Glossary of terms

Budget: The annual process through which a government sets out its spending plans and
tax measures or the annual plan or proposal to outline how much money a person or
organization will earn and how much they will need or be able to spend for the upcoming
fiscal year.
Balanced budget: When a government spends exactly as much as it takes in.
Budget deficit: The amount by which total government spending is more than government
income during a specified period.
Budget surplus: The amount by which government revenues are more than government
spending during a specified period.
Economic aid: Assistance to other countries designed to help the recipient’s economy.
Economic growth: The expansion of the economy, leading to the creation of more jobs and
more wealth.
Fiscal year: A twelve-month period (which does not coincide with the calendar year) used
for accounting and budget purposes by the government.
Globalization: The tendency for national economies to become integrated with each other,
through the movement of goods and services, capital and people. It is the trend toward
the breakdown of state borders and the rise of international and global organizations and
governments.
Inflation: The increase of prices.
Poverty line: The federal standard for poverty: Anyone below a certain income level is
considered poor.
Tariff: A tax imposed on imports. Tariffs are designed to support domestic producers but
they result in higher prices for consumers. Tariffs are not imposed on similar goods from
within the country.
Automated Teller Machine (ATM) A machine that provides cash and performs banking services
(for deposits and transfers of funds between accounts) automatically when accessed by
customers using plastic cards coded with personal identification numbers (PINs).
Bank Reserves : The percentage of a bank's deposits that it keeps on hand, i.e., does not lend
out.

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Bank Service Charges: Fees paid by bank customers for financial services--for example, check-
cashing fees, fees for using the ATMs of other banks and fees for using bank-issued credit
cards.
Bank Statement: A monthly summary providing the status of a depositor's financial accounts
(checking and/or savings).
Business Cycles: Another term to describe the way that economies tend to expand and
contract over time. Ups and downs in economic activity over time.
Capital: Resources and goods made and used to produce other goods and services.
Examples include buildings, machinery, tools and equipment.
Capital Gain: A profit realized from the sale of property, stocks or other investments.
Capital Loss: A loss suffered upon the sale of property, stocks or other investments for less
money than the purchase price of the asset in question.
Cash: Money in the form of paper currency or coins (as distinct from checks, or credit).
Central Banking System: The institution at the heart of a country’s financial system. It sets the
level of short-term interest rates. It uses rate changes to control inflation. Central banks
also control foreign exchange reserves and can use these to intervene in the currency
markets.
Commercial banks: Banks that focus on taking in money in the form of deposits and lending
it out to individuals and businesses.
Consumption: The spending of money on goods and services by households. Consumers can
either spend their income, or save it.
Currency: The monetary unit of a nation state, or group of states. Most currencies are
allowed to rise and fall in value against each other and are traded in the foreign exchange
market.
Check: A written order to a bank directing this bank as stated amount of money from the
customer's account.
Deflation: A sustained decrease in the average price level of all the goods and services
produced in the economy.
Debt: Money borrowed from someone else, whether a bank, a company or a person.

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Depression: A prolonged and sharp fall in economic output, associated with a high level of
unemployment.
Distribution of Income: The way in which the nation's income is divided among families,
individuals or other designated groups.
Employment Rate: The percentage of the total population aged 16 or over that is employed.
Exports: Goods and services produced in one nation and sold in other nations.
Fixed Expenses/ Costs: Costs of production that do not change when output changes, for
example the rent paid on a factory.
Fixed Income: Income that stays the same from week to week or month to month.
Foreign Investment: The purchase of financial and/or physical assets in one county by
businesses or people in another county.
Government Spending: Spending by all levels of government on goods and services; includes
categories like military, schools and roads.
Human Capital: The skills and brainpower of workers. Improving human capital through
training and education is often seen as a way of improving productivity, although the
effectiveness of such programs can be hard to measure. They include knowledge, talent,
skills, health, and values. (Also known as human resources)
Imports: Goods and services bought from sellers in another nation.
Income Tax: Payments made by individuals and corporations to the government based on
income received.
Investing: Putting money someplace with the intention of making a financial gain.
Investment possibilities include stocks, real estate, and other financial instruments.
Investment Return: The additional income earned from saving or investing money, often
expressed as an annual percentage of the amount invested.
Natural Resources: “Gifts of nature” used to produce goods and services; examples include
land, oceans, air, trees, mineral deposits, soil fertility, and climatic conditions.
Purchasing Power: The amount of goods and services that a monetary unit of income can
buy.
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.

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Shortage: The situation that arises when the quantity demanded of a product exceeds the
quantity supplied.
Wage: Payments for labor services that are directly tied to time worked or pieces produced.
Asset: Something that can be used to create economic value. An asset can be tangible, such
as a building or machinery or intangible, such as a patent or a brand name.
Balance of payments: A term used to describe a country’s transactions with the rest of the
world. The import and export of goods and services are captured in the current account,
which also includes investment income and transfers.
Capital controls: Regulations designed to prevent money from moving across borders. They
protect the domestic currency from depreciation.
Cartel: Agreement where a group of producers collaborate to fix the price, or restrict the
supply, of a good or service. The best-known example is the OPEC (Organisation of the Petroleum
Exporting Countries)
Developed countries: Nations where incomes per person are high, relative to the global
average. These countries tended to industrialise early and are mainly based in Europe, and
in former European settler colonies in North America and Australasia. Many Asian nations
such as Japan and South Korea are also classified as developed.
Developing countries: Nations where income per person is lower than in “developed nations”.
These countries have industrialised later than those in Europe or America.
Dumping: Selling something for less than the cost of producing it. This practice may be
adopted by a dominant supplier in an industry in the hope of driving competitors out of
business.
Gold standard: International system, used in the late 19th and early 20th centuries, that
linked the amount of domestic currency and the exchange rate to a country’s gold
reserves.
Hybrid working: A term that emerged during the pandemic to describe employees who work
part of the time in the office and part of the time at home.
Infrastructure: The plumbing of the economy. Roads, railways, airports and container ports
are all vital for an economy’s operation. But they take up a lot of land and can have negative
externalities, such as noise.

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Intellectual property : An asset created solely by human intelligence and creativity. Examples
include copyrights, patents and trademarks.
Private sector: Those economic activities that are not controlled by the government, ranging
from a one-man window cleaning business to giant corporations.
Quota: A trade barrier that limits the number, or monetary value, of goods that a country
imports.
Profits: The difference between a company’s revenues and its costs.

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