Economics Glossary copied from an assignment for an IB course at second year of high school. It contains 377 terms. absolute advantagean advantage in the production of all goods and services absolute monopolya firm that supplies and controls the entire market for its product . accepting housea merchant bank that accepts bills of exchange accounting costthe cost of something in financial terms ad-valorem taxa tax based on value, for example, VAT is currently charged at 17.5 per cent of the value of the product . aggregate (monetary) demandthe total level of demand for all goods and services in an economy aggregate supplythe total supply of goods and services allocation problemthe problem of how best to allocate scarce resources to the production of the goods and services that will satisfy the wants of society allocative efficiencythe efficiency with which resources are allocated to the production of different goods and services in order to maximise the utility obtained by society from those resources arithmetic progressiona sequence of numbers each of which differs from the preceding one by a constant amount (for example, 2, 4, 6,8,10,12...) artificial resourcea resource that does not occur naturally asseta long-lasting capital item not used up in the process of production at call and short noticea loan that is repayable on demand average costtotal cost divided by output average productthe average product of a factor of production is the total product divided by the number of units of that factor employed balance of paymentsa summary of a country's financial transactions with the rest of the world during the preceding twelve months balance of tradea summary of a country's visible imports and exports during the preceding twelve months balance sheetan accounting statement showing the assets and liabilities of an orgariisation at a point in time balancing iteman item included to cover errors and omissions and make an account balance bank billa bill of exchange that has been accepted by a clearing bank or accepting house Bank of Englandthe central bank of the United Kingdom, having responsibility for setting interest rates and implementing the government's monetary policies bank rateoriginally the rate at which the Bank of England would rediscount bills of exchange; this is now often used to refer to the minimum lending rate barriers to entry/exitdifficulties or obstacles to entering or leaving a particular market, such as the costs of setting up base yeara year chosen as the standard against which other years can be statistically compared bill of exchangea form of credit whereby the seller of goods or services sets out the amount owed by a purchaser and demands payment on a specified date. The purchaser acknowledges the debt by signing the bill, which may then be discounted for cash by an accepting house bondfixed interest-bearing securities brandingestablishing a recognisable identity for a product normally associated with a brand name" broad moneyM4 is a measure of money supply that includes notes and coins in circulation plus non-interest bearing retail bank deposits, other interest bearing deposits up to five years original maturity, building society shares and deposits up to five years maturity, all outside the public sector; MS consists of M4 plus most national savings ordinary accounts plus some money-market items such as treasury bills and bank bills budgeta financial plan setting targets for expenditure and income building societya financial institution that raises money almost entirely from private citizens and provides loans almost entirely for the purpose of house purchase capitalresources such as land, buildings, machinery and materials that are used for the production of goods and services but are not use up in the production process; see also circulating capital, fixed capital capital costthe cost of capital items required by a business, such as premises, machinery and equipment capital deepeningan increase in the amount of capital per worker in an economy, increasing productivity per worker j capital deficiencythe lack of productive capital equipment such as machinery in an economy, which therefore has to rely on the use of less productive labour capital formationthe creation of capital capital gainthe increase in value of a capital item over time capital marketthe market for large funds that can be used to purchase capital items capital wideningan increase in an economy's capital where the proportion of capital to labour remains the sa-me capital-intensive productionproduction using a large amount of machinery and equipment in relation to labour cartelan association of firms providing the same product for the purposes of controlling the market for that product cash flowthe inflows and outflows of a firm's money cash reserve ratioa bank's ratio of cash to loans central banka financial institution that has a role in implementing government economic policy and acts as banker to commercial banks and the government centralised economya government-controlled economy certificate of deposita promise issued by a bank in return for a deposit, to repay the amount deposited with interest on a specified date ceteris pmibusa latin term meaning 'all things being equal chequea form instructing a bank to transfer money from the drawer's account to the account of the payee. Cheques can also be used to instruct a bank to pay cash to the payee (who may also be the drawer) circulating capitalresources that are used up in the production of goods and services, sold to customers as finished goods and returned to the business as income from the sale of those goods classical (theory of) unemploymentunemployment due to institutional factors such as a high minimum wage, or trade unions and professional organisations demanding high wages clearing bankshigh street banks, sometimes known as commercial or retail banks, forming the link between ordinary citizens and the financial system by providing a channel for money to be deposited and used for credit creation closed economya self-sufficienteconomy that does not have to rely on international trade closed shopa firm or industry in which employment is open only to those who are members of specified trade unions coefficient of price elasticitya numerical measure of price elasticity collective bargainingnegotiations over pay and conditions carried out by groups of employers and their employees, who are normally represented by trade unions commercial banksee clearing banks commercial rentthe reward earned by owners of land for the use of their land commodity agreementan agreement concerning the production, supply and price of a primary good common agricultural policy (CAP)EU policy covering the level of production, price and subsidy of agriculture and agricultural produce in member states comparative advantagea relative advantage in the production of some goods or services competition commissionregulatory body set'up by the government to ensure that any proposed merger between firms that might affect the competitiveness of the market is in the interests of consumers competitive demand demand for goods that are substitutes for each other complementary goodsgoods that are generally used or consumed in conjunction with other goods, such as pens and ink conditions of demandfactors affecting the lev.el of demand generally or for a specific product conditions of supplyfactors affecting the level of supply generally or for a specific product consumption functionthe relationship between income and planned aggregate consumption contestable marketa market that is open to competition cost of livinga measure of the general level of household expenditure cost-push inflationa rise in prices due to the costs of production increasing more rapidly than production costs of productionexpenditure on items such as raw materials, parts and labour used directly in the production of goods and services and used up in the production of those goods and services council taxlocal tax imposed on households by local authorities credit creationthe use of funds deposited with a financial institution to make loans in excess of the amount deposited ' cross elasticitythe effect of a change in the price of one product on the demand for or supply of another ..' current accountan account with a financial institution which is used for day-to-day financial transactions :. customs unionan association of countries aimed at removing barriers to free trade between them, while maintaining barriers to imorts from countries outside the customs union cyclical unemploymentunemployment due to a downturn in the business cycle debenturea preferential long-term loan normally-at a fixed rate of interest deficitan excess of debits over credits (for example, expenditure over income) , deflationa reduction in the level of economic activity deflationary gapa deficiency of demand below that required to allow for full employment de-industrialisationthe reduction of industry in an economy (for example, the decline in manufacturing in the UK) demanddemand for goods or services is created when people want those goods or services; effective demand is demand supported by the willingness and ability of people to pay for goods and services to be produced or supplied demand curvea graph showing the relationship between demand and price or other condition of demand demand-deficiency unemploymentunemployment due to insufficient demand leading to a drop in production' demand-pull inflationan increase in prices caused by demand rising more rapidly than production demand-sidefactors arising from changes in demand demerit goodsgoods that, although demanded by some members of society, are generally considered harmful or undesirable dependent populationthat part of the population of a country that relies on others for the satisfaction of its needs, for example, children and state pensioners deposit accountan account with a financial institution used for longerterm deposits on which the institution will pay interest depreciationthe decline in value of an asset over time deregulationthe removal of restrictions on trading, especially concerning competition derived demanddemand for a product or commodity that results from demand for another product or commodity devaluationa lowering of the value of a currency against other currencies diminishing marginal utilitythe tendency for additional units of a commodity eventually to provide less utility diminishing returnsthe law of diminishing returns states that if additional units of a variable factor are used in production, eventually the extra output from each additiona.l - unit will decrease direct costa cost that is incurred directly in the process of production (for example, raw materials) direct productiondirect production exists where a unit of society itself produces the goods and services that it needs direct taxa tax imposed directly on individuals discount housea financial institution that buys bills of exchange at a discount before they are due . discount marketthe market for trading in discounted bills of exchange discriminating monopolya monopoly,that is able to discriminate between different categories of customers, for example by charging different prices diseconomies of scaledisadvantages that accrue from an increase in the size of a business distribution problemthe problem of allocating resources, goods and services to individuals and groups, businesses or other organisations, in a way that most effectively satisfies the needs of people in society . disutilitythe costs of economic growth, such as pollution division of labourthe principle of dividing the production process into discrete tasks and allocating each task to a specific unit of labour dumpingthe sale of goods more cheaply in export markets than in the home market in order to undercut world prices and encourage exports duopolya market that is controlled by two firms dynamic efficiencythe changing efficiency of an economy in the face of changing conditions, such as technology economic aidhelp provided to less developed nations by more developed nations. Such aid may be financial, in the form of commodities, such as food and medicines, or technical, in the form of equipment, skills or training economic dependencethe dependence of one nation on another for providing goods and services that meet the needs of its society, and that cannot be produced, or cannot be produced with the same economic efficiency, by that nation economic developmentan increase in the efficiency of economic activity economic efficiencya situation in which the goods and services produced in an economy afford the optimum satisfaction to society economic growthan increase in GDP economic modela representation of an economic system or part of a system economic rentthe earnings of any factor of production in excess of its cost economies of scaleadvantages that accrue from an increase in the size of an organisation . . effective demanddemand for goods and services that is backed up by the ability and willingness to pay for them entrepreneur(ship)the acceptance of risks involved in setting up an enterprise environmental free goodgoods and resources that are provided freely in nature equilibrium positionthe point at which supply exactly equals demand equilibrium pricea price arrived at by the free interaction of supply and demand in the market equilibrium quantitythe amount of a product supplied in response to the free interaction of demand and price equilibrium rate of interestthe level of interest required for the supply of funds to equal demand equilibrium wagethe level of wages at which demand for labour equals its supply equitya) the ordinary shares of, or risk capital invested in, a firm; b) the fairness of distribution of goods and services between members of society; see also horizontal equity, vertical equity exchange ratethe rate at which the currency of one country can be exchanged for that of another excise dutytaxes on goods imposed by customs and excise expenditure relativea relationship with changes in the level of expenditure expenditure taxa tax on goods purchased externalitiescosts, often social or environmental, associated with the provision of goods and services that are not a direct part of the production system factor costthe financial cost of factors of production; the cost of a good or service in terms of the cost of its factors of production factor incomesthe revenue earned by factors of production factor of productionland, capital, labour or enterprise involved in the production of a good or service fiduciary issuethe issue by banks of promises to pay that are not covered by the banks' assets financial (wealth) capitalmoney available to purchase assets fine billsee bank bill fiscal policyeconomic policy that relies on government income and expenditure fixed capitallong-lasting items of capital that are not used up in the production process fixed costa cost that does not vary with the level of output of a firm (for example,rent) . fixed exchange ratea rate of exch~nge between currencies that has been set at a specific level fixed factor of productiona factor of production that cannot easily be varied floating debtthat part of the national debt in the form of treasury bills foreign exchange ratethe rate at whicha unit of onecountry's currency exchanges for that of another country fractionally backed notesbank notes that have a nominal value greater than the value of the bank's assets free resourceresources that are freely available in nature free-ridera person who enjoys the benefits of a product without paying for it ' frictional unemploymentunemployment due to people changing jobs fundingthe provision of finance for a .project geometric progressiona sequence of numbers that increases by a constant ratio (for example, 2, 4, 8, 16,32,64. ..) Giffen goodsbasic products such as staple foods, demand for which tends to rise as .prices. rise gilt-edged marketthe market for government bonds gilt-edged securitya government bond gilta gilt-edged security globalisationthe trend towards international and worldwide business organisations giving rise to supra-national economic activity gold standardthe system of fixing exchange rates of currencies in terms of the value of gold goods of ostentationgoods that tend to be purchased because they are expensive, often considered status symbols, so that demand for them often increases when their price rises simply because they cost more government expenditureexpenditure by the government on the goods and services it provides government failuregovernment failure can be said to have taken place when government intervention in markets leads to worse economic problems than if there had been no such intervention gross domestic product (GDP)the aggregate value of the goods and services produced in one year by factors of production located within a country, even though they may be owned abroad gross national product (GNP)the value of all goods and services produced in one year bXfacJQrs of ~roduction owned within a country, even though they may be located abroad horizontal equitythe like treatment of identical people in sociefy hyperinflationa high level of inflation, often giving rise to social disorder immobility of labourthe tendency of labour to have difficulty moving from one industry or location to another imperfect competitioncompetition that is not entirely free importsgoods produced abroad and brought into a country imputed rentthe value of a service that is provided privately for which no actual payment is m.ade (for example, .housework, DIY) income effecta change in demand that results from a change in the purchasing power of incomes rather than the general level of incomes income elasticity of demandthe degree to which changes in the level of income affects demand income taxa direct, proportional tax that is levied on an individual's income incomes policygovernment policy on controlling the level of income and wage increases incorporated businessa business that has been incorporated as a limited company, and is therefore considered a legal entity independent demanddemand for goods and services that is unrelated to demand for other goods and services . index linkeda value linked to the rate of inflation indifference levelthe level at which the marginal utility consumers derive from one product exactly equals the marginal utility derived from an alternative indirect costa cost that is not incurred directly in the production process (for example, administration expenses) indirect productionwhere the goods and services that a society needs are produced outside that society and obtained through trade indirect taxa tax on the activities or products of individuals or firms individual demandthe level of demand of one consumer individual supplythe level of goods or services provided by one supplier inductionthe process of drawing a conclusion from a set of premises or circumstances inferior goodsgoods that are purchased when incomes are low, but discarded for other, more expensive goods when incomes are higher inflationa continuing increase in the general level of prices inflationary gapan excess of demand over that required to produce full employment injectionmoney coming into an economy (for example, income from exports) . interestrevenue earned by money International Monetary Fund (IMP)an organisation whose'objective is to promote international trade by increasing the exchange rate stability of major currencies through a fund from which countries with balance of payment deficits may borrow investment multiplierthe continuing effect of an in1ection of investment into the economy invisible transactionsincome and expenditure for services, investments and other transfers between countries issuing housea merchant bank authorised to issue shares in companies joint supplygoods that are produced as a by-product of the process of producing other goods labour-intensive productionproduction using a large amount of labour in relation to machinery and equipment to labour labouras a factor of production labour is the work or effort provided by people leakagemoney going out of an economy (for example, payments for imports) liabilitya debt or promise to pay limited liabilitya restriction on the liability of the owners of an incorporated business to the amount of their original investment liquid assetan asset that can be turned into cash quickly liquiditythe ability to quickly turn assets into cash liquidity preferencethe desire to hold money rather than spend it loanable fundsmoney that is available for making loans Maastricht Treatytreaty signed in Maastricht, Holland, in 1991, which created the European Union out of the existing European Community. It aimed at closer economic, political and social harmonisation and links between member states, including European monetary union macro-economicsthat part of economics that looks at wider economic problems such as unemployment and inflation managed flexibilitya system of controlling exchange rates that operated between 1945 and 1973. The values of currencies were set against the dollar, itself tied to the value of gold, with a small margin for fluctuation marginal costthe increase in total cost when output is increased by one unit marginal productthe increase in total product resulting from the employment of an extra unit of a variable factor marginal productivitythe additional productivity gained from the employment of one additional unit of a factor of production marginal revenuethe increasein total revenue when output is increased by one unit marginal tax ratethe rate of tax you would pay on any increase in income over and above your current income marginal utilitythe amount of additional utility provided by one extra unit of a product . market demandthe total demand of all consumers for one or more good or service market economyan economy in which the supply of goods and services is unregulated and left to market forces market efficiencythe effectiveness of a market in producing and distributing goods or services to meet the needs of society market failurea situation in which a free market fails to adequately provide for the needs of all members of society market forcesthose influences on demand, supply and price that arenot subject to government or other influence market mechanismthe interaction of the unregulated forces of demand and supply to set the price, quantity demanded and quantity supplied of a product market pricethe price of a product resulting from the interaction of the market forces of supply and demand market supplythe total supply of one or more goods and services merchant banka private bank normally acting as an accepting house and issuing house merit goodsgoods and services that are generally considered too important to be left to the operation of a free market. micro-economicsthat part of economics that investigates basic economic principles such as demand and supply minimum lending ratethe minimum rate for normal loans made by banks, set from time to time by the Bank of England minimum wagethe lowest wage that can legally be paid mixed economyan economy that is partly regulated by government and partly left to market forces mobility of labourthe ease with which labour is able, to move to different areas or industries monetary policypolicy designed to influence the economy by controlling the money supply monetary sectorfinancial institutions that come under the auspices of and have to deposit a proportion of their funds with, the Bank of England . money marketthe market for short-term funds money supplythe amount of money in the economy monopolya firm that supplies at least 25 per cent of the market and is able to control the supply and price of a product monopoly rentthe additional profit that a monopolist is able to make by controlling supply and price of a product monopsonistan employer in the position of being a sole buyer of labour in an industry or market, and therefore able to set wage rates multipliera factor used to show the effect of changing one aspect of the economy narrow moneya measure of money supply (MO) that consists mainly of notes and coins in circulation; sometimes private sector sight deposits at banks are included (Ml) and other accounts subject to withdrawal by cheque plus other deposits due to mature within one month (M2) national accountsstatements of national income and expenditure national debtthe accumulated outstanding borrowing by the government national incomeincome received from all factors of production owned by a country in a year national productthe agregate production of goods and services by all factors of production ~ by a country m a year nationalisationthe transfer of private sector industries into public ownership natural monopolyan industry in which it would be wasteful or inefficient to have more than one supplier natural rate of unemploymentthe rate of unemployment when the labour market is in equilibrium natural resourcesresources that are found in nature negative externalitya social cost associated with production net domestic productgross domestic product adjusted for taxes and depreciation net national productgross national product adjusted for net property income from abroad, taxes and depreciation net property income from abroadproperty income from abroad less property income paid abroad non price-based competitioncompetition between firms using factors other than price to discriminate between products .. non-accelerating inflation rate of unemployment (NAIRU)the level of unemployment that is consistent with zero inflation non-contestable marketa market that is not open to competition non-excludabilitythe inability to limit the provision of a good or service to specific paying customers non-renewable resourcea resource that cannot be replaced once it has been used up non-tariff barriersbarriers to imports other than tariffs (for example, discriminatory administrative practices) normal rate of profitthe minimum return that will keep a firm in its particular industry after all other factors of production have been paid for normative economicsa type of economic method that uses economic theory as a basis for action or political policy oligopolya group of firms that between them control a market open economyan economy that trades with other economies for goods and services open market operationtransactions that occur in the free market and are subject to normal forces of demand and supply opportunity costthe cost of something in terms of the next best alternative forgone . optimum populationthe most appropriate size of population for a country, having regard to its needs and the resources available to satisfy those needs overdraftan arrangement with a commercial bank whereby a customer is allowed to draw cheques in excess ofthe amount they have deposited with the bank pareto efficiencya situation in which nobody in an economy can be made better off without somebody el~e becoming worse off perfect competitioncompetition in a market if}which there are many customers for and suppliers of identical products, and customers have complete knowledge of suppliers and prices of those products perfect elasticityof demand a hypothetical price elasticity where at one price demand for a product is zero but if the price falls slightly demand becomes infinite Phillips curvea graph showing the relationship between inflation and unemployment positive economicsa type of economic thinking confined to showing what is likely to happen in different circumstances,without drawing conclusions about what future course of action should be taken positive externalitya benefit associated with the production of a good or service that affects people not directly involved in its production poverty trapa situation in which a person is unable to escape poverty since any increase in their personal income would be negated by a reduction in the amount of state benefits they received precautionary demand for moneythe demand for money to be held in reserve against unexpected events price agreementsagreements between firms on price levels price elasticitythe extent to which the quantity of a product demanded or supplied is affected by its price price mechanismthe process of setting prices through the free interaction of demand and supply price relativea relationship with the level of prices price-based competitioncompetition between firms that is based on offering a product at the most attractive price primary sectorthat sector of industry that obtains the raw materials used in manufacturing private benefitbenefits associated with the provision of goods and services that accrue to the producers or consumers of those goods and services private costcosts associated with the provision of goods and services that accrue to the producers or consumers of those goods and services. private sectorthat sector of industry owned and operated by private individuals rather than the government private sector liquiditythe ability of firms in the private sector to convert assets into cash in order to cover their liabilities privatisationthe transfer of state-owned industries into private ownership. producer goodsgoods, such as machinery and office equipment, which is used by businesses in the production of other goods producer surplusthe difference between the amount producers require to induce them to supply additional un.its of a product, and the amount they actually receive from selling the additional units production industryan industrial organisation that operates in more than one industrial sector, i.e. obtaining raw materiaIs-(primary) and manufacturing goods from them (secondary) production possibility curve or frontierthe maximum combination of the number of units of two types of goods that can be produced using available resources productive assetsassets that are used to produce goods or services productive or technical efficiencyproduction using the minimum resources required productivitythe volume of output from given resources progressive taxationa tax that increases with an increase in the value of the item taxed propensity to consumethe predisposition of people in society to spend a proportion of their incOJ11erather than save it propensity to savethe predisposition of people in society to save a proportion of their income rather than spend it proportional taxationa tax system in which all taxpayers hand over the same proportion of their income in tax public financethe method of raising revenue and principles of public expenditure employed by the government public goodsgoods that are supplied by government, since their non-excludability is likely to mean that there would be no incentive to supply them in a free market public sectorbusinesses and other organisations owned by the state public sector net cash requirement (PSNCR)the finance needed by government to operate the public sector, taking into consideration the government's anticipated income and expenditure purchasing powerthe value of a currency in terms of the goods and services a unit of that currency will purchase . purchasing power paritya comparison of currencies in terms of purchasing power quangoa body established and funded by th~ government, but which operates independently under its own board of governors quantity theory of moneya theory based on'the premise that the general level of prices depends upon the supply of money quasi or temporary rentpayment for a factor of production that is above its transfer earnings, due to a temporary shortage of that factor' quasi-public goodsgoods that are supplied by the government; but may have some element of excludability quaternary sectorsubdivision of the tertiary sector that provides services to business quotaa permitted or prescribed volume or value rate of discountthe rate at which an accepting house will discount (pay less than) the face value of a bill of exchange. The rate of discount will vary according to the source of the bill and its due date 0 rate of interestthe rate at which a financial institution will pay interest on money deposited and charge interest on loans recessiona period of declining economic activity reflationan increase in economic activity regional unemploymentunemployment in a particular region due to changes in economic activity in that region (such as a declining local industry) regressive taxationsystem of taxation under which people with lower incomes pay a higher proportion of their incomes in tax than those with higher incomes renewable resourcesnatural resources that can be replaced residual errora small accounting error often attributable to rounding figures up or down, or due to small items that cannot accurately be calculated restrictive practices courta tribunal set up to ensure that business mergers, trading agreements and other business practices are in the public interest restrictive practicesbehaviour aimed at preventing the free operation of a market retail banksee clearing banks retail price index (RPI)a measure of the change in prices of a range of goods and services, representative of general household expenditure over time. retained profitthat part of the profit of a firm that is retained by the firm after all dividends, taxes, etc. have been paid returns to scalethe amount by which costs vary with levels of output revenuethe income received from the sale of goods or services scarcitythe finite nature of all resources seasonal unemploymentunemployment resulting from the seasonal nature of an industry . secondary sectorthat sector of industry that manufactures goods securities marketthe market for government and other bond? sharea stake in the capital of a company sight depositsmoney in a bank current account, which may be interest bearing Single European Market (SEM)unified market comprising the European Union within which the goods and services of member states can be freely exchanged, but which is protected from imports from other countries by common tariffs social accountingthe process of compiling national accounts social benefita benefit to society that arises as a by-product of the production of a good or service social capitalitems of fixed capital that are provided for the good of society, such as roads and hospitals social costa cost to society that arises as a by-product of the production of a good or service special depositan amount that clearing banks can be required to deposit with the Bank of England in order to control the money supply specialisationthe concentration on producing specific goods and services, or carrying out discrete activities in the production of those goods and services specific taxa tax that is levied per unit of a product rather than by value speculative demand for moneydemand for money to speculate on the price movements of bonds standard for deferred paymenta commodity that may be accepted in payment for goods and services that can subsequently be exchanged for other goods and services standard of livingthe level of material wealth or welfare of a society, or specific sector of a society static efficiencythe efficiency of an economy at a specific point in time under the conditions prevailing at that time stock appreciationthe increase in value of stock over time structural unemploymentunemployment due to the permanent decline in an industry subsidy financial support provided by the government out of taxation substitute goodsgoods that are considered acceptable alternatives, so that if the price of one rises, demand may be switched to the alternative Substitution effectthe tendency of consumers to purchase more of a product when the price falls because that product represents better value than substitute products sunk costscapital costs of a firm not recoverable in the short-term in the event of the firm wanting to exit a market supplythe provision of resources, goods and services supply-sidefactors arising from changes in supply surplusan excess of credits over debits (for example, income over expenditure) sustainabilitythe ability to maintain economic growth without exhausting natural resources or ca,using ecological damage tariffa tax on imports designed to raise their price and so increase demand for home-produced goods technological unemployment unemployment that arises due to the introduction of new labour-saving technology in an industry tertiary sectorthat sector of industry that provides services third worlda collective term for nations with less developed or industrialised economies time depositmoney deposited for a specIfied time in an interest bearing bank account trade billa bill of exchange issued by a commercial organisation trade creationthe 'creation' of trade behind tariffs as consumers are encouraged to buy home-produced goods trade diversionthe diversion of trade from its normal channels as overseas producers lose their traditional markets trade unionan association of workers, normally in a specific trade or industry, whose purpose is to negotiate on behalf of its members on employment matters, including pay and conditions trading surplusthe surplus of income from exports after expenditure on imports transactions demand for moneydemand for money to be used for day-to~day expenditure transfer earningsthe amount a factor of production could earn if used in its next best alternative occupation transfer paymentsthe transfer of money from one source to another without the donor receiving any productive service in return (for example, pensions) treasury billbill of exchange issued by the treasury. underwritingthe process of guaranteeing a payment by a third party; the guarantee by an issuing house to purchase all shares of a new issue made through that house not otherwise taken up unincorporated businessa business that has not been incorporated as a company, the affairs of which are considered the same as those of the owners of the business unit labourcost the cost of one unit of labour unit of accounta basic unit of currency or exchange unit of productionan identifiable part of a source of output unlimited liabilitythe unrestricted liability of the owners of a business for the debts and other affairs of that business utilitythe satisfaction obtained from a giveo' amount of a good or service value addedthe increase in value of a product at each stage of the production process value added tax (VAT)a tax on the increase in value of a product at each stage of the production process variable capitalitems of capital used in a production process that vary with the level of production variable costa cost that varies with the level of production (for example, raw materials) variable factor of productiona factor of production that can easily be increased or reduced velocityof circulation the average number of times that each unit of money changes hands vertical equitythe discriminatory treatment of different people in society in an attempt to achieve a fair distribution of goods, services and opportunities wage controlgovernment policy on controlling the level of wage Increases wage differentialsaccepted differences between wage levels for different types or levels of occupation ways and means advancesloans to the government by the Bank of England weightinggiving greater prominence to one factor by increasing its value by a given ratio to other factors working capitalitems of capital that are used up in the production process working populationthat part of the population of a country that is eligible and available for employment World Bank (International Bank for Reconstruction and Development)an international co-operative organisation formed to assist economic development, especially of third world countries, through loans guaranteed by the governments of member nations yieldthe return on an investment