LIBF Unit 1

Democracy

a system of government in which the people rule through the power to vote for their representatives.

Excise duty

a tax levied on the manufacture or sale of specific goods, such as tobacco and alcohol.

Capital gains tax

a tax on the increase in value of an asset, such as land or shares.

Corporation tax

a tax that a business pays on its profits.

Compound interest

interest that is calculated on the principal plus the interest that has been charged or paid so far.

Capacity building

making local communities self-sustaining.

Immigrant

a person from another country who comes to this country to live.

Currency broker

a person or business who deals in all kinds of currency exchange.

Emigrant

a person who leaves this country to move to another one.

Credit history

a person's previous history of debt repayments.

Budget

a plan for how you will use your income, including spending and saving.

Economic growth

a situation in which the economy is expanding, as measured by increasing national income, low interest rates and low unemployment.

Credit card

a small plastic card that allows the owner to use credit.

Cashless society

a social system in which no cash is used to pay for goods and services.

Debit card

a small plastic card that allows someone to withdraw money that they already have available in an account.

Economic downturn

a period during which economic activity slows down, potentially leading to a recession.

Charity

(1) an organisation set up to help a particular group or issue; (2) the act of donating money or time to a cause.

Benefits

(1) money and other financial support (such as reduced bus and train fares or provision of housing) that the government provides for people who are unable to get any other income; (2) payments that the government makes to someone who is entitled to receive them (eg Jobseeker's Allowance).

Debt

(1) money owed to another person or organisation such as a bank; (2) the total amount of money that someone owes at a particular point in time.

Credit

- (1) the ability to buy goods and services before you are able to pay for them, by using money borrowed from the bank, ie using more money than you currently have; (2) money put into your current or savings account.

Bureau de change

a business that deals in currency exchange.

Bonds

a certificate that shows you have bought the debt from a company or the government, in return for which the company or government pays a fixed amount of money in interest each year.

Dependant

a child or other person who is financially dependent on you.

Cabinet

a committee of senior government ministers who are responsible for setting government policy.

Austerity

a government measure to reduce the amount of money it spends (usually reduced wages and benefits), resulting in difficult financial conditions for a population.

Gilts

a high-interest, very secure government bond (see 'Bonds').

Bill

a law that has been passed.

Communist economy

a type of market economy in which government makes all of the decisions.

Free-market economy

a type of market economy in which private individuals and companies make decisions, motivated by profit, without government interference.

Income

all of the money (or items worth money) that you receive, including through work, investments and government benefits.

Household

all of the people living in a single residence.

Cash flow

all of your money coming in and money going out.

Financial Conduct Authority (FCA)

an agency that regulates financial firms and services.

Commission

an amount charged by currency exchange services as a flat fee for the service of buying or selling foreign currencies.

Commuter belt

an area just outside a city, in which people live and from which they travel into the city to work each day.

Direct debit

an arrangement made with the bank to pay a company the amount of money they request from your bank account, in payment for goods or services; often used to pay bills.

Financial capability

an individual's ability to manage their money well.

Fixed rate

an interest rate that is set at a particular amount for a particular period of time and does not change for that period.

Annual Budget

an outline, given by the Chancellor of the Exchequer, of planned government expenditure for the next financial year.

Asset

anything that a person owns that has a monetary value, such as a house, car, stereo, jewellery and so on.

Cash

banknotes and coins.

Banking industry

banks, buildings societies and other businesses that offer financial products and services; part of the private sector.

Corporate social responsibility (CSR)

business self-regulation that drives a company to act in an ethical manner - ie to make socially responsible decisions, such as recycling or reducing its pollution.

Currency exchange

changing one currency for another; buying and selling foreign currency.

Charity sector

charities and other non-government organisations that are run not for profit, but for the good of society.

Bad debt

debt that can never be paid off.

Imports

goods or services that are bought abroad and brought into a country.

Exports

goods or services that are sold outside a country.

Flat pay structure

income that does not increase by very much over time and which can remain relatively stable.

Cost-push inflation

inflation that is driven by higher costs of production.

Demand-pull inflation

inflation that is driven by the numbers of people who want a particular item or service.

Income tax

money that must be paid to the government from your income to pay for public services such as health and education.

Expenditure

money that you spend.

Deficit

more expenditure than income; more money paid out than coming in.

Immigration

movement into one country from another country.

Emigration

movement out of one country to another country.

Consumer Prices Index (CPI)

one of the main measures of inflation, calculated monthly by measuring the average cost of a 'basket' of goods less major household expenditure, such as mortgages and council tax.

Counterfeiting

producing an imitation (fake) of a 'real' product, with the intention of gaining (usually financially) from people not knowing the difference.

Gross profit

profit before corporation tax is paid.

High credit risk

someone who may not be able to repay a loan.

Consumer

someone who uses or buys goods and services.

Economic indicators

statistics that tell us something about the economy, eg interest rates or unemployment rates.

Direct tax

tax that is taken directly from income or wealth.

Flat-rate tax

tax that is the same proportion at all levels of income.

Cost of living

the amount that you need to spend to buy the goods and services necessary for living an average life.

Fiscal policy

the decisions a government makes about taxes and what to spend public money on.

Barter

the exchange of goods and services for payment of other goods and services without using money.

Election

the formal system of voting.

Gross income

the income that you receive before any deductions (ie tax and National Insurance contributions) are made.

Gross interest

the interest paid on savings before income tax has been taken off.

Annual equivalent rate (AER)

the interest rate that would be paid on a savings account if you were to leave the money in the account for a full year.

Annual percentage rate (APR)

the interest that would be charged on a sum borrowed over one full year; used to measure the interest rate on loans, mortgages and credit cards; the calculation includes the fees that lenders charge automatically on the product, so that it gives a clear picture of the cost.

Equivalent annual rate (EAR)

the interest that would be charged on an overdraft if you were to borrow the money for a full year.

Electoral register

the list of names of people who have registered to vote.

Earnings

the money that you make from your job.

Foreign currency

the money used in a country other than your own.

Currency

the money used in a particular country.

Capital

the money with which a business starts or the original amount of debt taken out.

Birth rate

the numbers of children born in a year, compared to the population total.

Bank rate

the official interest rate as set by the Bank of England.

Consequences

the outcome or result of a given event or action. Constitutional monarchy - a system of government in which a king or queen is the head of state and an elected body makes the laws.

Disposable income

the part of your income that you can choose to use in whatever way you want, after you have paid all of your essential expenses. There are technical definitions for 'disposable' and 'discretionary' income, but you do not need to know these distinctions at this level of study.

Foreign exchange rate

the price of exchanging one kind of currency into another.

Economic cycle

the regular up-and-down movement of the economy.

Basket of goods

the representative items that a household buys over a period of time on which inflation calculations are based.

Default

the situation in which a borrower is unable to repay a debt.

Depreciation

the situation in which an asset or money decreases in value.

Devaluation

the situation in which the value of something goes down.

Economy

the state of a country relating to the amount of money that is in the system and the production and consumption of goods and services.

Demography

the study of the structure of a human population.

Identity

the things that make a person who they are, the things that make us the same as or different from other people.

Expenses

the things that you have to spend your income on.

Gross domestic product (GDP)

the total value of all goods made and services provided by a country in a year.

Denomination

the value of money, eg the amount written on a coin or a banknote.

First-past-the-post

the voting system used in UK general elections. The candidate with the most votes in each constituency is elected to Parliament, and the party with the most Members of Parliament then forms a government. Due to the way this system works, the party that ends up forming a government does not necessarily receive a majority of the votes cast.

Hyperinflation

very high inflation.

Full employment

when everyone in a country who is willing and able to work in paid employment has a job (in practice, classed by the UK government as an unemployment rate of 2% or less).

Devolution

when particular political powers are given to a smaller subsection of the nation - for example, in the UK some powers have been transferred to Scotland, Wales and Northern Ireland.

Coalition

when two or more political parties join together to form a majority in Parliament because neither of them could do so by themselves.

Debit

withdrawing money from your own account, from money that you already have; not using more money than you have.