- Industry: Economy; Printing & publishing
- Number of terms: 15233
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A loan provided at below the market interest rate. Soft loans are used by international agencies to encourage economic activity in developing countries and to support non-commercial activities.
Industry:Economy
One of two main sorts of market failure often associated with the provision of insurance. The other is adverse selection. Moral hazard means that people with insurance may take greater risks than they would do without it because they know they are protected, so the insurer may get more claims than it bargained for. (See also deposit insurance, lender of last resort, IMF and World Bank. )
Industry:Economy
Bigger is better. In many industries, as output increases, the average cost of each unit produced falls. One reason is that overheads and other fixed costs can be spread over more units of output. However, getting bigger can also increase average costs (diseconomies of scale) because it is more difficult to manage a big operation, for instance.
Industry:Economy
The risk that a government will default on its debt or on a loan guaranteed by it.
Industry:Economy
A market dominated by a single buyer. A monopsonist has the market power to set the price of whatever it is buying (from raw materials to labor). Under perfect competition, by contrast, no individual buyer is big enough to affect the market price of anything.
Industry:Economy
The “dismal science”, according to Thomas Carlyle, a 19th-century Scottish writer. It has been described in many ways, few of them flattering. The most concise, non-abusive, definition is the study of how society uses its scarce resources.
Industry:Economy
Created in 1967, the SDR is the IMF's own currency. Its value is based on a portfolio of widely used currencies.
Industry:Economy
When the production of a good or service with no close substitutes is carried out by a single firm with the market power to decide the price of its output. Contrast with perfect competition, in which no single firm can affect the price of what it produces. Typically, a monopoly will produce less, at a higher price, than would be the case for the entire market under perfect competition. It decides its price by calculating the quantity of output at which its marginal revenue would equal its marginal cost, and then sets whatever price would enable it to sell exactly that quantity. In practice, few monopolies are absolute, and their power to set prices or limit supply is constrained by some actual or potential near-competitors (see monopolistic competition). An extreme case of this occurs when a single firm dominates a market but has no pricing power because it is in a contestable market; that is if it does not operate efficiently, a more efficient rival firm will take its entire market away. Antitrust policy can curb monopoly power by encouraging competition or, when there is a natural monopoly and thus competition would be inefficient, through regulation of prices. Furthermore, the mere possibility of ¬antitrust action may encourage a monopoly to self-regulate its behavior, simply to avoid the trouble an investigation would bring.
Industry:Economy
A way of punishing errant countries, which is currently more acceptable than bombing or invading them. One or more restrictions are imposed on international trade with the targeted country in order to persuade the target’s government to change a policy. Possible sanctions include limiting export or import trade with the target; constraining investment in the target; and preventing transfers of money involving citizens or the government of the target. Sanctions can be multi¬lateral, with many countries acting together, perhaps under the auspices of the United Nations, or unilateral, when one country takes action on its own. How effective sanctions are is debatable. According to one study, between 1914 and 1990 there were 116 occasions on which various countries imposed economic sanctions. Two-thirds of these failed to achieve their stated goals. The cost to the country imposing sanctions can be large, particularly when it is acting unilaterally. It is estimated that in 1995 imposing sanctions on other countries cost the American economy over $15 billion in lost exports and 200,000 in lost jobs in export industries. Widely considered a notable success was the use of economic sanctions against the apartheid regime in South Africa, although some economists question how big a part the sanctions actually played. Clearly important was the fact that the sanctions were imposed multilaterally by the international community, so there were comparatively few breaches of the restrictions. But, arguably, the most crucial factor in persuading the government in Pretoria to cave in was that foreign companies fearing that their share price would fall because their investments in South Africa would attract bad publicity voluntarily chose for commercial reasons to disinvest.
Industry:Economy
An attitude to investment that is often criticized. According to critics, speculation involves buying or selling a financial asset with the aim of making a quick profit. This is contrasted with long-term investment, in which an asset is retained despite short-term fluctuations in its value. Speculators actually play a valuable role in financial markets as their appetite for frequent buying and selling provides liquidity to the markets. This benefits longer-term investors, too, as it enables them to get a good price when they do eventually sell.
Industry:Economy
