November 20, 2006
"Anthropogenic" Greenhouse Gases
'Anthropogenic' seems to be the word of the day for the last couple lectures. It means "caused or produced by humans," according to www.dictionary.com. Essentially, it's differentiating from animal-produced GHGs (e.g., the methane produced by livestock digestion [cow farts - don't laugh] and nitrates produced by animal waste decomposition [rotting cow poop]) and other naturally occuring sources. Humans are by far the largest source of GHGs, though in some developing countries the livestock component is almost as large.
Posted by lpowner at 04:14 PM | Comments (0)
November 08, 2006
Economics Vocabulary
These terms are not be in alphabetical order. Many are discussed further in related Q&A entries. Use the "find" command on your browser to look for particular terms on this page, or use the "search" box at right to search the site. This will also locate related entries.
exchange rate - the price of one currency in terms of another. When one unit of my currency becomes worth more units of your currency - it takes more of yours to buy one of mine - we say that my currency has appreciated vis-a-vis yours and that yours has depreciated vis-a-vis mine. When one unit of my currency becomes worth fewer of yours - it takes fewer of yours to buy one of mine - we say that my currency has depreciated and yours has appreciated.
interest rate - the price of borrowing money. This same rate is also the rate of return (profit) for capital lenders. If you borrow $100 at 7% annual interest, and let's say you take a year to pay it back, you would pay back $107. The person you borrowed from gets back his/her original $100, plus the $7 in interest. The $7 you pay in interest is the price you pay for having the money (and spending it) now rather than having to wait until you accumulate that much money yourself to spend it.
factor - land, labor, capital. These are the factors of production - all goods and services produced and/or traded in an economy are composed of some combination of these three resources.
sector - an industry.
current account - the 'national checking account' of goods and services coming in and out of a country (it also has a couple other minor components but we can ignore them). States that export more goods and services than they import have a current account surplus; states that import more goods and services than they export have a current account deficit.
capital account - the 'national savings account' of investment that comes into and out of a country. States that attract more investment than they themselves send abroad have a capital account surplus; states that send more investment abroad than they attract have a capital account deficit.
exports - goods and services produced in my country and sent to your country. Costa Rica exports bananas to the United States.
imports - goods and services produced in your country and sent to my country. The US imports bananas from Costa Rica.
tariffs - taxes placed on imports to raise their price to a level comparable with domestic products. This protects inefficient domestic producers, whose costs are higher than the exporting country's producers'.
Leontief Paradox - the observation that, in the immediate post-World War II era, the United States - a clearly capital-rich country - imported capital-intensive goods and exported labor-intensive goods. This clearly contradicts the Hecksher-Ohlin theorem's expectations.
Hecksher-Ohlin theorem - states that a country will export goods which use intensively the factor(s) which are abundant in its economy, and will import goods which use intensively the factor(s) which are scarce in its economy. This assumes that factors can move costlessly between sectors of the economy.
Stolper-Samuelson theorem (political implications) - "a rise in the relative price of a good will lead to a rise in the return to that factor which is used most intensively in the production of the good, and conversely, to a fall in the return to the other factor." (Wikipedia) In other words, as a state trades and specializes, the price of its relatively abundant factor will increase, and this will trickle down to the owners of that factor. Likewise, the price of the relatively scarce factor will decline, and that will decrease the wages of those who hold or use that factor intensively. When combined with the Hecksher-Ohlin theorem, this leads us to expect class- (i.e., factor-) based political cleavages
Ricardo-Viner theorem (political implications) - under conditions of at least partial factor immobility, we expect to see sectoral (industry-based) cleavages emerge to seek protection. Because labor and capital are unable to move between industries, we expect that they will band together to seek protection for their particular industry.
reserves, official or currency - holdings of a hard currency by a central bank, used to defend fixed exchange rates and also to cover short term deficits in the balance of payments (current account).
non-tariff barriers (NTBs) - any barrier to trade besides tariffs. Health and safety regulations, environmental regulations, labelling and other forms of regulatory requirements, quotas, voluntary export restraints, etc.
mobility, of factors - degree to which a factor of production can shift costlessly between different sectors of the economy. Highly mobile factors can shift easily between industries with little or no costs or loss of value. Immobile (sometimes called specific) factors incur great costs to shift between industries.
liquidity - degree to which an asset (i.e., some form of capital) can be converted into cash; can range from highly liquid to semi-liquid to illiquid.
fixed exchange rate -when the price of a currency is determined by the government or central bank of a country; involves a public statement that the central bank will guarantee the value of the currency by promising to exchange it at a certain fixed rate. In the modern world, this then means that the central bank or government must intervene in global currency markets to ensure that the rate at which the currency is fixed (or pegged) is near to the market's value for the currency. Otherwise the state risks a speculative attack on the currency.
floating exchange rate - when the price of a currency is determined by the forces of supply and demand in international currency markets.
hard currencies - currencies that retain their value over time. The low fluctuation means that denominating trade or investment in these currencies will reduce the chance of losses from exchange rate shifts or inflation. This property makes them desirable as reserves and for international transactions. The key hard currencies are currently the dollar, the British pound, the Japanese yen, and the euro; prior to the euro's introduction, the German Mark was also a popular reserve or international transaction currency. (Opposite: soft currencies. Soft currencies are often not convertible, which makes them unattractive for trade.)
convertibilty - the ability to exchange one currency for another. Nonconvertibility can be either the result of a government policy which refuses to exchange the currency, or the result of market pressures, where no one wants to buy the currency because they don't believe it will hold its value.
balance of payments - refers to a specific component of the current account which includes only the values of imports and exports.
exchange rate risk - a risk inherent in international trade or investment that the value of a currency will change between the time you sign the contract to buy foreign goods (or make an investment in a foreign country) and the time the goods are delivered (or you go to withdraw your investment). If the loss from a shift in exchange rate is high, then this could conceivably wipe out the gains from trade or investment, so traders/investors are usually unwilling to do business in places with high exchange rate risk. Conversely, the existence of exchange rate risk is what allows currency speculation to be profitable.
Posted by lpowner at 01:25 PM | Comments (0)