Monday, August 24, 2009


Putty Putty Capital:The capital which can be transformed into durable goods and then can be brought back to flexible capital again.

Amortization:The running down or payment of a loan by installments. An example is a repayment mortgage on a house, which is amortized by making monthly payments that over a pre-agreed period of time

Autarky:The idea that a country should be self-sufficient and not take part in international trade. The experience of countries that have pursued this Utopian ideal by substituting domestic production for imports is an unhappy one.

Backwardation:When a commodity is valued more highly in a spot market (that is, when it is for delivery today) than in a futures market (for delivery at some point in the future).

Economic Cannibalism:Firms are reluctant to produce new articles in place of an already existing one which is doing good in market as that would cannibalize business or eat one's own business.

Catch Up Effect:In any period, the economies of countries that start off poor generally grow faster than the economies of countries that start off rich. As a result, the NATIONAL INCOME of poor countries usually catches up with the national income of rich countries. New technology may even allow DEVELOPING COUNTRIES to leap-frog over industrialized countries with older technology. This, at least, is the traditional economic theory. In recent years, there has been considerable debate about the extent and speed of convergence in reality.

Complimentary goods:Goods without which some other goods can not function.Example-a computer can not run without software.

Crony Capitalism:Economic nepotism.Form of corruption.Giving financial benefits to near and dear ones.

CAPM:Capital; Asset Pricing Model.Valuing assets to calculate capital.Needed for safe investment.

Gearing:A company's debt expressed as a percentage of its equity.Also known as leverage.

Gini Coefficient:An inequality indicator. The Gini coefficient measures the inequality of income distribution within a country. It varies from zero, which indicates perfect equality, with every household earning exactly the same, to one, which implies absolute inequality, with a single household earning a country's entire income. Latin America is the world's most unequal region, with a Gini coefficient of around 0.5; in rich countries the figure is closer to 0.3.

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