Economic Terms

The value of imports exceed the value of exports.

Below is a diagram to show the process of running a current account deficit i.e. in order to run a current account deficit the government must run up a financial account surplus to borrow the funds to finance the country's marginal propensity to import.

The value of imports equal the value of exports.

Below is a diagram to show the process of running a balanced current account. No borrowing or lending is required with this current account position.

 

The value of exports exceed the value of imports.

Below is a diagram to show the process of running a current account surplus i.e. in order to run a current account surplus the government must run up a financial account deficit to lend the funds to other countries wishing to run up a current account deficit, as this earns interest rather than sitting in the government's coffers.

 

 

A financial ratio used to test a bank's liquidity by deriving the proportion of current assets available to cover current liabilities. This ratio helps to gauge whether a company's liquid assets e.g money market instruments, are readily available to pay off short-term liabilities such as deposits. Generally the higher the ratio the safer the bank is perceived to be.

The ongoing cost of running the government and the services it provides.

A phenomenon where poor families become impoverished for at least three generations.

Below is a graphical depiction of the cycle of poverty.

Unemployment that is created as a result of a lack of demand and therefore AD is not sufficient to achieve output consistent with full employment. This type of unemployment is sometimes referred to as demand deficient unemployment.

Below is a diagram to illustrate how cyclical unemployment occurs in an aggregate demand and aggregate supply framework. The AD shifts inwards and as a result firms value workers less due to the lack of products that need to be made. This is the type of unemployment that often occurs during downturns in the economic cycle as demand starts to flag. In this instance the AD curve shifting inwards has the caused the unemployment rate to go from 5% to 9%.

AS the name suggests this type of unemployment is often unpreventable as it is a result of the natural downturn in a country's economic cycle i.e. there are periods in which workers are required to produce high amounts of output and periods where workers are not required as much to produce goods and services.