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September 21, 2018 

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FIXED EXCHANGE RATE: An exchange rate that's established at a given level and maintained through government (usually central bank) actions. To fix the exchange rate, a government must be willing to buy and sell currency in the foreign exchange market in whatever amounts are necessary. A fixed exchange rate typically disrupts a nation's balance of trade and balance of payments. If the exchange rate is fixed too low, then a government needs to sell it's currency in the foreign exchange market, and may end up expanding the money supply too much, which then causes inflation. If the exchange rate is fixed too high, then export sales to other countries are curtailed and the economy is likely to slide into a recession.

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TECHNICAL EFFICIENCY:

Obtaining the greatest possible production of goods and services from available resources. In other words, resources are not wasted in the production process. This is also considered as engineering efficiency and should be contrasted with economic or allocative efficiency.
Technical efficiency means that natural resources are transformed into goods and services without waste, that producers are doing the best job possible of combining resources to make goods and services. There is no waste of material inputs. There are no workers standing idly around waiting for spare parts. The maximum amount of physical production is obtained from the given resource inputs. In essence, production is achieved at the lowest possible opportunity cost.

Technical efficiency is a prerequisite for allocative or economic efficiency. Economic efficiency is achieved if the highest possible level of satisfaction is obtained from given resources. Because satisfaction is derived from consuming goods and services, economic efficiency requires the greatest possible level of production, that is, technical efficiency.

However, while technical efficiency is necessary for economic efficiency, it does not guarantee economic efficiency. While technical efficiency might be achieved in the production of purple spotted stuffed animals, allocative efficiency is not achieved if no one actually wants purple spotted stuffed animals and they remain stored in a big purple warehouse.

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Recommended Citation:

TECHNICAL EFFICIENCY, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2018. [Accessed: September 21, 2018].


Check Out These Related Terms...

     | production possibilities | technology | production | efficiency | economic efficiency | consumer sovereignty | satisfaction | full employment | opportunity cost |


Or For A Little Background...

     | good | service | allocation | resource allocation | scarcity | limited resources | unlimited wants and needs | economic goals | factors of production | economic thinking |


And For Further Study...

     | distribution standards | economic system | seven economic rules | three questions of allocation |


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