given one-year period using the factors of production located within a particular country's borders
An estimate of the total money value of all the final goods and servicesproduced in a given one-year period using the factors of production located within a particular country's borders
GDP; Gross Domestic Product
Gross Domestic Product (GDP)
An estimate of the total money value of all the final goods and servicesproduced in a given one-year period using the factors of production located within a particular country's borders
An estimate of the total money value of all the final goods and servicesproduced in a given one-year period using the factors of production located within a particular country's borders
GNP; Gross National Product
Gross National Product (GNP)
An estimate of the total money value of all the final goods and servicesproduced in a given one-year period by the factors of production owned by a particular country's residents. ("Final" goods and services means goods and services sold or otherwise provided to their final consumers --that is, to avoid doublecounting, the value of steel sold to GM to make a car is not added separately into the GNP or GDP totals because its value is already included when we add in the final sales price of the car tothe customer.)
An estimate of the total money value of all the final goods and servicesproduced in a given one-year period by the factors of production owned by a particular country's residents. ("Final" goods and services means goods and services sold or otherwise provided to their final consumers --that is, to avoid doublecounting, the value of steel sold to GM to make a car is not added separately into the GNP or GDP totals because its value is already included when we add in the final sales price of the car tothe customer.)
Growth theory
Growth theory
The part of economic theory that seeks to explain (and hopes to predict) the rate at which a country's economy will grow over time. Economic growth is usually measured as the annualpercentage rate of growth in one or another of the country's major national income accounting aggregates,such as Gross National Product or Gross Domestic Product (almost always with appropriate statistical adjustments to discountthe potentially misleading effects of price inflation). Just about any country's economy will show sizable year-to-year and quarter-to-quarter fluctuations in its economic growth rate, but economic growth theorists tend to concentrate their efforts on analyzing and explaining the smaller variations in thelonger-term trend or average rate of economic growth over periods of a decade or more. They leave explanation of the shorter-term fluctuations around thelonger-term trend to specialists in business cycle theory because investigation has shownthat the predominant influences on short-term growth rates seemto differ in important ways from the determinants of an economy's long term average growth performance. It might also be added that the political effects of variations in long rangeeconomic growth ratestend to be substantiallydifferent from the political effects of the booms and busts of thebusiness cycle.
The short term ups anddowns of the business cycle have dramatic effects on popular perceptions of the country's economic well-being. In a recession, hundreds of thousands or even millions of people maybecome unemployed and suffer dramatic declines in their incomes for the duration of the crisis -- usually for a period of somewhere between sixmonths and one-and-a-half years before more normal economic conditions return again. Yet over the long haul, even rather small increases or decreases in the trend rate of economicgrowth will have muchmore profound and enduring effects on economic production and hence on the material living standards of the population.
The part of economic theory that seeks to explain (and hopes to predict) the rate at which a country's economy will grow over time. Economic growth is usually measured as the annualpercentage rate of growth in one or another of the country's major national income accounting aggregates,such as Gross National Product or Gross Domestic Product (almost always with appropriate statistical adjustments to discountthe potentially misleading effects of price inflation). Just about any country's economy will show sizable year-to-year and quarter-to-quarter fluctuations in its economic growth rate, but economic growth theorists tend to concentrate their efforts on analyzing and explaining the smaller variations in thelonger-term trend or average rate of economic growth over periods of a decade or more. They leave explanation of the shorter-term fluctuations around thelonger-term trend to specialists in business cycle theory because investigation has shownthat the predominant influences on short-term growth rates seemto differ in important ways from the determinants of an economy's long term average growth performance. It might also be added that the political effects of variations in long rangeeconomic growth ratestend to be substantiallydifferent from the political effects of the booms and busts of thebusiness cycle.
The short term ups anddowns of the business cycle have dramatic effects on popular perceptions of the country's economic well-being. In a recession, hundreds of thousands or even millions of people maybecome unemployed and suffer dramatic declines in their incomes for the duration of the crisis -- usually for a period of somewhere between sixmonths and one-and-a-half years before more normal economic conditions return again. Yet over the long haul, even rather small increases or decreases in the trend rate of economicgrowth will have muchmore profound and enduring effects on economic production and hence on the material living standards of the population.
Incentive
Incentive
Something that provides a motive for aperson to choose a particular course of action. Organized cooperative activities ina social setting -- such as cooperation for the purpose of economic production -- depends upon each of the participants having some sort of incentive to behave in the required cooperative fashion. Different societies (and even different organizations within the same society) vary considerably in the nature of the incentive systems upon which they characteristically rely to organize their common projects.
Incentives may be classified according to a number of different schemes, but one of the more useful classifications subdivides incentives into three general types: moral incentives,coercive incentives andremunerative incentives.
Something that provides a motive for aperson to choose a particular course of action. Organized cooperative activities ina social setting -- such as cooperation for the purpose of economic production -- depends upon each of the participants having some sort of incentive to behave in the required cooperative fashion. Different societies (and even different organizations within the same society) vary considerably in the nature of the incentive systems upon which they characteristically rely to organize their common projects.
Incentives may be classified according to a number of different schemes, but one of the more useful classifications subdivides incentives into three general types: moral incentives,coercive incentives andremunerative incentives.
Saturday, 20 October 2012
Annual Rate of Return
Annual Rate of Return The annual rate of gain or loss on an investment expressed as a percentage.
Asset Allocation
Asset Allocation; The diversification of investments among several asset classes, such as stocks, bonds, and short-term investments (e.g., cash equivalents). Proper asset allocation may limit risk and increase opportunities.
Average Portfolio Maturity (APM)
Average Portfolio Maturity The average maturity of all the bonds in a bond fund’s portfolio.
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