Key Economic Terms and Concepts

Annual Percentage Rate (APR)

The yearly cost of borrowing money, shown as a percentage.

Automatic Stabilizer

Programs like taxes and unemployment benefits that help the economy without new laws.

Bond (Government Security)

A loan you give to the government, and they pay you back with interest.

Capital Gains Tax

A tax on money you earn from selling things like stocks or property.

Commodity Money

Money that has value because it's made of something valuable, like gold or silver.

Discretionary Spending

Government spending decided every year, like for schools or the military.

Estate Tax

A tax on the money or property passed on when someone dies.

FDIC (Federal Deposit Insurance Corporation)

An agency that protects your bank money if the bank fails.

Federal Budget Deficit

When the government spends more money than it earns in a year.

Federal Budget Surplus

When the government earns more money than it spends in a year.

Federal Funds Rate

The interest rate banks charge each other for short-term loans.

Fiat Money

Money that has value because the government says so, like the U.S. dollar.

Inflationary Gap

When the economy is producing too much, causing prices to rise.

Mandatory Spending

Money the government must spend, like on Social Security or Medicare.

Medium of Exchange

Money used to buy things instead of trading goods.

National Debt

The total money the government owes from borrowing over the years.

Open Market Operations

When the Federal Reserve buys or sells government bonds to control money in the economy.

Progressive Tax

A tax that takes a bigger percentage from people who earn more.

Property Tax

A tax on land or buildings based on how much they're worth.

Proportional Tax

A tax where everyone pays the same percentage, no matter their income.

Recessionary Gap

When the economy is not producing enough, leading to job loss.

Regressive Tax

A tax that takes a bigger percentage from people who earn less.

Representative (Commodity-Backed) Money

Money you can exchange for something valuable, like gold.

Sales Tax

A tax added to the price of things you buy.

Store of Value

Money can hold its value and be saved to use later.

The Discount Rate (Fed)

The interest rate the Federal Reserve charges banks for loans.

Unit of Account

Money is used to measure and compare the value of things.