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Glossary
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Economic Terms
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arrangement, credited to and subject to

withdrawal by the depositor.

Aa
Absolute Advantage -The ability to produce
more units of a good or service than some other
producer, using the same quantity of resources.
Asset - Something of monetary value owned
by an individual or an organization.
Accounting Loss - Total explicit costs are
greater than total explicit revenue which results
in a loss.
Allowance - A sum of money paid regularly to
a person, often by a parent to a child;
sometimes paid in compensation for services
rendered.
Assumptions - Beliefs
presupposed to be true.

or

statements

Advertising - Using advertisements (public

notices, displays or presentations often based
on celebrity endorsements, appeals to
authority, bandwagon effects and attractive
imagery) to promote the sale of goods or
services.

Benefit - Monetary or non-monetary gain

received because of an action taken or a
decision made.
Borrow - To receive and use something
belonging to somebody else, with the intention
of returning or repaying it-often with interest
in the case of borrowed money.
Brand - A trade name used to identify a
product produced by a particular company,
distinguishing it from similar products
produced by competitors.
Budget - A spending-and-savings plan, based
on estimated income and expenses for an
individual or an organization, covering a
specific time period.
Business - Any activity or organization that
produces or exchanges goods or services for a
profit.

Annual Fee - The yearly charge for having a

credit card or credit account.

Business Plan - A description of an

enterprise including its name, its goals and
objectives, the product(s) sold and distributed,
the work skills needed to produce those
products, and the marketing strategies used to
promote them.

Average Cost - Total cost (TC) divided by the

amount produced.

Cc

Bb
Bank - A financial institution that provides
various products and services to its customers,
including checking and savings accounts, loans
and currency exchange.
Bank Account - An arrangement by which a
bank holds funds on behalf of a depositor. Also,
the balance of funds held under such an

Capital- Resources and goods made and used

to produce other goods and services. Examples
include buildings, machinery, tools and
equipment.
Cash - Money in the form of paper currency or
coins (as distinct from checks, money orders or
credit).
Coins - Government-issued pieces of metal
that have value and are used as money.

Competition - Attempts by two or more

individuals or organizations to acquire the
same goods, services, or productive and
financial resources.
Consume - To buy and use a good or service.
Corporation - A legal entity owned by
shareholders whose liability for the firm's
losses is limited to the value of the stock they
own.
Costs - An amount that must be paid or spent
to buy or obtain something. The effort, loss or
sacrifice necessary to achieve or obtain
something.
Credit - The opportunity to borrow money or
to receive goods or services in return for a
promise to pay later.
Credit History - A record of past borrowing
and repayments.
Creditor - A person or company to whom
money is owed.
Currency - The money in circulation in any
country.
Current Account - Part of a nation's balance
of payments accounts; records exports and
imports of goods and services, net investment
income and transfer payments with other
countries.

Dd

Discount Rate - The interest rate the Federal

Reserve charges commercial banks for loans.
Deposit - Money put into a financial account.
Also, to place money in a financial account.
Depreciation - A reduction in the value of
capital goods over time due to their use in
production.
Discount Rate - The interest rate the Federal
Reserve charges commercial banks for loans.
Dividend - A share of a company's net profits
paid to stockholders.
Distribution - The allocation or dividing up
of the goods and services a society produces.

Ee
Employee - A person working for somebody
else, for wages or salary.
Economicsm - The study of how people,
firms and societies choose to allocate scarce
resources with alternative uses.
Entrepreneur - One who draws upon his or
her skills and initiative to launch a new
business venture with the aim of making a
profit
Expenses - Payments for goods and services.
Exchange - Trading a good or service for
another good or service, or for money.

Debt - Money owed to someone else. Also the

state or condition of owing money. Can be
individual, corporate or government debt.

Exports - Goods and services produced in one

nation and sold in other nations.

Demand - The quantity of a good or service

that buyers are willing and able to buy at all
possible prices during a period of time.

Ff

Fraud - Wrongful or criminal deception

intended to manipulate a person for the
purpose of gain, usually financial.

Human Resources - The health, education,

experience, training, skills and values of
people. Also known as human capital.

Financial Risk - The chance that an

individual, business or government will not be
able to return money invested.

Households - Individuals and family units

that buy goods and services (as consumers) and
sell or rent productive resources (as resource
owners).

Firms - Economic units that demand

productive resources from households and
supply goods and services to households and
government agencies.
Free Trade - The voluntary exchange of goods
and services in the absence of trade barriers
and restrictions.

Gg
Globalization - The term usually refers to the
increased flow of trade, people, investment,
technology, culture and ideas among countries.
Goal - Something a person or organization
plans to achieve in the future; an aim or desired
result.
Goods - Tangible objects that satisfy economic
wants.
Government Failure - Policy and budget
choices by government officials that result in
inefficiency.
Gross Pay - A total amount of money earned
(from salaries, wages, etc.) before taxes and
other deductions are withheld. Also known as
gross income.

Hh
Hyperinflation - A very rapid rise in the
overall price level.

Ii
Imports - Goods and services bought from
sellers in another nation.
Income - Payments earned by households for
selling or renting their productive resources.
May include salaries, wages, interest and
dividends.
Inflation - A rise in the general or average
price level of all the goods and services
produced in an economy.
Innovation - A new idea or method.
Investment - The purchase of capital goods
(including machinery, technology or new
buildings) that are used to produce goods and
services.

Jj
Job - A piece of work usually done on order at
an agreed-upon rate. Also a paid position of
regular employment.

Kk
Keynesian Economics - A school of thought
that emphasizes the role government plays in
stabilizing the economy by managing aggregate
demand.

Keynesian Theory - The macroeconomic

theory holding that business cycles are caused
by changes in aggregate demand and that such
cycles can and should be influenced by fiscal
and monetary policy undertaken to promote
economic stability.

Li
Labor - The quantity and quality of human
effort available to produce goods and services.
Law of Demand - As the price of a good or
service rises (or falls), the quantity of that good
or service that people are willing and able to
buy during a certain period of time falls (or
rises).
Law of Supply - As the price of a good or
service that producers are willing and able to
offer for sale during a certain period of time
period rises (or falls), the quantity of that good
or service supplied rises (or falls).
Lend - To grant someone the use of
something, on condition that the object
borrowed or its equivalent will be returned
(often with interest, in the case of money).
Liability - Legal responsibility to pay for
damages or losses one has caused.
Liquidate - To wind up the affairs of a
company by identifying liabilities and selling
off assets in order to make payments to
creditors.

Management - the decision-making role in

organizations. The role of management is to
provide
strategic
leadership
for
the
organization.
Macroeconomics - The study of economics
concerned with the economy as a whole,
involving aggregate demand, aggregate supply,
and monetary and fiscal policy.
Marginal Cost - The increase in a producer's
total cost when it increases its output by one
unit.
Markets - Places, institutions or technological
arrangements where or by means of which
goods or services are exchanged.
Microeconomics - The study of economics
concerned with individual units of the economy
such as households, firms and markets; with
how prices and outputs are determined in those
markets; and with how the price mechanism
allocates resources and distributes income.
Money - Anything that is generally accepted as
final payment for goods and services; serves as
a medium of exchange, a store of value and a
standard of value.
Monopoly - A market structure in which there
is a single supplier of a good or service.
Mortgage - A special type of loan for the
purchase of a house or other real estate.
Multinational Corporation A corporation
that operates in two or more countries.

Late Fee - In a credit arrangement, a fee

charged when payment is received after the due
date.

Nn

Mm

Nominal Rate of Return - The rate of return

from an investment before adjusting for
inflation.

Nonprofit Organization - An organization

that is exempt from federal (and sometimes
state) taxes; receives income from donors,
subsidized beneficiaries and, indirectly,
taxpayers; and therefore should provide its
goods or services free or below cost.

facilities in other countries and/or by hiring

cheaper foreign workers.

Normal Good - A commodity whose quantity

demanded goes up when the consumer's real
income rises.

Partnership - A business with two or more

owners who share the firm's profits and losses.

Net Pay - The amount of money a person

receives within a pay period after taxes and
other deductions are taken out of his or her
paycheck.
Net Exports - Exports minus imports.
NASDAQ - An electronic marketplace
enabling buyers and sellers to get together via
computer and hundreds of thousands of miles
of high-speed data lines to trade stocks.

Oo
Oligopoly - A market structure in which a few,
relatively large firms account for all or most of
the production or sales of a good or service in a
particular market, and where barriers to new
firms entering the market are very high.
Occupation - A job or profession; also a
category of work, sometimes identified by the
degree of skill required.
Opportunity Cost - The second-best
alternative (or the value of that alternative)
that must be given up when scarce resources
are used for one purpose instead of another.
Overdraft - A check written for more than the
balance in one's checking account; in colloquial
terms, a check that bounces.
Outsourcing - Sometimes called offshoring,
outsourcing occurs when a firm in one country
tries to reduce costs by locating production

Pp
Pension Fund - An account established by a
business to fund retirement benefits for its
workers. Pension funds invest in stocks, bonds,
mutual funds and real estate.
Perfect Competition - A market structure in
which a large number of relatively small firms
produce and sell identical products and in
which there are no significant barriers to entry
into or exit from the industry.
Profit - Income received for entrepreneurial
skills and risk taking, calculated by subtracting
all of a firm's explicit and implicit costs from its
total revenues.
Price - The amount of money that people pay
when they buy a good or service; the amount
they receive when they sell a good or service.
Paper Money - Certificates of various
denominations generally recognized and
accepted as a medium of exchange within a
nation and elsewhere.
Poverty - The state of being poor, variously
defined. Sometimes defined relatively--by
reference, for example, to the average
household income in a nation or region.
Premium - The fee paid for insurance
protection.
Private Good - A good that provides benefits
only to the purchaser.
Productivity - The amount of output (goods
and services) produced per unit of input
(productive resources) used.

Purchasing Power - The amount of goods

and services that a monetary unit of income
can buy.

Qq
Quality Comparison- Examining products
to learn whether one is better than others.
Quantity Demanded - The amount of a good
or service people will buy at a given price in a
given period of time.
Quantity Supplied - The amount of a good
or service sellers are willing and able to offer at
a given price in a given period of time.

Rr
Rate of Return - Earnings from an
investment, stated as a percentage of the
amount invested; usually calculated on an
annual basis.
Resources - The basic kinds of resources used
to produce goods and services: land or natural
resources, human resources (including labor
and entrepreneurship), and capital.
Revenue - The money a business receives
from customers who buy its goods and services.
Not to be confused with profit.

Sale - An exchange of goods or services for

money.
Services - Activities performed by people,
firms or government agencies to satisfy
economic wants.
Supply - The amount of a good or service that
producers are willing and able to offer for sale
at each possible price during a given period of
time.

Tt
Tariff - A tax on an imported good or service.
Taxes - Compulsory payments to governments
by households and businesses.
Trade - The exchange of goods and services
for money or other goods and services.
Traditional Economy - An economy in
which customs and habits from the past are
used to resolve most economic issues of
production and distribution.
Trade Barriers- Restrictions that prevent
free trade among nations.
Total Revenue (TR) - All money received
from selling a good or service; the price times
the quantity sold of each item.

Risk - The chance of losing money.

Ss
Salary - A regular payment, often at monthly
or biweekly intervals, made by an employer to
an employee, especially in the case of
professional or white-collar employees.

Uu
Unemployment - The number of people
without jobs who are actively seeking work.

Utility - An abstract measure of the

satisfaction consumers derive from consuming
goods and services.

Vv
Value of Money - The ability of money to buy
goods and services.
Variable Costs (VC) - Costs of production
that change as a firm's output level changes.
Variable Income - Income that varies from
week to week or month to month.

Ww
Wage - Payments for labor services that are
directly tied to time worked, or to the number
of units of output produced.
Work - Effort applied to achieve a purpose or
result, often for pay; skills and knowledge put
to use to get something done; employment at a
job or in a position; occupation, profession,
business, trade, craft, etc.

Workers - People employed to do work,

producing goods and services.
World Bank - An international organization
that makes loans and provides technical
expertise to developing nations.

World Trade Organization (WTO) - A

trade agreement among over 100 nations that
specifies the level of tariffs among the
signatories and attempts to resolve trade
disputes.