The EzyEducation website uses cookies to help ensure we give you the best experience.
If you continue without changing your settings, we assume that you are happy to receive all cookies on the EzyEducation website.
Please refer to our Privacy and Cookies Statement to

find out more.


Economic Terms

All   0-9   A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Intervention prices

The price levels (high and low) that a Government will monitor to determine when to intervene in markets to support or stabilise prices.


A policy perspective that favours government intervention in order to correct any market failures present and in the process increase the level of economic welfare in society. Policymakers that take this perspective, believe that the only way a government can fulfill their macroeconomic objectives is for a heavy layer of government intervention to be administrated.

The type of interventionist policies include:

  • Regulation
  • Nationalisation
  • Investment in human capital
  • Investment in infrastructure
  • Investment in technology

The aim is to shift the LRAS curve to the right as shown by the diagram below:

Apart from reducing the price level and increasing real output, interventionist policies create a number of different advantages for an economy:

  1. Greater equality - redistributes income and wealth to improve equality of opportunities.
  2. Corrects market failure - governments can ensure that markets do take into account of the externalities involved in the consumption/production of goods and services.
  3. Heals economic cycle problems - intervention helps overcome downturns in the economy.
  4. Increases economic efficiency and productivity - increases productive capacity of the economy.

However, these types of policies can also create problems in an economy and these are the evaluative points you should consider when talking about government intervention:

  1. Government failure - without full information can be pressurised by certain political groups to pursue inefficient projects. 
  2. Loss of efficiency savings - nationalisation creates more state owned industries which lack profit making incentives and this could fail to drive up efficiency and lower costs.
  3. Restricts freedom - government intervention takes away the decision making process from private individuals which goes against the free marketeer view (the market is best at deciding what and how to produce goods and services).


The creation of a product or way of doing things for the first time.


When capital is purchased to increase productive capacity.

A key aspect is that the cost of purchasing capital is considered expenditure and is part of Aggregate Demand. However, the purpose of purchasing additional capital is to increase productive capacity which will influence Aggregate Supply i.e. outward LRAS shift. Distinguishing these two outcomes using AD/AS analysis is a minimum requirement for success at Economics A-level.

The increase in expenditure has an immediate impact (as soon as the capital is purchased) while changes in productive capacity will take longer to emerge (as it takes time to integrate capital into the productive process the impact on output also takes time to emerge).



Investment Bank

A financial institution that assists individuals, corporations, and governments in raising financial capital by underwriting or acting as the client's agent in the issuance of securities.

Investment good

A good that is purchased if there is an expectation it will increase in value over time e.g. classic car, antiques, commodities.

Investment goods

A good that is purchased if there is an expectation it will increase in value over time e.g. classic car, antiques, commodities.

Investment income

Income generated by the investments owned by individuals and firms. The income is a reward that is paid for the use of the capital

Invisible trade

Trade in services and other intangible financial items.

Display # 
Forgot your password?