Glossary of Economic Terms & Definitions

Contained in this glossary of economic terms is a list of definitions of fundamental terms and concepts used in economics, a social science that studies the production, distribution, and consumption of goods and services.
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- balance of payments - The balance of payments (BoP) is a record of all economic transactions between a country and the rest of the world over a period of…
- bourgeoisie - The bourgeoisie is the ruling class in Marx’s theory of class struggle under capitalism. The bourgeoisie is the property-owning class who own the means of…
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- capital expenditure - Capital expenditure is money spent by a business to buy, maintain, or improve long-term assets like buildings, equipment, and land. These assets are expected to…
- capital flight - Capital flight is a large-scale movement of money and assets out of a country. It can be a result of political or economic events, such…
- centrally planned - A centrally planned economy or command economy, is an economic system where the government has complete control over the production and distribution of goods and…
- conglomerate - A conglomerate is a type of multi-industry company that consists of several different and unrelated business entities that operate in various industries under one corporate…
- consumer sovereignty - Consumer sovereignty is an economic concept where consumers decide what goods and services they want to buy, and businesses must produce those goods and services…
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- derived demand - This is an economic term that describes the demand for a good or service that is a result of the demand for another good or…
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- economies of scale - In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation and are typically measured by the amount…
- external sector - The external sector performance of any economy reflects the economic transactions between the residents of an economy and the rest of the world. In the…
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- fiscal reform - Fiscal reform is the process of changing a country’s tax policies and spending priorities to improve the economy. The goal is to make the economy…
- Foreign exchange reserves - Foreign exchange reserves are assets in foreign currencies that are held on reserve by a nation’s central bank. These reserves are used as backup funds…
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- Gross Domestic Product - Gross Domestic Product (GDP) is a measure of a country’s national income, representing the total monetary value of all goods and services produced within a…
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- homogeneous products - Homogeneous products imply that the products are identical in quality, shape, size and colour. So, no producer is in a position to charge a different…
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- indemnity - In the indemnity clause, one party commits to compensate another party for any prospective loss or damage.
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- laissez-faire - The French phrase laissez-faire refers to the practice of allowing people or institutions to act or behave however they want, with little or no interference…
- law of diminishing returns - The law of diminishing returns says that, if you keep increasing one factor in the production of goods (such as your workforce) while keeping all…
- liquidity - Liquidity refers to the efficiency or ease with which an asset or security can be converted into ready cash without affecting its market price. Liquid…
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- monetary policy - Central banks use monetary policy to manage economic fluctuations and achieve price stability, which means that inflation is low and stable.
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- production quota - A production quota is a goal for the production of a good. It is typically set by a government or an organization and can be…
- proximate cause - Proximate cause refers to an event or action that the court deems to be the primary and legal cause of a particular injury. It is…
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- reserve ratio - The reserve ratio – also known as bank reserve ratio, bank reserve requirement, or cash reserve ratio – is the percentage of deposits a financial…
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- social amenities - Social amenities, or public amenities, refer to places, buildings or infrastructural facilities which are to be shared and to become convergence spots for the local…
- subrogation - Subrogation is when you file a claim with your insurer, the company can try to recover its costs from the person responsible for your injury…
- subsidy - A subsidy is a benefit given by the government to groups or individuals, usually in the form of a cash payment or tax reduction. If…
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- Tiger Cub economies - The Tiger Cub economies are Southeast Asia’s emerging economies: Indonesia, Malaysia, the Philippines, Thailand, and Vietnam. While still in their early stages of development, the…