- Industry: Economy; Printing & publishing
- Number of terms: 15233
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A club of European countries. Initially a six-country trade area established by the 1957 Treaty of Rome and known as the European Economic Community, it has become an increasingly political union. In 1999 a single currency, the Euro, was launched in 11 of the then 15 member countries. Viewed as a single entity, the EU has a bigger economy than the United States. In 2002, a further 10 countries were invited to join the EU in 2004, increasing its membership to 25 countries, with more countries likely to follow later.
Industry:Economy
The central bank of the European union, responsible since January 1999 for setting the official short-term interest rate in countries using the Euro as their domestic currency. In this role, the European Central Bank (ECB) replaced national central banks such as Germany’s Bundesbank, which became local branches of the ECB.
Industry:Economy
The economy comprising all the countries that have adopted the Euro. There is much debate among economists about whether the Euro zone is in fact an optimal currency area.
Industry:Economy
The main currency of the European Union, launched in January 1999 and in general circulation since 2002 (see economic and monetary union).
Industry:Economy
There are two definitions in economics. # The capital of a firm, after deducting any liabilities to outsiders other than shareholders, who are typically the legal owners of the firm’s equity. This ownership right is the reason shares are also known as equities. # Fairness. Dividing up the economic pie. Economists have been particularly interested in this with regard to how systems of taxation work. They have examined whether taxes treat fairly people with the same ability to pay (horizontal equity) and people with different abilities to pay (vertical equity). The fairness of other aspects of how the gains from economic activity are distributed through society have also been debated by economists, especially those interested in welfare economics. Some economists start with the presumption that the free-market outcome is inherently inequitable, and that equity (sharing out the pie) must be traded off against efficiency (maximizing the size of the pie). Others argue that it is inequitable to take money away from someone who has created economic value to give to people who have been less skilled or industrious.
Industry:Economy
When supply and demand are in balance. At the equilibrium price, the quantity that buyers are willing to buy exactly matches the quantity that sellers are willing to sell. So everybody is satisfied, unlike when there is disequilibrium. In classical economics, it is assumed that markets always tend towards equilibrium and return to it in the event that something causes a temporary disequilibrium. General equilibrium is when supply and demand are balanced simultaneously in all the markets in an economy. Keynes questioned whether the economy always moved to equilibrium, for instance, to ensure full employment.
Industry:Economy
Some people think capitalism is wholly bad for the environment as it is based on consuming scarce resources. They want less consumption and greater reliance on renewable resources. They oppose free trade because they favor self-sufficiency (autarky), or at least so-called fair trade, and because they believe it encourages poorer countries to destroy their natural resources in order to get rich quick. Although few professional economists would share these views, in recent years many attempts have been made to incorporate environmental concerns within mainstream economics. The traditional measure of GDP incorporates only those things that are paid for; this may include things that reduce the overall quality of life, including harming the environment. For instance, cleaning up an oil spill will increase GDP if people are paid for the clean-up. Attempts have been made to devise an alternative environmentally friendly measure of national income, but so far progress has been limited. At the very least, traditional economists increasingly agree that maximizing GDP growth does not necessarily equal maximizing social welfare. Much of the damage done to the environment may be a result of externalities. An externality can arise when people engaged in economic activity do not have to take into account the full costs of what they are doing. For instance, car drivers do not have to bear the full cost of making their contribution to global warming, even though their actions may one day impose a huge financial burden on society. One way to reduce externalities is to tax them, say, through a fuel tax. Another is prohibition, say, limiting car drivers to one gallon of fuel per week. This could result in black markets, however. Allowing trade in pollution rights may encourage “efficient pollution”, with the pollution permits ending up in the hands of those for which pollution has the greatest economic upside. As this would still allow some environmental destruction, it might be unpopular with extreme greens. There may be a case for international eco markets. For instance, people in rich countries might pay people in poor countries to stop doing activities that do environmental damage outside the poor countries, or that rich people disapprove of, such as chopping down the rain forests. Choices on environmental policy, notably on measures to reduce the threat of global warming, involve costs today with benefits delayed until the distant future. How are these choices to be made? Traditional cost-benefit analysis does not help much. In measuring costs and benefits in the far distant future, two main things seem to intervene and spoil the conventional calculations. One is uncertainty. We know nothing about what the state of the world will be in 2200. The other is how much people today are willing to pay in order to raise the welfare of others who are so remote that they can barely be imagined, yet who seem likely to be much better off materially than people today. Some economists take the view that the welfare of each future generation should be given the same weight in the analysis as the welfare of today’s. This implies that a much lower discount rate should be used than the one appropriate for short-term projects. Another option is to use a high discount rate for costs and benefits arising during the first 30 or so years, then a lower rate or rates for more distant periods. Many studies by economists and psychologists have found that people do in fact discount the distant future at lower rates than they apply to the near future.
Industry:Economy
The life and soul of the capitalist party. Somebody who has the idea and enterprise to mix together the other factors of production to produce something valuable. An entrepreneur must be willing to take a risk in pursuit of a profit.
Industry:Economy
A deposit in dollars held in a bank outside the United States. Such deposits are often set up to avoid taxes and currency exchange costs. They are frequently lent out and have become an important method of credit creation.
Industry:Economy
One of the factors of production, along with land, labor and capital. The creative juices of capitalism; the animal spirits of the entrepreneur.
Industry:Economy
