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Glossary of Economic Terms

John Black, Nigar Hashimzade, and Gareth Myles

❶An authoritative and comprehensive dictionary containing clear, concise definitions of over 3, key economic terms, this A to Z covers all aspects of economics including economic theory, applied microeconomics and macroeconomics, labour economics, public economics and public finance, monetary economics, and environmental economics. Another is the Internal Revenue Service, which collects taxes.

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Household - The household is the independent unit of customers. Government - A government is a formal body which is in charge of creating and enforcing laws within a state. Developed - Developed nations are those which meet certain criteria of economic measurement including gross domestic product GDP per capita, industrialization, etc.

Underdeveloped - An underdeveloped nation is one which has not yet organized, nor begun to organize in terms of job growth, industrialization, health care, etc.

Developing Economy - A developing economy is one in which there may be hunger issues but not what you would find in an underdeveloped economy , and where you may find a wide variety of progress being made on the development spectrum. In addition to understanding the basic terms associated with economics, you'll also need to familiarize yourself with different economic systems. An economic system is the way that production within a society occurs. It involves how goods or services are produced, distributed, and managed within the society.

Here are the economic systems you should be familiar with. Sometimes people conflate confuse some of these economic system terms with political system terms. Capitalism - Capitalism is the economic system many are already familiar with.

The purpose of capitalism is to ensure that production occurs that maximizes profit and is characterized by competition against other producers within the system. The means of production are privately held. Socialism - Socialism is an economic system in which the means of production are held in common amongst members. There are many different types of socialism, and some types of socialism communism, for example are also political theories.

Market Economy - A market economy is an economy in which there is a strong division of labor someone owns the restaurant, someone manages the restaurant, yet other people carry out the tasks of cooking and waiting tables ; supply and demand is what allows individuals to set prices. Supply and Demand - Associated with market economies and setting price points, supply is the number of goods or services produced and demand is the number of consumers wanting the goods or services.

The higher the demand and the lower the supply, the more expensive an item will be whereas the higher the supply and the lower the demand, the lower the price. Traditional Economy - A traditional economy is based on agriculture.

Mixed Economy - A mixed economy is one which combines elements of both capitalist societies and socialist societies. Mixed economies feature some elements of the ideals of capitalism and private ownership of the means of production along with elements of the ideals of socialism with the public governmental ownership of the means of production.

Planned Economy - A planned economy is an economy in which the state directs the economy. This means that the state will determine how goods will be produced and to whom the goods will be distributed.

Gift Economy - A gift economy is one in which goods and services are freely given to others without any expectations for returns of the favor. Barter Economy - A barter economy is one in which goods and services are traded for other goods and services without an intermediary form of payment like money. Millions of people lost their jobs, homes, and savings. Many of them depended on charity and government aid to put food on their tables. The Great Depression was so severe, it impacted the economies of nations around the globe.

It lasted about a decade, ending when the U. Our involvement in the war created many defense-related jobs. Interest The fee for using someone else's money. For example, if a person borrows money from a bank to pay for college, he or she pays back the amount borrowed plus interest.

On the other hand, if a person deposits money in a bank savings account, he or she gets to collect interest from the bank. The bank is allowed to use the person's money temporarily. In return, it must pay the customer interest. Interest is almost always calculated as a percentage or rate. See " Interest Rate ". Interest Rate The percentage at which interest is charged or paid.

You calculate the interest by converting the percentage to a decimal, then multiplying it by the amount borrowed: Investment Anything that is purchased with the hope that it will generate income or be more valuable at a future date. Some investments are "sure things. A savings bond will definitely be worth more in the future, because it is guaranteed by the government.

Other investments are more risky. That means there is a chance that they become less valuable, instead of more valuable, over time. Stocks are one example. See "Stocks" for details. Layoff The loss of a job when a company cuts costs. For example, one car maker had to lay off hundreds of employees last spring. The car maker had not been doing very well. Because of high fuel prices, customers were not buying SUVs and other big cars. To survive in this economy, the car maker had to lay off some of its employees.

The company will save money because it no longer has to pay those workers. People take loans in order to pay for new homes, new cars, college tuition, home improvements, and other things.

Companies often take loans in order to expand their business for example, a restaurant owner might borrow money in order to open another restaurant. Banks are willing to lend money to people and businesses because they expect to get back the amount of the loan plus a fee called interest. See " Interest ". Collecting interest is how banks stay in business. It is the heart of New York's financial district, the place where stocks are traded and important business decisions are made.

However, when people talk about Wall Street in today's economic crisis, they usually do not mean the actual place. They use the phrase "Wall Street" to stand for big businesses and high-powered investors.

Main Street might be real place in your town. Thousands of towns and cities across the country have a Main Street. But when people talk about Main Street in discussions about the economy, they do not usually mean a real street. They use "Main Street" to stand for everyday people and small businesses. Lately, you may have heard the expression "Wall Street versus Main Street. That's because many people feel that decisions made by big investors have been hurting everyday Americans. Many people criticized the Bailout Bill see "Bailout Bill" , saying it does more to help big business and investors than everyday people.

Mortgage A loan that is used to buy a house. In the past, many home buyers had to work hard to get a mortgage loan. They had to prove to the bank that they earned enough money to pay for the house over time. But over the past few years, getting a mortgage loan became easier and easier.

Banks were eager to give loans, and homebuyers were eager to get them. In many cases, buyers were given mortgage loans that they could not afford to pay back. This was one reason for the current economic crisis. During a recession, businesses sell fewer goods and services. See " Depression ". Regulations Rules of conduct for banks, stock markets, and other financial institutions. Regulations are passed by the government and its agencies. For example, the Securities and Exchange Commission is responsible for making rules about the stock market see " Stock Market ".

One rule says that any company that sells stock must publish reports about how the company is performing. Regulations like this one are meant to keep our financial system operating fairly. Savings Account A bank account where money is kept so that it can grow. When a person opens a savings account, he or she can deposit money into the account or withdraw money from the account.

Money that is in the account earns interest from the bank. That is, the bank pays the account holder a small fee. This fee is calculated as a percentage of the money in the account.

Stock An ownership interest in a company. Stocks are sold by companies to raise money. When a person buys stock in a company, he or she owns a tiny part of that company. When a company is doing well that is, selling a lot of goods or services and making a lot of money , the value of the company goes up. The price of the company's stock goes up, too. Then, a stockholder can sell his or stock and make a profit. When many stock prices stay low for a long time, it is a sign of a weak economy.

Stock Market A place where stocks, or part-ownerships in companies, are bought and sold see " Stock ". There, people can buy or sell stocks in more than 2, different companies. If a person wants to buy or sell stock in a company, he or she can go to the exchange. Or, he or she can call a stock broker, a person whose job it is to buy and sell stocks.

Taxes Taxes are the main way people pay for their government. One kind of tax is the income tax. Every year, workers pay a sizeable percentage of their income, or salary, to the nation's government and to the government of the state where they live. Another kind of tax is a sales tax. In 45 of the 50 states, people pay a few extra cents for each dollar that they spend in a store.

The extra cash goes to the state government. Income taxes and sales taxes help the government pay for things like roads, schools, and the armed forces. However, many Americans argue that taxes are too high.

Treasury Department The part of the federal government that manages the nation's money. Once the President and Congress agree on a budget for the nation, it is up to the Treasury to raise enough money for the items on the budget and then oversee the spending. One way the Treasury raises money is by collecting taxes from people and businesses. Another way is by selling savings bonds and notes to investors. Have you ever received a U. Those are sold by the U. The Treasury Department is very large.

It has 12 sections, or "bureaus. Mint, which prints all U. Another is the Internal Revenue Service, which collects taxes.

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An authoritative and comprehensive dictionary containing 2, key economic terms with clear, concise definitions. It covers all aspects of economics including economic theory, applied microeconomics and macroeconomics, labour economics, public economics and public finance, monetary economics, environmental economics, and many others.

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Economic Glossary is a list of over 2, common economic terms definitions. With our Economics dictionary, you look up economic definitions . How to use this dictionary: The page below contains most of the key terms from an introductory Economics course. To read a definition scroll your cursor over a .

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economics terms dictionary free download - Economics Terms Dictionary, Economics Terms Dictionary, Dictionary of Economic Terms . Scottish political economist and moral philosopher. His inquiry into the Nature and Causes of the Wealth of Nations was one of the earliest attempts to study the historical development of industry and commerce in Europe.