скачать книгу бесплатно
2 an individual’s or company’s account at a COMMERCIAL BANK or BUILDING SOCIETY into which the customer can deposit cash or cheques and make withdrawals on demand on a day-to-day basis. Current accounts (or sight deposits as they are often called) offer customers immediate liquidity with which to finance their transactions. Most banks and building societies pay INTEREST on current account balances that are in credit. See BANK DEPOSIT, DEPOSIT ACCOUNT.
current assets ASSETS, such as STOCKS, money owed by DEBTORS, and cash, that are held for short-term conversion within a firm as raw materials are bought, made up, sold as finished goods and eventually paid for. See FIXED ASSETS, WORKING CAPITAL.
current liabilities all obligations to pay out cash at some date in the near future, including amounts that a firm owes to trade CREDITORS and BANK LOANS/OVERDRAFTS. See WORKING CAPITAL.
current yield see YIELD.
Customs and Excise a government agency for the collection of INDIRECT TAXES levied in accordance with appropriate rates, rules and regulations. In the UK, Her Majesty’s Customs and Excise typically collects revenue from VALUE-ADDED TAX and EXCISE DUTY payable on alcoholic drink, tobacco and betting. The agency also enforces the laws regarding the import and export of certain goods, collects IMPORT DUTIES and seeks to prevent attempts to avoid paying import duties by smuggling. See also INLAND REVENUE.
customs duty a TAX levied on imported products (see IMPORTS). Unlike TARIFFS, customs duties are used primarily as a means of raising revenue for the government rather than as a means of protecting domestic producers from foreign competition. See TAXATION.
customs union a form of TRADE INTEGRATION between a number of countries in which members eliminate all trade barriers (TARIFFS, etc.) amongst themselves on goods and services, and establish a uniform set of barriers against trade with the rest of the world, in particular a common external tariff. The aim of a customs union is to secure the benefits of international SPECIALIZATION AND INTERNATIONAL TRADE, thereby improving members’ real living standards. See GAINS FROM TRADE, TRADE CREATION, EUROPEAN UNION, MERCOSUR.
cyclical fluctuation the short-term movements, both upwards and downwards, in some economic variable around a long-term SECULAR TREND line. See Fig. 35. See DEMAND MANAGEMENT.
cyclically adjusted public-sector borrowing requirement see PUBLIC-SECTOR BORROWING REQUIREMENT.
cyclical unemployment the demand-deficient UNEMPLOYMENT that occurs as a result of a fall in the level of AGGREGATE DEMAND and business activity during the RECESSION and DEPRESSION phases of the BUSINESS CYCLE.
cyclical variation see TIME-SERIES ANALYSIS.
Fig. 35 Cyclical fluctuation. The pronounced short-term swings in output growth rates over the course of the BUSINESS CYCLE, around a rising long-term trend growth line for the country’s GROSS NATIONAL PRODUCT.
d (#ulink_7da1e1e3-8953-506c-8dd1-4db024d0ed8a)
dawn raid a situation in which a potential TAKEOVER bidder for a company buys a substantial shareholding in the target company at current market prices, often through intermediaries (to disguise the identity of the bidder). This shareholding can then be used as a platform for a full takeover bid for all the shares at a stated offer price. See TAKEOVER BID, CITY CODE.
deadweight loss the reduction in CONSUMERS’ SURPLUS and PRODUCERS’ SURPLUS that results when the output of a product is restricted to less than the optimum efficient level that would prevail under PERFECT COMPETITION. Fig. 36 shows the demand and supply curves for a product, and their interaction establishes the equilibrium market price OP. At this price, consumers’ surplus is shown as the diagonally shaded area ABP and producers’ surplus as the vertically shaded area APO. If output is restricted from OQ to OQ
, then the price paid by consumers would rise to OP
and consumers’ surplus would be reduced by the amount ACE, while the price received by producers would fall to OP
and producers’ surplus would be reduced by the amount ADE.
Deadweight loss is particularly likely to occur in markets dominated by MONOPOLY suppliers who restrict output in order to keep prices high.
dear money see TIGHT MONEY.
Fig. 36 Deadweight loss. See entry.
death rate the number of people in a POPULATION who die per thousand per year. In 2004, for example, the UK death rate was 10 people per 1,000 of the population. The difference between this rate and the BIRTH RATE is used to calculate the rate of growth of the population of a country over time. The death rate tends to decline as a country attains higher levels of economic development. See DEMOGRAPHIC TRANSITION.
debentures a means of financing companies through fixed-interest LOANS secured against company ASSETS.
In some cases the company may offer a specific asset, such as a particular machine, as security for the loan; in other cases lenders are offered security by means of a general claim against all company assets in the event of default. See LOAN CAPITAL.
debt an amount of money owed by a person, firm or government (the borrower) to a lender. Debts arise when individuals, etc., spend more than their current income or when they deliberately plan to borrow money to purchase specific goods, services or ASSETS (houses, financial securities, etc.). Debt contracts provide for the eventual repayment of the sum borrowed and include INTEREST charges for the duration of the loan. An individual’s debt can include MORTGAGES, INSTALMENT CREDIT, BANK LOANS and OVERDRAFTS; a firm’s debt can include fixed-interest DEBENTURES, LOANS, BILLS OF EXCHANGE and bank loans and overdrafts; a government’s debt can take the form of long-term BONDS and short-term TREASURY BILLS (see NATIONAL DEBT). See PUBLIC SECTOR BORROWING REQUIREMENT. See also INTERNATIONAL DEBT.
debt capital see LOAN CAPITAL.
debt financing the financing of firms’ and governments’ deficits by the issue of FINANCIAL SECURITIES such as short-dated company BILLS OF EXCHANGE and government TREASURY BILLS, and, in the case of government, longer-term BONDS. See PUBLIC SECTOR BORROWING REQUIREMENT.
debtor a person or business that owes money to individuals or firms for goods, services or raw materials that they have bought but for which they have not yet paid (trade debtors) or because they have borrowed money. Debtors are also termed ‘accounts receivable’. See CREDITORS, DEBT, CREDIT CONTROL, WORKING CAPITAL, BAD DEBT.
debtor nation a country that has had more invested in it than it has invested abroad. A debtor nation has to pay out more interest and dividends on investments made in the country than it receives, with a consequent deficit in its BALANCE OF PAYMENTS. Many DEVELOPING COUNTRIES are debtor nations. Compare CREDITOR COUNTRY.
debt servicing the cost of meeting INTEREST payments and regular contractual repayments of principal on a LOAN along with any administration charges borne by the BORROWER.
decentralization the diffusion of economic decision-making to many different decision-makers rather than concentrating such decision-making centrally. In an economy this is achieved by the adoption of the PRICE SYSTEM, which devolves decisions to individual consumers and suppliers. In a firm, decentralization involves delegating authority to make decisions ‘down the line’ to particular divisions and departments. See PRIVATE ENTERPRISE ECONOMY, M-FORM ORGANIZATION.
decision tree a graphical representation of the decision-making process in relation to a particular economic decision. The decision tree illustrates the possibilities open to the decision-maker in choosing between alternative strategies. It is possible to specify the financial consequence of each ‘branch’ of the decision tree and to gauge the PROBABILITY of particular events occurring that might affect the consequences of the decisions made. See RISK AND UNCERTAINTY.
decreasing returns to scale see DISECONOMIES OF SCALE.
decreasing returns to the variable-factor input see DIMINISHING RETURNS.
deferred compensation payment schemes that pay lower wages during the early years of employment in an organization and higher wages in subsequent years. With deferred compensation schemes, a worker’s remuneration increases with seniority and experience, which tend to improve the worker’s efficiency within the organization. Such compensation schemes tend to reduce labour turnover and reduce SHIRKING. See PAY.
deficiency payment see INCOME SUPPORT.
deficit see BUDGET DEFICIT, BALANCE OF PAYMENTS.
deficit financing see BUDGET DEFICIT, PUBLIC SECTOR BORROWING REQUIREMENT.
deflation a reduction in the level of NATIONAL INCOME and output usually accompanied by a fall in the general price level (DISINFLATION).
A deflation is often deliberately brought about by the authorities in order to reduce INFLATION and to improve the BALANCE OF PAYMENTS by reducing import demand. Instruments of deflationary policy include fiscal measures (e.g. tax increases) and monetary measures (e.g. high interest rates). See MONETARY POLICY, FISCAL POLICY.
deflationary gaporoutput gap the shortfall in total spending (AGGREGATE DEMAND) at the FULL EMPLOYMENT level of national income (POTENTIAL GROSS NATIONAL PRODUCT). Because of a deficiency in spending, some of the economy’s resources lie idle and ACTUAL GROSS NATIONAL PRODUCT is below that of potential GNP. To counteract this deficiency in spending, the authorities can use FISCAL POLICY and MONETARY POLICY to expand aggregate demand. See Fig. 37. See also DEFLATION, REFLATION, INFLATIONARY GAP.
DEFRA see DEPARTMENT FOR THE ENVIRONMENT, FOOD AND RURAL AFFAIRS.
deindustrialization a sustained fall in the proportion of national output accounted for by the industrial and manufacturing sectors of the economy, a process that is often accompanied by a decline in the number of people employed in industry (compare INDUSTRIALIZATION).
There is a well-established trend in advanced economics for the industrial sector to grow more slowly than the service sector, as shown in Fig. 38. For the UK, the share of industry in GDP fell from 43% in 1960 to 29% in 2002, while the share of services increased from 54% to 70%. Over the same period, employment in industry in the UK fell from 11.8 million in 1960 to 3.7 million in 2003.
Fig. 37 Deflationary gap. (a) The AGGREGATE SUPPLY SCHEDULE is drawn as a 45-degree line because businesses will offer any particular level of output only if they expect total spending (aggregate demand) to be just sufficient to sell all of that output. However, once the economy reaches the full employment level of national income (OY
), then actual output cannot expand further and at this level of output the aggregate supply schedule becomes vertical. (b) Alternatively, aggregate supply can be depicted in terms of the various levels of real national income supplied at each price level. Again, once the economy reaches the full employment level of real national income, the aggregate supply schedule becomes vertical. In both (a) and (b), if aggregate demand is at a low level (AD
), then actual output (OY) will be determined by the intersection of AD
and the aggregate supply schedule at point A; this output (OY) is less than potential output (OY
), leaving an output gap. An output gap can be removed by the authorities by expanding aggregate demand to the full employment level of aggregate demand (AD
) where actual output (determined by the intersection of AD
and the aggregate supply schedule at point B) corresponds with potential GNP.
Changes in sector shares may simply reflect changes in the pattern of final demand for goods and services over time, and as such may be considered a ‘natural’ development associated with a maturing economy. On the other hand, deindustrialization that stems from supply-side deficiencies (high costs, an overvalued exchange rate, lack of investment and innovation) which put a country at a competitive disadvantage in international trade (see IMPORT PENETRATION) is a more serious matter. In this case, deindustrialization often brings with it a fall in national output, rising unemployment and balance of payments difficulties.
The extent of deindustrialization in the UK was even more marked in the early 1980s because of Britain’s artificially high exchange rate, bolstered by UK oil exports, which caused Britain to lose overseas markets. See STRUCTURE OF INDUSTRY, STRUCTURAL UNEMPLOYMENT.
Fig. 38 Deindustrialization. The distribution of gross national product shows how the industrial sector in advanced economics grows more slowly than the service sector. The figures for industry include those for manufacturing. Source: World Development Report, World Bank, 2004.
delivered pricing the charging of a PRICE for a product that includes the cost of transporting the product from the manufacturer to the customer. The delivered prices quoted by a manufacturer might accurately reflect the actual costs of transportation to different areas, or alternatively, discriminatory prices might be used to cross-subsidize areas in order to maximize sales across the country. See BASING POINT PRICE SYSTEM.
delivery note a document sent by a supplier to a customer at the time when products are supplied that itemizes the physical quantities of product supplied. Thereafter an INVOICE is usually sent to the customer showing the money value of products supplied. Compare STATEMENT OF ACCOUNT.
demandoreffective demand the WANT, need or desire for a product backed by the money to purchase it. In economic analysis, demand is always based on ‘willingness and ability to pay’ for a product, not merely want or need for the product. CONSUMERS’ total demand for a product is reflected in the DEMAND CURVE. Compare SUPPLY.
demand curve a line showing the relationship between the PRICE of a PRODUCT or FACTOR OF PRODUCTION and the quantity DEMANDED per time period, as in Fig. 39.
Most demand curves slope downwards because (a) as the price of the product falls, consumers will tend to substitute this (now relatively cheaper) product for others in their purchases; (b) as the price of the product falls, this serves to increase their real income, allowing them to buy more products (see PRICE EFFECT, INCOME EFFECT, SUBSTITUTION EFFECT). In a small minority of cases, however, products can have an UPWARD-SLOPING CURVE.
The slope of the demand curve reflects the degree of responsiveness of quantity demanded to changes in the product’s price. For example, if a large reduction in price results in only a small increase in quantity demanded (as would be the case where the demand curve has a steep slope) then demand is said to be price inelastic (see PRICE-ELASTICITY OF DEMAND).
The demand curve interacts with the SUPPLY CURVE to determine the EQUILIBRIUM MARKET PRICE. See DEMAND FUNCTION, DEMAND CURVE (SHIFT IN), DIMINISHING MARGINAL UTILITY, MARGINAL REVENUE PRODUCT.
Fig. 39 Demand curve. Demand is the total quantity of a good or service that buyers are prepared to purchase at a given price. Demand is always taken to be effective demand, backed by the ability to pay, and not just based on want or need. The typical market demand curve slopes downwards from left to right, indicating that as price falls more is demanded (that is, a movement along the existing demand curve). Thus, if price falls from OP
to OP
, the quantity demanded will increase from OQ
to OQ
.
demand curve (shift in) a movement of the DEMAND CURVE from one position to another (either left or right) as a result of some economic change other than price. A given demand curve is always drawn on the CETERIS PARIBUS assumption that all the other factors affecting demand (income, tastes, etc.) are held constant. If any of these changes, however, then this will bring about a shift in the demand curve. For example, if income increases, the demand curve will shift to the right, so that more is now demanded at each price than formerly. See Fig. 40. See also DEMAND FUNCTION, INCOME-ELASTICITY OF DEMAND.
Fig. 40 Demand curve (shift in). An increase in income shifts the demand curve D
D
to D
D
, increasing the quantity demanded from OQ
, to OQ
. The magnitude of this shift depends upon the INCOME ELASTICITY OF DEMAND for the product.
demand deposit see BANK DEPOSIT, COMMERCIAL BANK.
demand elasticity see ELASTICITY OF DEMAND.
demand for a factor input see DERIVED DEMAND.
demand function a form of notation that links the DEPENDENT VARIABLE, quantity demanded (Qd), with various INDEPENDENT VARIABLES that determine quantity demanded such as product price (P), income (Y), prices of substitute products (Ps), advertising (A), etc.:
Qd = f(P, Y, Ps, A, etc)
Changes in any of these independent variables will affect quantity demanded, and if we wish to investigate the particular effect of any one of these variables upon quantity demanded, then we could (conceptually) hold the influence of the other independent variables constant (CETERIS PARIBUS), whilst we focus upon the particular effects of that independent variable. See DEMAND CURVE, DEMAND CURVE (SHIFT IN).
demand managementorstabilization policy
The control of the level of AGGREGATE DEMAND in an economy, using FISCAL POLICY and MONETARY POLICY to moderate or eliminate fluctuations in the level of economic activity associated with the BUSINESS CYCLE. The general objective of demand management is to ‘fine-tune’ aggregate demand so that it is neither deficient relative to POTENTIAL GROSS NATIONAL PRODUCT (thereby avoiding a loss of output and UNEMPLOYMENT) nor overfull (thereby avoiding INFLATION).
An unregulated economy will tend to go through periods of depression and boom as indicated by the continuous line in Fig. 41. Governments generally try to smooth out such fluctuations by stimulating aggregate demand when the economy is depressed and reducing aggregate demand when the economy is over-heating. Ideally, the government would wish to manage aggregate demand so that it grows exactly in line with the underlying growth of potential GNP, the dashed line in Fig. 41, exactly offsetting the amplitude of troughs and peaks of the business cycle.
Two main problems exist, however:
(a) the establishment of the correct timing of such an INJECTION or WITHDRAWAL;
(b) the establishment of the correct magnitude of an injection or withdrawal into the economy (to counter depressions and booms). With perfect timing and magnitude, the economy would follow the trend line of potential GNP.
A number of stages are involved in applying a stabilization policy as shown in the figure. For example, at time period zero the onset of a recession/depression would be reflected in a downturn in economic activity, although delays in the collection of economic statistics means that it is often time period 1 before data becomes available about unemployment rates, etc. Once sufficient data is to hand, the authorities are able to diagnose the nature of the problem (time period 2) and to plan appropriate intervention, such as tax cuts or increases in government expenditure (time period 3). At time period 4, the agreed measures are then implemented, although it may take some time before these measures have an effect on CONSUMPTION, INVESTMENT, IMPORTS, etc. (see MULTIPLIER). If the timing of these activities is incorrect, then the authorities may find that they have stimulated the economy at a time when it was already beginning to recover from recession/depression, so that their actions have served to exacerbate the original fluctuation (dotted line 1 in Fig. 41). The authorities could also exacerbate the fluctuation (dotted line 1) if they get the magnitudes wrong by injecting too much purchasing power into the economy, creating conditions of excess demand.
If the authorities can get the timing and magnitudes correct, then they should be able to counterbalance the effects of recession/depression and follow the path indicated as dotted line 2 in Fig. 41. Reducing the intensity of the recession in this way requires the authorities to FORECAST accurately the onset of recession some time demand management ahead, perhaps while the economy is still buoyant (time period 6). On the basis of these forecasts, the authorities can then plan their intervention to stimulate the economy (time period 7), activate these measures (time period 8), so that these measures begin to take effect and stimulate the economy as economic activity levels fall (time period 9).
Much government action is inaccurate in timing because of the institutional and behavioural complexities of the economy. Where the government has not been successful in adequately eradicating such peaks and troughs in the business cycle, it is frequently accused of having stop-go policies (see STOP-GO CYCLE), that is, of making injections into a recovering economy, which then ‘overheats’, and subsequently withdrawing too much at the wrong time, ‘braking’ too hard.
Demand management represents one facet of government macroeconomic policy, other important considerations being SUPPLY-SIDE policies, which affect the rate of growth of potential GNP, and EXCHANGE RATE policies, which affect the competitiveness of internationally traded goods and services. See DEFLATIONARY GAP, INFLATIONARY GAP, EQUILIBRIUM LEVEL OF NATIONAL INCOME, AUTOMATIC (BUILT-IN) STABILIZERS, INTERNAL-EXTERNAL BALANCE MODEL, PUBLIC FINANCE, BUDGET.
Fig. 41 Demand management. The management of aggregate demand in an economy.
demand-pull inflation a general increase in prices caused by a level of AGGREGATE DEMAND in excess of the supply potential of the economy. At full employment levels of output (POTENTIAL GROSS NATIONAL PRODUCT), excess demand bids up the price of a fixed real output (see INFLATIONARY GAP). According to MONETARISM, excess demand results from too rapid an increase in the MONEY SUPPLY. See INFLATION, QUANTITY THEORY OF MONEY, COST-PUSH INFLATION.
demand schedule a table listing various prices of a product and the specific quantities demanded at each of these prices. The information provided by a demand schedule can be used to construct a DEMAND CURVE showing the price-quantity demanded relationship in graphical form.
demand theory see THEORY OF DEMAND.
demerger the break-up of a company, often originally formed through a MERGER, into two (or more) separate companies. This is most easily achieved when the original businesses comprising the merger have continued to be run as separate divisions of the enlarged group. In this case, for example, the A-B company could be split into separate quoted companies, A and B, with the company’s existing shareholders being given shares in both companies. Thus, unlike a DIVESTMENT (the sale of a division to outside interests) or a MANAGEMENT BUY-OUT (the sale of a division to its existing management), initially at least the companies continue to be owned by their existing shareholders.
A demerger may occur because the merged company has failed to perform up to expectations because of internal conflicts of management, or may result from a rethink of the company’s BUSINESS STRATEGY favouring a concentration on ‘core’ businesses.
Fig. 42 Demographic transition. The levelling-off of the rate of population growth during a country’s economic development.
demographic transition a POPULATION cycle that is associated with the ECONOMIC DEVELOPMENT of a country. In underdeveloped countries (i.e. subsistence agrarian economics), BIRTH RATES and DEATH RATES are both high, so there is very little change in the overall size of the population. With economic development (i.e. INDUSTRIALIZATION), INCOME PER HEAD begins to rise and there is a fall in the DEATH RATE (through better nutrition, sanitation, medical care, etc.), which brings about a period of rapid population growth. Provided ECONOMIC GROWTH is consistently greater than the increase in population, income per head continues to expand and eventually serves to reduce the BIRTH RATE (small families become the ‘norm’ in society as people seek to preserve their growing affluence). At this point, population growth slows down and may eventually level off. See Fig. 42.
Most advanced industrial countries have gone through a demographic transition of the kind described above and are today characterized by both low birth and death rates and slow-growing populations. See POPULATION TRAP, DEVELOPING COUNTRY.
denationalization see PRIVATIZATION.
