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World Trade Organisation (WTO)

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160 member countries that implement and advance global trade agreements and resolve trade disputes between nations.

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World Bank

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A financial institution owned by 188 countries that assists poorer nations with economic development through loans (often at little/no interest) to fund investment and reduce poverty.

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Workable competition

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The government's objective to achieve the maximum level of competition within an industry that is compatible with the market structure and specific conditions of industry, i.e. a situation where all markets are contestable.

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Wealth effect

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Occurs when an increase in the price of assets such as property and shares leads to an increase in consumption. This occurs because rising asset prices make the owners of these assets feel wealthier and so willing to spend a greater proportion of their income.

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Wealth

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Value of the stock of assets held by individuals at a point in time

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Wants

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Material desires of individuals that provide some pleasure when they are satisfied. This will depend on personal preferences. Wants are said to be unlimited.

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Wages

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The return to the factor of production labour for its use in the production of goods and services. These not only include wages but also salaries, fees, commissions and other earnings.

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Voluntary export restraints

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Agreements to restrict the number of exports to another country in exchange for a similar concession from the other nation.

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Valuation effect

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Where an appreciation (or depreciation) of the currency causes an immediate decrease (or increase) in the Australian dollar value of foreign debt.

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Utility

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The satisfaction that individuals derive from the consumption of goods and services.

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United Nations

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Organisation of 193 countries established in 1945 with broad agenda covering the global economy, international security, the environment, poverty and development, international law and global health issues.

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Unit elasticity of demand

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A change in prices causes a proportional change in quantity demanded such that total spending by a consumer on a good remains unchanged.

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Unemployment rate

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The number of people officially unemployed as a percentage of the labour force.

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Underlying inflation

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A measure of the increase in the general price level that removes the effect of one-off or volatile price movements.

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Underemployment

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Refers to those persons who are working less than full time (and therefore not unemployed) but would like to work more hours.

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Treasury

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Govt. dept. responsible for developing fiscal policy through the Federal Budget, and advising the govt. on issues of financial stability.

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Transnational corporations (TNCs)

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Global companies that dominate global product and factor markets. TNCs have production facilities in at least two countries and are owned by residents of at least two countries.

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Transmission mechanism

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Explains how changes in the stance of monetary policy pass through the economy to influence economic objectives such as inflation and economic growth.

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Transition economies

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Former socialist economies that are now becoming market economies, and are concentrated in Central and Eastern Europe and Asia.

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Transactions motive

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Demand for money for day-to-day purchases for which people need to use money.

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Tragedy of the commons

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Situation where the failure of the market to assign costs to individuals leads to an overuse of resources such as the natural environment, which have no single owner.

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Trade Weighted Index (TWI)

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Measure of the value of the $AU against a basket of foreign currencies of major trading partners. These currencies are weighted according to their significance to Australia's trade flows.

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Trade union

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An organisation that represents the interests of workers, primarily by seeking to improve their wages and working conditions.

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Trade liberalisation

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The process of reducing tariffs, subsidies and other barriers to trade in order to encourage increased linkages between economies.

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Trade bloc

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Occurs when a number of countries join together in a formal preferential trading agreement to the exclusion of other countries.

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Total outlay method

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A way to calculate the price elasticity of demand by looking at the effect of changes in price on the revenue earned by the producer. If price and revenue move in the same direction, demand is inelastic; if price and revenue move in the opposite direction, demand is elastic; and if revenue remains unchanged in response to a price change, demand is unit elastic.

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Thailand-Australia Free Trade Agreement (TAFTA)

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Bilateral free trade agreement between Australia and Thailand signed in 2003.

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Terms of trade

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Measures the relative movements in the prices of an economy's imports and exports over a period of time. The terms of trade index is calculated as export price index divided by import price index multiplied by 100.

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Technology transfer

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Occurs when falling global barriers to trade and financial flows allow developing economies to access more advanced technology from overseas.

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Technical optimum

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The most efficient level of production for a firm. At this point, average costs of production are at their lowest possible level.

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Technical efficiency

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The ability of an economy to achieve the maximum level of output for a given quantity of inputs. See also "allocative efficiency" and "dynamic efficiency".

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Taxation

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A leakage from the circular flow of income. It refers to the amount of revenue a government gains from different sectors and activities in the economy.

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Tax-free threshold

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Refers to the level of income below which income tax is not payable.

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Tax base

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The items that are taxed by a government, such as income, wealth or consumption.

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Tariffs

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Taxes on imported good imposed for the purpose of protecting Australia industries.

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Supply

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The quantity of a good or service that all firms in a particular industry are willing or able to offer for sale at different price levels, at a given point in time.

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Superannuation

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A form of saving that individuals cannot access until they reach retirement age.

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Substitute

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A good that consumers may choose to buy in place of another good, such as butter and margarine or tea and coffee.

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Subsidies

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Cash payments from the govt. to business to encourage production of a G/S and influence the allocation of resources in an economy. Subsidies are often granted to businesses to help them compete with imported G&S.

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Stock exchange

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An organisation that provides facilities for investors to trade shares and other financial assets.

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Structural unemployment

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Describes those persons unemployed because of a mismatch between their skills and those demanded by employers. Factors: technological change and rapid changes in consumer demand, where labour skills cannot adapt quickly enough to such changes.

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Structural change

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Involves changes in the patterns of production that reflect changes in technology, consumer demand, global competitiveness and other factors. It results in some products, processes and even industries disappearing, while others emerge.

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Standard of living

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Refers to the material wellbeing of individuals within a country, usually measured by Gross National Income (GNI) per capita.

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Stagflation

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Occurs when the rate of inflation and the rate of unemployment rise simultaneously.

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Speculators

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Investors who buy and sell financial assets with the intention of making profits from short term price movements. Often criticised for creating excessive volatility in financial markets.

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Specialisation of labour

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Occurs when the volume of production is large enough for workers to concentrate on a particular stage of the production process.

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Specialisation

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When an economy concentrates on producing a particular set of G/S in which it has a comparative advantage.

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Social welfare payments

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Payments from govt. to assist people with the basic costs of living. (AKA: transfer payments, government benefits, social security, income support and Centrelink payments)

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Snob effect

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Refers to a situation where individuals desire a G/S because of its exclusivity, i.e. where demand for a G/S decreases as it gains more users.

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Singapore-Australia Free Trade Agreement (SAFTA)

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Signed 2003.

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Simply transformed manufacturers

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Low-value added manufacturing goods that generally command low prices on international markets, such as socks and singlets.

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Share market

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A market for the sale of equity interests in companies.

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Share

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A type of financial asset that provides an individual with ownership over part of a business or company.

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Secondary financial markets

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Markets in which investors trade financial assets, such as shares or debentures, with other investors.

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Seasonal unemployment

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Affects those persons unemployed due to the seasonal nature of their work. Their jobs are only available at certain times of the year such as fruit picking or being Santa Claus.

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Savings

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Represents the amount of disposable income that is not spent on consumption. It's a leakage from the CFI, which is necessary to fund investment. The reward for savings is interest.

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Satisficing behaviour

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The idea that firms will attempt to pursue a satisfactory level in all goals (profit maximisation etc.) rather than maximising any single goal.

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Revalutation

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Occurs when the government, or central bank, increases the value of a currency that operates with a fixed exchange rate.

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Returns to production

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The payments made to factors of production to compensate for their use. The returns to production include: wages to labour, rent on land, interest on capital and profit on enterprise.

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Reserve Bank of Australia (RBA)

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Australia's central bank. Its main roles are to conduct monetary policy and oversee the stability of the financial system.

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Reserve assets

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Refers to holdings of foreign currency and gold held by the RBA to use in foreign exchange markets in order to influence the value of the Australian dollar.

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Rent

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The return to the factor of production natural resources (land) for their use in the production of G&S. It does not just include rent from property but but all income rewards derived form the productive use of natural resources.

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Renewable resources

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Inputs into the production process that reproduce themselves, ensuring that present consumption of these resources does no necessarily reduce the ability of future generations to consume these resources, e.g. timber.

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Renewable Energy Target (RET)

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The policy to increase the proportion of Australia's electricity supply from renewable energy, such as solar, wind and geothermal energy to 20% by 2020.

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Relative poverty

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Refers to those whose standards of living is substantially lower than the average for the economy as a whole, and it is often defined as a level of income below 30% of average earnings.

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Regulation

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The collection of government rules and institutions that influence the operation of markets and the participants in markets.

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