Economics and Personal Finance Vocabulary Words

reserve requirement

The ratio of reserves to deposits required of banks by the Federal Reserve.

consumer price index

The instrument used to measure the price of a standard group of goods meant to represent the typical 'market basket' of a typical urban consumer.

monetary policy

Actions the Federal Reserve takes to influence the level of real GDP and inflation rate.

macroeconomic indicators

Economic data used by analysts to interpret current or future investment possibilities and are used to determine the overall health of an economy.

retaliatory trade actions

This negative action occurs when one country retaliates against another by raising import tariffs or placing other restrictions on the other country's imports.

Business Cycle

the phases of expansion and contraction in economic activity

Deficit

occurs when expenses exceed revenues, imports exceed exports, or liabilities exceed assets

Federal Deposit Insurance Corporation

the government agency that insures customer deposits if a bank fails

Free Trade Agreement

pact between two or more nations to reduce barriers for trade and typically under this policy, goods and services can be bought and sold across international borders with little or no government economic restrictions

Inflation

a general increase in prices and the decline of purchasing power of a given currency

Interest Rate

the percentage amount a lender charges a borrower for a loan

Price Level

an average of all prices of goods and services currently being produced in the economy; Offers an indication of the overall purchasing power of money at a point in time

Stock Exchange

the market for buying and selling stocks

Unemployment Rate

the total amount of unemployed people represented as a percentage of the workforce

Capital Gain

profit made from the selling of a stock

Discretionary Spending

government spending that is appropriated (assigned) annually and can be broken down into defense and nondefense

Fiscal Policy

refers to the use of government spending and tax policies to influence economic conditions

Gross Domestic Product (GDP)

the total value of all final goods & services produced in a particular economy; the total dollar value of all final goods and services produced within a country's borders in a given year

Investing

the act of committing money with the expectation of earning a financial return that exceeds the initial amount

Mandatory Spending

government spending that consists of permanent programs like social security, medicare, and medicaid and these programs receives money based on how many are eligible to receive these funds

Tariff

a tax imposed by one country on the goods and services imported from another country

Capital Loss

money lost from the selling of a stock

Collective Bargaining

the process in which union and company representatives meet to negotiate a new labor contract

Deflation

a general decrease in price levels where consumers can buy more goods and services at lower prices but can harm the economy because it typically lowers demand and decreases the amount of borrowing

Federal Poverty Level

an economic measure used to decide whether the income level of an individual or family qualifies them for certain federal benefits and programs; Often referred to as 'poverty line'

Government Regulation

laws that control the way a business or system can operate

Interest

the price paid for the use of borrowed money, or money earned by deposited funds

National Debt

the net accumulation of the federal government's annual budget deficits; The total amount of money that the U.S. federal government owes to its creditors

Standard of Living

refers to the quantity and quality of material goods and services available to a given population; Focuses on factors such as income, GDP, life expectancy, and economic opportunity

Surplus

describes the amount of an asset or resource that exceeds the portion that's actively being utilized; a budget surplus can occur when there's leftover tax revenue after all government programs are fully financed

Intellectual Property

intangible assets (non-physical asset such as ideas) owned and legally protected by a company or individual from outside use or implementation without consent

Protectionism

refers to government policies that restrict international trade to help domestic industries

Discount Rate

interest rate the Federal Reserve charges for loans to commercial banks and other financial institutions

Comparative Advantage

an economy's ability to produce a particular good or service at a lower opportunity cost than its competitors; When used to describe global economics, it typically illustrates the benefits of trade

Federal Reserve System

the nation's central banking system and founded to provide the country with a safe, flexible, and stable monetary and financial system; Often referred to as 'The Fed'

Right-to-Work Law

a law that bans mandatory union membership

Globalization

the growth in international exchange of goods, services, and capital, and the increasing levels of integration that characterize economic activity