David K.H. Begg, Gianluigi Vernasca-Economics-McGraw Hill Higher Education (2011)

Glossary
International value of the domestic currency quantity
of foreign currency per unit of domestic currency.
Intra-industry trade two-way trade in goods made
within the same industry.
Invention the discovery of new knowledge.
Inventories goods held in stock by the firm for future
sales.
Investment the purchase of new capital goods by firms.
Investment demand firms' desired or planned
additions to physical capital (factories and
machines) and to inventories.
Investment demand schedule shows desired
investment at each interest rate.
Invisible hand the assertion that the individual pursuit
of self-interest within free markets may allocate
resources efficiently from society's viewpoint.
Involuntary unemployment when workers want to
work at the going wage but cannot find jobs.
IOU money a medium of exchange based on the debt
of a private firm or individual.
IS schedule shows combinations of income and
interest rates at which aggregate demand equals
actual output.
Isoquant shows minimum combinations of inputs to
make a given output. Different points on an
isoquant reflect different production techniques.
Labour-augmenting technical progress increases the
effective labour supply.
Labour force all individuals in work or looking for
work.
Laffer curve shows how much tax revenue is raised at
each possible tax rate.
Land the factor of production that nature supplies.
Law of comparative advantage countries specialize
in producing and exporting the goods that they
produce at a lower relative cost compared to other
countries.
Law of diminishing marginal returns further
increases in a variable input lead to steadily
decreasing marginal product of that input.
Law of diminishing returns says each extra worker
adds less to output than the previous extra worker
added.
Leakage leakage from the circular flow is money no
longer recycled from households to firms.
Lender of last resort the central bank: it lends to banks
when financial panic threatens the financial system.
Less-developed countries (LDCs) countries with low
per capita incomes.
Life-cycle hypothesis assumes people make a lifetime
consumption plan (including bequests to their
children) that is just affordable out of lifetime
income (plus any initial wealth inherited).
Limited liability shareholders of a company cannot
lose more than they have already invested in the
business.
Liquidity the cheapness, speed and certainty with
which asset values can be converted back into
money.
Liquidity crisis an institution is temporarily unable to
meet immediate requests for payment even though
its underlying assets exceed its liabilities.
LM schedule shows combinations of interest rates and
income-yielding money market equilibrium when
the central bank pursues a given target for the
nominal money supply.
Log-rolling a vote for another person's preferred
outcome on one issue in order to exchange
for their vote your preferred outcome on another
issue.
Long run the period needed for complete adjustment
to a price change; its length depends on the type of
adjustments consumers wish to make.
Long-run average cost the total cost (LTC) divided by
level of output.
Long-run equilibrium when the price equates the
quantity demanded to the total quantity supplied by
the number of firms in the industry when each firm
is on its long-run supply curve and firms can freely
enter or exit the industry.
Long-run marginal cost the rise in long-run total cost
if output rises permanently by one unit.
Long-run supply curve how price affects desired
output; hence, the part of a firm's LMC curve above
its LAC curve.
Long-run total cost the minimum cost of producing
each output level when a firm can adjust all
inputs.
Luxury good a good with an income elasticity above
unity.
Maastricht criteria for joining EMU said that a
country must already have achieved low inflation
and sound fiscal policy.
Macroeconomics the study of the economy as
a system.
Managed float central banks intervene in the forex
market to try to smooth out fluctuations and nudge
the exchange rate in the desired direction.
Marginal cost the rise in total cost when output rises
1 unit.
Marginal firm the last firm to enter in the market,
which makes zero long-run profits.
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