- Industry: Economy; Printing & publishing
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The total of all the money coming into a country from abroad less all of the money going out of the country during the same period. This is usually broken down into the current account and the capital account. The current account includes:
* visible trade (known as merchandise trade in the United States), which is the value of exports and imports of physical goods;
* invisible trade, which is receipts and payments for services, such as banking or advertising, and other intangible goods, such as copyrights, as well as cross-border dividend and interest payments;
* private transfers, such as money sent home by expatriate workers;
* official transfers, such as international aid. The capital account includes:
* long-term capital flows, such as money invested in foreign firms, and profits made by selling those investments and bringing the money home;
* short-term capital flows, such as money invested in foreign currencies by international speculators, and funds moved around the world for business purposes by multinational companies. These short-term flows can lead to sharp movements in exchange rates, which bear little relation to what currencies should be worth judging by fundamental measures of value such as purchasing power parity. As bills must be paid, ultimately a country's accounts must balance (although because real life is never that neat a balancing item is usually inserted to cover up the inconsistencies). Balance of payments crisis is a politically charged phrase. But a country can often sustain a current account deficit for many years without its economy suffering, because any deficit is likely to be tiny compared with the country's national income and wealth. Indeed, if the deficit is due to firms importing technology and other capital goods from abroad, which will improve their productivity, the economy may benefit. A deficit that has to be financed by the public sector may be more problematic, particularly if the public sector faces limits on how much it can raise taxes or borrow or has few financial reserves. For instance, when the Russian government failed to pay the interest on its foreign debt in August 1998 it found it impossible to borrow any more money in the international financial markets. Nor was it able to increase taxes in its collapsing economy or to find anybody within Russia willing to lend it money. That truly was a balance of payments crisis. In the early years of the 21st century, economists started to worry that the United States would find itself in a balance of payments crisis. Its current account deficit grew to over 5% of its GDP, making its economy increasingly reliant on foreign credit.
Industry:Economy
A number that is calculated to summarize a group of numbers. The most commonly used average is the mean, the sum of the numbers divided by however many numbers there are in the group. The median is the middle value in a group of numbers ranked in order of size. The mode is the number that occurs most often in a group of numbers. Take the following group of numbers: 1, 2, 2, 9, 12, 13, 17
The mean is 56/7=8
The median is 9
The mode is 2
Industry:Economy
Things that have earning power or some other value to their owner.
Industry:Economy
“Real economists don’t talk about competitiveness,” said Paul Krugman, a much-respected contemporary economist. Real businessmen and real politicians talk about it all the time, however. Many firms have undergone savage downsizing to remain competitive, and governments have set up numerous committees to examine how to sharpen their countries’ economic performance. Mr. Krugman’s objection was not to the use of the term competitiveness by companies, which often do have competitors that they must beat, but to applying it to countries. At best, it is a meaningless word when applied to national economies; at worst, it encourages protectionism. Countries, he claimed, do not compete in the same way as companies. When two companies compete, one’s gain is the other’s loss, whereas international trade, Mr. Krugman argued, is not a zero-sum game: when two countries compete through trade they both win. Yet measures of national competitiveness are not complete nonsense. A country’s future prosperity depends on its growth in productivity, which government policies can influence. Countries do compete in that they choose policies to promote higher living standards. Even so, conceptual and measurement difficulties mean that the growing number of indices purporting to compare the competitiveness of different countries should probably be taken with a large pinch of salt.
Industry:Economy
“Neither a borrower nor a lender be,” wrote Shakespeare in “Hamlet”. Actually, the availability of debt, and the willingness to take it on, is a crucial ingredient of economic growth, because it allows individuals, firms and governments to make investments they would not otherwise be able to afford. The price of debt is interest. Until recently, lending was an activity dominated by banks (although mortgages for individuals buying their homes have long been available from special housing savings institutions). Since the 1960s, debt has become increasingly available from other sources. Companies have sold trillions of dollars worth of bonds to investors in the financial markets. Individuals have been able to borrow with credit cards, and for those who have nowhere else to turn there are pawn shops and loan sharks, which charge very high rates of interest. Total private-sector debt in 2003 was around 150% of GDP in the United States, compared with less than 100% in 1928. In most countries, by far the biggest single borrower is the state, through the national debt.
Industry:Economy
If you pay your cleaner or builder in cash, or for some reason neglect to tell the taxman that you were paid for a service rendered, you participate in the black or underground economy. Such transactions do not normally show up in the figures for GDP, so the black economy may mean that a country is much richer than the official data suggest. In the United States and the UK, the black economy adds an estimated 5—10% to GDP; in Italy, it may add 30%. As for Russia, in the late 1990s estimates of the black economy ranged as high as 50% of GDP.
Industry:Economy
A lender, whether by making a loan, buying a bond or allowing money owed now to be paid in the future.
Industry:Economy
America's central bank. Set up in 1913, and popularly known as the Fed, the system divides the United States into 12 Federal Reserve districts, each with its own regional Federal Reserve bank. These are overseen by the Federal Reserve Board, consisting of seven governors based in Washington, DC. Monetary policy is decided by its Federal Open Market Committee.
Industry:Economy
Selling something for less than the cost of producing it. This may be used by a dominant firm to attack rivals, a strategy known to antitrust authorities as predatory pricing. Participants in international trade are often accused of dumping by domestic firms charging more than rival imports. Countries can slap duties on cheap imports that they judge are being dumped in their markets. Often this amounts to thinly disguised protectionism against more efficient foreign firms. In practice, genuine predatory pricing is rare – certainly much rarer than anti-dumping actions – because it relies on the unlikely ability of a single producer to dominate a world market. In any case, consumers gain from lower prices; so do companies that can buy their supplies more cheaply abroad.
Industry:Economy
A firm with the ability to set prices in its market (see monopoly, oligopoly and antitrust).
Industry:Economy
