Economics vocabulary

fiscal year (FY)

12-month planning cycle in business and government (October 1 through September 30 for government)

recession

An extended decline in general business activity.

command system

a bank that provides checking accounts and savings accounts, and makes loans for a variety of purposes

central bank

a bank whose functions include controlling the nation's money supply; an institution that lends money to other banks and the place where the government does its banking business (Federal Reserve System in U.S.).

financial institution

a bank, credit union, savings and loan, or other organization that offers services related to saving and borrowing money

laissez faire

a basic economic policy that calls for noninterference by the government in business matters

balanced budget

a budget in which the money going out is equal to or less than the money taken in

nonprofit

a business not intending to make a profit

bank

a business that keeps money for customers, makes loans, and provides other money-related services

bond

a certificate of a loan to a government or a business (A person who buys a bond is lending money to the government or corporation that sells the bond.)

trade deficit

a condition in which the value of a nation's imports is greater than the value of its imports

commercial bank

a country's ability to produce a product at a lower opportunity cost than other countries

deflation

a decrease in the average price of all goods and services

budget deficit

a financial situation in which spending is greater than income or revenues

budget surplus

a financial situation in which spending is less than income or revenues

minimum balance

a fixed amount of money that remains in a customer's account to avoid paying bank fees

import - (noun)

a good that is brought into one country from another; (verb) to bring goods into one country from another

export - (noun)

a good that is sent from one country to another; (verb)to send goods from one country to another

Federal Deposit Insurance Corporation (FDIC)

a government corporation that insures bank deposits up to $100,000

embargo

a government policy that cuts off trade with certain countries

credit union

a kind of bank that is owned by members who belong to a certain company or group; usually a not-for-profit organization

import quota

a law that sets a fixed limit on the amount of imports

depression

a period of serious recession marked by high unemployment and a decline in business

expansion

a period of time during which the amount of business (GDP) increases

employer

a person or company for whom other people work for pay

economist

a person who studies the economy

employee

a person who works for another in return for pay

clearinghouse

a place where banks exchange checks and settle accounts

budget

a plan of how much money a person, business, government, or organization is able to spend and how it will be spent

social insurance program

a program meant to prevent poverty; Social Security, workers' compensation, unemployment insurance, and Medicare are well-known examples

entitlement program

a program using eligibility requirements to provide health, nutritional, or income supplements to individuals

bank panic

a situation in which many banks fail because they are not able to meet the demands of their depositors for cash

comparative advantage

a situation in which producers or sellers of similar goods or service each try to get consumers to buy their products or use their services

competition

a situation in which producers or sellers of similar goods or service each try to get consumers to buy their products or use their services

loan

a sum of money borrowed for a certain amount of time

principal

a sum of money in an account, not including interest earned; in a loan, the original amount of money borrowed

natural resource

a supply of something that is found naturally on earth

Social Security

a system of federal financial support for retired workers and workers unable to continue working because of a disability

protective tariff

a tax meant to raise the price of an imported good in order to protect a certain industry from foreign competition

income tax

a tax on a person's income

excise tax

a tax on certain items such as alcohol, tobacco, and gasoline

tariff

a tax on imports

contraction

a time period when GDP (amount of business) is decreasing

promissory note

a written promise to pay a sum of money

mature

able to be redeemed

foreign aid

aid that one country gives to another in the form of money, capital resources, and food

business cycle

alternating time periods of expanding and contracting economic activity

budget resolution

an agreement in Congress that shows total spending and revenues for a fiscal year and how much will be spent in various categories

inflation

an economic condition characterized by rising prices (increase in the average price of all goods and services)

traditional system

an economic system based on past ways of life and culture

market system

an economic system in which individuals, not the government control the production and distribution of goods and services; also called capitalism

capitalism

an economic system in which individuals, not the government control the production and distribution of goods and services; also called market system

coin

an economic system in which the government controls the production and distribution of goods and services

mixed system

an economic system that includes both private ownership of property and government control (or regulation) of some services and industries

surcharge

an extra cost added to an original cost

tax return

annual report filed with local, state, or federal government detailing income earned and taxes owed

transaction

any business done with a the bank, such as a withdrawal or deposit

currency

any kind of money that is used as a medium of exchange

money

anything a group of people accept in exchange for goods and services

medium of exchange

anything that a group of people agree has a certain worth

unemployed

being without a job but looking for one

cash

bills and coins

free enterprise

economic system in which individuals and businesses are allowed to compete for profit with a minimum of government interference

economic choices

every society must decide WHAT to produce, HOW to produce, and FOR WHOM to produce

mandatory spending

federal spending required by law that continues without the need for annual approvals (appropriations) by Congress

savings and loan association (S&L)

financial institutions that traditionally loaned money to people buying homes

intergovernmental revenue

funds one level of government receives from another level of government

Medicare

government program that provides health care for the aged (elderly)

capital

human-made items, such as machines and tools, that are used to produce goods and services

welfare

income paid by the government to people who need it to live

compound interest

interest earned on the deposit and on all previously earned interest

revenue

money brought in by a business

credit

money loaned, usually for a fee, that must be paid back

debt

money owed when you or a government buy something or credit or borrow money

wages

money paid to an employee for work done

deposit

money put into a bank

unearned income

money received from investments such as savings accounts and bonds

taxes

money that a government collects from people and businesses

circulation

money that is available for use

reserve

money that is kept in the bank and not loaned to customers a period of time when the demand for goods declines, unemployment rises, and the flow of money slows down

savings

money that is put away to be used later

financial capital

money used to buy the tools and equipment used in production

scarcity

not enough of a certain resource to satisfy people's needs and wants

tax-exempt

not required to pay taxes

denomination

paper money of a particular value

automatic stabilizer

program that automatically provides benefits to offset a change in people's incomes

open market operations

purchase or sale of U.S. government bonds and Treasury bills

goods

real items or things, such as cars, watches, and clothing

deficit

situation in which government spends more than it collects in revenue

surplus

situation in which quantity supplied is greater than quantity demanded; situation in which government spends less than it collects in revenues

consumer

someone who buys and uses goods and services

incentive

something that encourages people to work harder or to produce more

need

something that you must have to survive

want

something that you would like to have but don't necessarily need

discretionary spending

spending for federal programs that must receive annual approval (appropriations) by Congress

withdrawal

taking money from a bank account

government revenue

tax dollars received by the government

property tax

tax on land and property

payroll tax

tax on wages and salaries to finance Social Security and Medicare costs

monetary policy

the Federal Reserve System program of increasing or decreasing the money supply to control inflation and unemployment

national debt

the amount of money that the government owes

Federal Reserve System (Fed)

the central bank of the United States

risk

the chance of loss

fiscal policy

the government program of increasing or decreasing taxes and government spending to control inflation and unemployment

cost-push inflation

the kind of inflation caused by the rising cost of resources such as labor or oil

demand-pull inflation

the kind of inflation caused when consumer spending is greater than the amount of goods and services available

appropriation

the law passed by Congress that funds (provides money) to government agencies to carry out their programs

authorization

the law passed by Congress that states the maximum amount of money Congress may appropriate for government programs

minimum deposit

the least amount of money required to open a bank account

prime rate

the lowest rate of interest that banks offer their best business customers

profit

the money a business makes after expenses are paid

income

the money a person gets from salary or wages, profits, interest, investments, and other sources

interest

the money a person pays to borrow money, or the money a bank pays depositors for using their money

Federal Open Market Committee (FOMC)

the most powerful committee of the Fed, because it makes the decisions that affect the economy as a whole by manipulating the money supply

dollar

the official unit of currency in the United States; based on the decimal system

private sector

the part of the economy produced by individuals and businesses

public sector

the part of the economy produced by the government

producer

the people or businesses that provide goods and services

savings rate

the percent of income that people save

foreign exchange market

the place where foreign exchange dealers in major cities around the world trade the money of different countries

protectionism

the policy of limiting trade with other countries to protect domestic industries

discount rate

the rate of interest charged by the Federal Reserve Bank to borrowing banks

investment

the risking of money and time to get something in return (usually interest or other income)

economics

the study of how people, businesses, and governments choose to use their limited (scarce) resources

Gross Domestic Product (GDP)

the total dollar value of the final goods and services produced in a country each year

unemployment

the total number of people out of work, but wanting to work

money supply

the value of all currency and checking account balances in a country

exchange rate

the value of one nation's currency in comparison to another

economy

the way in which human resources and natural resources are used to produce goods and services

economic system

the way that a country or culture produces and distributes goods and services

value

the worth of something as measured in goods, services, or a medium of exchange

subsidize

to aid or promote with money

counterfeit

to make a copy of something that people will think is genuine

invest

to use money to earn interest or income, or in the hopes of making a profit; for example, to buy stocks or bonds

international trade

trade between nations

bankrupt

unable to pay debts

free trade

unrestricted trade between countries

standard of living

way to measure how well the needs and wants of citizens are being met by a country's economic system

services

work that is done for other people, such as by waiters, lawyers, and nurses