Modul 1

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Economic Terms
Started with A
A. Adaptive expectations

• Adaptive expectations theory in economics states that individuals adjust

their future expectations based on current information and past
experiences. In other words, they form their expectations about the future
based on what they have observed in the past and what they currently
know.
• Example: If inflation was high in 2023, individuals in 2024 may expect
inflation to remain high and take steps to hedge against it, such as investing
in assets that tend to perform well in inflationary environments.
B. Adverse selection
Adverse selection occurs when one party in
a transaction has more information than the
other party, and this information
asymmetry leads to a disadvantage for the
party with less information. The party with
less information may be willing to pay
more or accept less favorable terms for the
transaction than they would if they had
more information.
Example: Adverse selection is common in
insurance markets, where the insurer has
less information about the insured's risk
profile than the insured does. This can lead
to the insurer charging higher premiums or
denying coverage to individuals who are
more likely to file claim.
C. Advertising
Advertising is a form of marketing Examples: Advertising can be
communication that aims to draw found in a variety of media,
the attention of a target audience to including television, radio, print,
a product or service. It is used to online, and social media.
create awareness, interest, and
desire for a product or service, and
to ultimately drive sales.
 D. Agency costs

Agency costs are the costs that arise from the conflict of interest
between the principal (owner) of a firm and its agent (manager).
These costs can include the costs of monitoring the agent's
behavior, the costs of bonding the agent, and the costs of lost
opportunities due to the agent's self-interest.
Example: Agency costs can arise when managers make decisions
that are not in the best interests of the shareholders. For example,
a manager might approve a project that is risky but that will boost
their own bonus, even if the project is not likely to be profitable
for the company.
E. Agricultural policy

• Agricultural policy is a set of government actions and regulations that

affect the agricultural sector. These policies can be designed to achieve a
variety of goals, such as food security, income support for farmers,
environmental protection, and rural development.
• Example: Agricultural policies can include subsidies to farmers, price
supports, trade restrictions, and conservation programs.
F. Agriculture
Agriculture is the broad industry
encompassing farming, forestry, and
fishing. It plays a vital role in
providing food, fiber, and other
essential products for human
consumption and industrial use.
Example:
- Cultivating staple crops: Growing grains
like rice, wheat, maize, and sorghum, as
well as legumes like soybeans, lentils, and
peas.
- Applying biotechnology: Developing
genetically modified crops and livestock
that are more resistant to pests, diseases,
and harsh environmental conditions.
G. Altruism
-Altruisme refers to a company's
prioritization of the interests of
society or the environment, even if
it is not financially beneficial
.Example: company investing in
sustainable practices that benefit the
environment, such as reducing
carbon emissions or implementing
recycling programs,
H. Amortisation

Reduction of asset value periodically over a specific period Purpose:

Allocating the cost of high-value assets evenly over their useful lifeExample:
if a company purchases machinery for $50,000 with a useful life of 5 years,
using straight-line depreciation, it would deduct $10,000 from the asset's
value each year for five years until the asset's value is fully allocated
ANIMAL SPIRITS
What is animal spirits?
Animal spirits is a term cointed by the economist John Maynard
Keynes. According to Keynes, animal spirits are a particular sort of
confidence, “naive optimism”
 ANTITRUST
Antitrust" refers to policies and laws designed to prevent business practices
that harm market competition and inhibit monopolies or cartels. The
fundamental principle of antitrust law is to protect consumers by ensuring
that markets remain open, fair, and competitive.
APPRECIATION

Appreciation is a rise in the value of an asset and opposite and

depreciation. When the value of currency rises relative to another,
it appreciates
ARBITRAGE
Arbitrage is the practice of
exploiting price differences of an
asset or product in two different
markets to gain nearly certain profit
without risk. It is a trading strategy
that leverages imbalances in prices
between two markets
ARBITRAGE PRICING THEORY

The Arbitrage Pricing Theory (APT) is a financial theory that

seeks to explain the relationship between the expected return on
an asset and its risk. Unlike the Capital Asset Pricing Model
(CAPM), which focuses on the relationship between the expected
return and the asset's beta, APT takes a broader approach by
considering multiple factors that influence asset prices.
ASIAN CRISIS
The Asian financial crisis, also known as the "Asian Contagion," was a
period of severe economic turmoil that affected many Asian countries in
the late 1990s. It was triggered by a combination of factors including
currency devaluations, financial market instability, and weaknesses in
banking and financial systems
The Asian crisis was characterized by currency depreciations, stock
market crashes, massive capital outflows, and economic recessions. Many
countries in the region experienced sharp declines in GDP growth, soaring
inflation, and high levels of unemployment
 ASSETS
"Asset" refers to something that has economic value
and can be owned or controlled by individuals,
companies, or other entities, providing potential
benefits in the future. Assets can include property,
cash, investments, or other forms of ownership that
can be measured in terms of monetary value
ASYMMETRIC
INFORMATION
Asymmetric information can lead to market
inefficiencies, reduced trust, and increased costs for
both buyers and sellers. Various mechanisms, such as
signaling, screening, and government regulations, are
often employed to mitigate the adverse effects of
asymmetric information and improve market efficiency
ASYMMETRI
C SHOCK
DEFINITION
An asymmetric shock in economics refers to a change in economic
conditions that has an uneven impact on different countries,
regions, or sectors. In simpler terms, the effects of these economic
changes are not felt equally.
AUCTIONS
DEFINITION
Auctions, also known as public sales or vendues, are a process of
buying and selling goods or services through a competitive bidding
system. In an auction, sellers offer their items, and interested
buyers compete to win them by submitting bids, which are offers
to purchase the item at a specific price.
BACKWARDATI
ON
DEFINITION
Backwardation refers to a condition in the futures market where
the price of a futures contract for an asset is lower than the current
spot price (cash price) of that asset. In simpler terms, the price of a
futures contract for future delivery trades at a discount compared
to buying the asset outright for cash today.
BALANCE OF
PAYMENTS
DEFINITION

The balance of payments is a systematic record of all economic transactions that occur
between residents of a country and residents of other countries during a specific period.
These transactions encompass trade in goods and services, financial transfers, and monetary
flows. In simpler terms, the balance of payments is a report summarizing the inflow and
outflow of money (funds) from and to a country.
BALANCED
BUDGET
DEFINITION

A balanced budget, also known as a fiscal equilibrium, refers to a situation in government

finance where the total revenues generated by a government (taxes, fees, etc.) are equal to
the total expenditures (spending on public services, programs, etc.) during a specific period
(usually a fiscal year)
BANK
DEFINITION
A bank is a financial institution that acts as a financial intermediary between
those with surplus funds (depositors) and those who need funds (borrowers).
Banks accept deposits from individuals and businesses in various forms, such as
savings accounts, certificates of deposit, and checking accounts. These collected
funds are then channeled back to the public in the form of loans or credits for
various purposes, like investment, business capital, or property purchases.
BANKRUPTCY
DEFINITION
Bankruptcy refers to a financial situation where an individual or
organization is legally declared unable to repay their debts to
creditors. In simpler terms, they lack sufficient assets or cash flow
to meet their financial obligations.
BARRIERS TO
ENTRY (OR
EXIT)
DEFINITION

Barriers to entry are obstacles or challenges that make it difficult for new firms to enter a
particular industry and compete effectively with existing businesses. These barriers can be
economic, legal, technological, or social in nature. They act as a form of protection for
established companies, allowing them to potentially earn higher profits for a longer period.
Barter
Barter is the exchange of
goods or services without
using money
Basel I & Basel II
Basel I and Basel II are international banking
regulatory frameworks. Basel I sets, minimum
capital requirements for stability, while Basel II
enhances risk management and aligns capital with
banks risk profile
Basis Point
A basis point is a unit used to measure
small percentage changes in interest
rates, bond prices, or yields. One basis
point is equivalent to 0.01% or one
hundredth of a percent.
Bear
"Bear" in finance refers to a market or
an investor who anticipates a decline
in asset prices in the future, typically
for the short or medium term.
Someone who is "bearish" holds a
negative view on the market or a
particular asset and may seek to sell
or hedge against the decline in value.
Behavioral Economics

Behavioral economics is a field of study

that combines insights from psychology
and economics to understand how
individuals make economic decisions.
Behavioral economics seeks to explain
why people sometimes make irrational
choices and how these insights can inform
public policy, marketing strategies, and
financial decision-making.
Beta
Beta is a statistical measure of an
asset's (typically a stock)
sensitivity to changes in the
overall market performance. It's
used to gauge how much the price
movement of an asset correlates
with movements in the overall
market.
Big Mac Index
The Big Mac Index is a
method used to compare the
relative purchasing power
between two currencies by
using the price of a Big Mac, a
fast-food product sold by
McDonald's, as a benchmark.
Black Economy
Black economy refers to
economic activities that go
unreported or unrecognized by
the government, often to avoid
tax payments or violate tax
regulations. This includes
transactions conducted in cash
without official records, illegal
trade of goods or services, and
unreported businesses.
 One method for determining option prices. The
assumption used in this model is the existence
of dividend distribution
Black
Scholes An agreement or contract between the option
seller and the option buyer
A human decision-making process in which
we strive to satisfy, not optimize, or reality in
everyday life.
A bond is an interest-bearing security issued by
governments, companies and some other
organizations, within a minimum period of one
year.

Government Bonds, namely Indonesian Retail

Government Bonds, Savings Sukuk, Retail
Sukuk, and Retail Saving Bonds
 Brands

An identity for the product produced to

differentiate it from competitors

Branding Product
a strategy by giving an identity to the
product so that consumers can easily
recognize it.
 Bretton Words

Established a system through

which fixed currency exchange
rates could be created using gold
as a universal standard.
 Bubble

An economic cycle with a rapid

increase in the value of an object or
asset.
Budget

Budget in en anual prosejur tu desain

how mach public spending ther should
bi in the year Hed and what mix of
taxation
Thank you
Thank you