Economics Study Terms: Markets, GDP, Inflation, and Global Trade

Bull market

Prolonged period of rising stock prices and a general feeling of investor optimism.

Bear market

Prolonged period of falling stock prices and a general feeling of investor pessimism.

Common stock

Pays a variable dividend and gives the holder voting rights.

Preferred stock

Pays a fixed dividend but has no voting rights.

Income stocks

Have a consistent history of paying high dividends.

Growth stocks

Stocks in corporations that reinvest their profits into the business so that it can grow.

Productivity

Output per worker-hour that is measured over a defined period of time.

Gross domestic product (GDP)

The output of goods and services produced by labor and property located within a country.

3 types of goods and services that make up the GDP

Private investment (home construction, business spending on equipment/software), Government spending (federal expenditures on social programs), Personal spending: goods and services for personal use.

Gross national product (GNP)

The total dollar value of goods and services produced by a nation, including goods and services produced abroad by U.S. citizens and companies.

Inflation

Rising prices.

Consumer price index (CPI)

Measures the change in price over a period of time of 400 specific retail goods and services used by the average urban household.

Producer price index (PPI)

Measures wholesale price levels in the economy.

Goals of healthy economy

Increase productivity (GDP, GNP), decrease unemployment, maintain stable prices (CPI, PPI).

Licensing

Letting another company, or licensee, use a trademark, patent, special formula, company name, or some other intellectual property for a fee or royalty.

Contract manufacturing

Hiring a foreign manufacturer to make your products according to your specifications.

Joint venture

A business enterprise that a domestic company and a foreign company undertake together.

Foreign direct investment (FDI)

A business enterprise that a domestic company and a foreign company undertake together.

Multinational

A large corporation that has operations in several countries (i.e., McDonald's).

Mini-national

A midsize or smaller company that has operations in foreign countries.

Free trade

Commercial exchange between nations that is conducted on free market principles, without regulations.

Protectionism

A government's establishment of economic policies that systematically restrict imports in order to protect domestic industries.

World Trade Organization

A global coalition of nations that makes the rules governing international trade.

North American Free Trade Agreement (NAFTA)

An international trade agreement among the United States, Canada, and Mexico.

European Union (EU)

Europe's trading bloc.