RIMJHIM DUBEY

100
Most Important
Economic Terminology

You must familiar with

1. *Gross Domestic Product (GDP):
The total value of all goods and services produced
in a country within a specific time frame.

2. *Inflation:*
The rate at which the general level of prices for
goods and services is rising, leading to a decrease
in purchasing power.

3. *Deflation:*
The opposite of inflation, deflation is a decrease in
the general price level of goods and services.

4. *Consumer Price Index (CPI):*

A measure that examines the average change in
prices paid by consumers for goods and services
over time.

5. *Monetary Policy:*
The central bank's management of the money
supply and interest rates to control inflation and
stabilize the currency.
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6. Fiscal Policy:*
The use of government spending and taxation to
influence the economy.

7. *Interest Rate:*
The cost of borrowing money or the return on
investment.

8. *Exchange Rate:*
The value of one currency in terms of another,
influencing international trade and investment.

9. *Supply and Demand:*

The fundamental forces that determine the price
and quantity of goods and services in a market.

10. *Market Economy:*

An economic system where decisions regarding
investment, production, and distribution are
determined by individual preferences and market
forces

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11. Command Economy:*
An economic system in which the government
makes all decisions about what, how, and for whom
to produce.

12. *Mixed Economy:*

An economic system that combines elements of
both market and command economies.

13. *Opportunity Cost:*

The value of the next best alternative forgone when
a decision is made.

14. *Scarcity:*
The fundamental economic problem of having
seemingly unlimited human wants and needs in a
world with limited resources.

15. *Marginal Utility:*

The additional satisfaction or benefit derived from
consuming an additional unit of a good or service.

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16. Elasticity:*
A measure of how sensitive the quantity demanded
or supplied is to a change in price or income.

17. *Laissez-faire:*
An economic philosophy advocating minimal
government intervention in the economy.

18. *Moral Hazard:*

The risk that one party can take excessive risks
because it does not have to suffer the full
consequences.

19. *Monopoly:*
A market structure characterized by a single seller
dominating the entire market.

20. *Oligopoly:*
A market structure in which a small number of firms
have the majority of market share.

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21. Perfect Competition:*
A market structure where many firms sell identical
products, and no single firm can influence the
market price.

22. *Aggregate Demand (AD):*

The total quantity of goods and services demanded
across all levels of an economy.

23. *Aggregate Supply (AS):*

The total quantity of goods and services that
producers in an economy are willing to supply at a
given overall price level.

24. *Phillips Curve:*

A concept that shows an inverse relationship
between inflation and unemployment.

25. *Keynesian Economics:*

An economic theory advocating for government
intervention to manage economic downturns and
stabilize the economy.
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26. Austrian Economics:*
An economic school of thought emphasizing
individual freedom, private property, and limited
government intervention.

27. *Multiplier Effect:*

The phenomenon where a change in spending
leads to a larger change in economic output.

28. *Depression:*
A severe and prolonged economic downturn
characterized by high unemployment and low
economic activity.

29. *Recession:*
A period of declining economic activity, typically
measured by two consecutive quarters of negative
GDP growth.

30. *Stagflation:*
A situation characterized by stagnant economic
growth, high unemployment, and high inflation.
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31. Crowding Out:*
The scenario where increased government
spending leads to a reduction in private investment.

32. *Currency Devaluation:*

A deliberate downward adjustment in the value of a
country's currency relative to another currency.

33. *Balance of Trade:*

The difference between a country's exports and
imports of goods.

34. *Dumping:*
Selling goods in a foreign market at a price below
their cost of production.

35. *Protectionism:*
The use of tariffs, quotas, or other measures to
protect domestic industries from foreign
competition.

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36. Free Trade:*
The absence of barriers to the free flow of goods
and services between countries.

37. *World Trade Organization (WTO):*

An international organization that facilitates trade
negotiations and resolves disputes between
member countries.

38. *Globalization:*
The increasing interconnectedness and
interdependence of economies on a global scale.

39. *Foreign Direct Investment (FDI):*

Investment by a multinational corporation in a
foreign country's economy.

40. *Sovereign Debt:*

The total amount of money that a country's
government owes to creditors.

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41. Austerity:*
A set of economic policies that aim to reduce
government budget deficits through spending cuts
and tax increases.

42. *Quantitative Easing (QE):*

A monetary policy in which a central bank
purchases financial assets to increase money
supply and encourage lending.

43. *Hedge Fund:*

An investment fund that pools capital from
accredited individuals or institutional investors and
invests in various assets.

44. *Derivative:*
A financial contract whose value is derived from the
performance of an underlying asset, index, or rate.

45. *Securities:*
Tradable financial assets such as stocks and bonds.

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46. Blue Chip Stocks:*
Shares of large, well-established, and financially
stable companies.

47. *Bear Market:*

A market characterized by falling stock prices.

48. *Bull Market:*

A market characterized by rising stock prices.

49. *Dividend:*
A payment made by a corporation to its
shareholders, usually in the form of cash or
additional shares.

50. *Mutual Fund:*

An investment vehicle that pools funds from many
investors to invest in diversified portfolios of stocks,
bonds, or other securities.

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51. 401(k):*
A retirement savings plan sponsored by an
employer that allows employees to contribute a
portion of their salary on a pre-tax basis.

52. *Cyclical Unemployment:*

Unemployment that occurs due to fluctuations in
economic activity.

53. *Structural Unemployment:*

Unemployment caused by changes in the structure
of an industry, making some skills obsolete.

54. *Frictional Unemployment:*

Unemployment that occurs when people are
between jobs or searching for their first job.

55. *Participation Rate:*

The percentage of the working-age population in the
labor force.

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56. Lump Sum Tax:*
A tax that is a fixed amount, regardless of the
taxpayer's income.

57. *Progressive Tax:*

A tax system in which the rate increases as the
taxpayer's income increases.

58. *Regressive Tax:*

A tax system in which the rate decreases as the
taxpayer's income increases.

59. *Flat Tax:*

A tax system in which the same percentage of
income is taken from all taxpayers.

60. *Public Goods:*

Goods or services that are non-excludable and non-
rivalrous, meaning individuals cannot be excluded
from their use, and one person's use does not
diminish their availability to others.

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61. Tragedy of the Commons:*
A situation where individuals, acting in their self-
interest, deplete shared resources, leading to the
detriment of the entire group.

62. *Externalities:*
Costs or benefits that affect a party who did not
choose to incur that cost or benefit.

63. *Public Debt:*

The total amount of money that a government owes
to external creditors and domestic lenders.

64. *Social Security:*

A government program that provides financial
support to individuals who are retired, disabled, or
unemployed.

65. *Welfare State:*

A system in which the government provides social
and economic support to its citizens.

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66. *Labor Force:*
The total number of people employed or seeking
employment in a country or region.

67. *Human Capital:*

The knowledge, skills, and abilities that individuals
possess, enhancing their economic productivity.

68. *Capitalism:*
An economic system characterized by private
ownership of the means of production and the
pursuit of profit.

69. *Socialism:*
An economic system where the means of
production, distribution, and exchange are owned or
regulated by the community as a whole.

70. *Communism:*
A political and economic ideology advocating for a
classless, stateless society where the means of
production are collectively owned.
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71. Milton Friedman:*
An influential economist associated with the
Chicago School of Economics, known for his
advocacy of free-market capitalism.

72. *John Maynard Keynes:*

A prominent economist whose ideas laid the
foundation for modern macroeconomics,
emphasizing the role of government intervention.

73. *Gini Coefficient:*

A measure of income inequality within a population,
ranging from 0 (perfect equality) to 1 (perfect
inequality).

74. *Wealth Inequality:*

The unequal distribution of assets within a
population.

75. *Regulatory Capture:*

A situation where regulatory agencies become more
aligned with the industries they are supposed to
regulate, rather than serving the public interest.

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76. Shadow Banking:*
Financial activities and institutions that operate
outside traditional banking regulations.

77. *Hedging:*
A risk management strategy used to offset potential
losses by taking an opposite position in a related
asset.

78. *Venture Capital:*

Funding provided by investors to startup companies
and small businesses with perceived long-term
growth potential.

79. *Microeconomics:*
The branch of economics that studies the behavior
of individuals, households, and firms in making
decisions regarding resource allocation.

80. *Macroeconomics:*
The branch of economics that studies the overall
economy, including topics such as inflation,
unemployment, and economic growth.
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81. Liquidity:*
The ease with which an asset can be converted into
cash.

82. *Yield Curve:*

A graphical representation of the relationship
between the interest rate and the time to maturity of
debt.

83. *Purchasing Power Parity (PPP):*

An economic theory that states that in the long run,
exchange rates should move towards the rate that
would equalize the prices of an identical basket of
goods and services in any two countries.

84. *Homo Economicus:*

The concept in economics of a rational and self-
interested individual who seeks to maximize utility.

85. *Creative Destruction:*

The process by which new innovations and
technologies replace older ones, leading to
economic progress but often causing the decline or
obsolescence of existing industries.
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86. Sunk Cost:*
A cost that has already been incurred and cannot
be recovered.

87. *Invisible Hand:*

The concept introduced by Adam Smith, suggesting
that individuals pursuing their self-interest
unintentionally contribute to the overall good of
society.

88. *Real Interest Rate:*

The interest rate adjusted for inflation.

89. *Nash Equilibrium:*

A concept in game theory where each player's
strategy is optimal given the strategies of all other
players.

90. *Black Market:*

An illegal or unofficial market in which goods or
services are bought and sold, often in violation of
price controls or rationing.
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91. Tariff:*
A tax imposed on imported goods and services.

92. *Subsidy:*
Financial assistance given by the government to
specific industries to encourage production or
consumption.

93. *Opinion Leaders:*

Individuals or entities that have a significant
influence on public opinion and consumer behavior.

94. *Money Supply:*

The total amount of money circulating in the
economy, including currency, demand deposits, and
other liquid assets.

95. *Hyperinflation:*
Extremely high and typically accelerating inflation.

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96. *Utility:*
The satisfaction or pleasure derived from
consuming a good or service.

97. *Crowdfunding:*
The practice of funding a project or venture by
raising small amounts of money from a large
number of people.

98. *Rent Control:*

Government regulations that limit the amount
landlords can charge for rent.

99. *Moral Suasion:*

The use of persuasion or informal pressure by
authorities to influence economic agents' behavior.

100. *Natural Monopoly:*

A situation where a single firm can supply the entire
market at a lower cost than multiple firms.

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