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Glossary of key terms on development economics (A-B)


Glossary Description

AAA Credit Rating

The best credit rating that can be given to a corporation's bonds, effectively indicating that the risk of default  is negligible

Absolute poverty

Those people who do not have adequate nutritional intake per day, or do not have adequate shelter or clothing in order to survive. The World Bank reports the number of people in countries below a $1.25 or $2 a day

Accelerator effect

Where planned capital investment is linked positively to the past and expected growth of consumer demand

Accession Countries

Countries in the process of joining the European Union

Accommodatory policy

A neutral policy stance in the face of an economic shock. For fiscal policy, generally means keeping tax and government expenditure rates unchanged. For monetary policy, generally means keeping (real) interest rates unchanged.

Adjusted net savings (or genuine savings)

The true rate of savings in an economy after taking into account investments in human capital, depletion of natural resources and damage caused by pollution

Advanced economies

According to the IMF, 35 economies are ‘advanced economies’. 24 in Europe + USA, Canada, Australia, New Zealand, Israel, Japan and South Korea

Age dependency ratio

The ratio of the nonworking population- people under 15 or over 65-to the working population- people 15-64

Ageing population

A change in the age structure of the population within a country, a rising average age and a growing number of people living beyond the standard working ages. By 2035 almost 30% of Chinese will be 60 or over

Aggregate supply shock

Either an inflation shock or a shock to potential national output; adverse aggregate supply shocks of both types reduce output and increase inflation

Aid effectiveness

A measure of the quality of aid delivery and maximizing the impact of aid on poverty reduction and development

Appropriate technology

A technology that complements the factor endowments of the country


Association of Southeast Asian Nations – a regional trade bloc

Asymmetric bargaining power

When the bargaining power in trade between one or more countries is imbalanced – this can lead to shifts in the measured terms of trade

Balanced growth

In macroeconomics, balanced growth occurs when output and the capital stock grow at the same rate

Balassa-Samuelson Effect

This effect refers to the fact that countries with higher per capita real incomes have a higher real exchange rate. There tends to be more investment and productivity in industries that are producing goods for export. However, a rise in productivity in the tradable goods sector will drive up wages in this sector and, as labour is assumed to be mobile across sectors, push up wages in the non-tradable sector. As the latter increase is not matched by a productivity increase, it will raise costs and prices in the non-tradable goods sector and thereby lead to a rise in inflation

Beggar my Neighbour

A policy that seeks to promote a country's economy at the expense of another country. An obvious example is the use of tariff barriers. A country may place tariff on imports to help promote local domestic industry. This may help local unemployment, but, be at the expense of the other country's export sector

Birth rate

The number of live births in a year expressed as a percentage of the population or per 1,000 people.

Brain drain

The movement of highly skilled or professional people from their own country to another country where they can earn more money

BRIC economies

The BRIC grouping – Brazil, Russia, India and China – has become short hand for the rise of emerging markets in the global economy. The BRICs already have a bigger share of world trade than the USA.

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