Definitions and Glossary of Economic and Financial Terms
Here are some easy-to-understand definitions of terms most commonly used in discussing the U.S. economy. Arranged by sub-topic and in alphabetical order.
MSCI
The MSCI Indices measure global stock market performance. They include the MSCI World Index and the MSCI EAFE Index, two of the most widely quoted.
The MSCI Indices measure global stock market performance. They include the MSCI World Index and the MSCI EAFE Index, two of the most widely quoted.
Adjustable Rate Mortgage
A definition of adjustable rate mortgages, and how adjustable rate mortgages work.
A definition of adjustable rate mortgages, and how adjustable rate mortgages work.
ASEAN
ASEAN is becoming a powerful trade group that represents the countries of Southeast Asia.
ASEAN is becoming a powerful trade group that represents the countries of Southeast Asia.
Asset Bubble
An asset bubble is when there is an inflation in assets, such as real estate or commodities.
An asset bubble is when there is an inflation in assets, such as real estate or commodities.
Asset-backed Commercial Paper
Asset-backed Commercial Paper (ABCP) is short-term corporate debt that is backed by assets such as real estate, autos and other commercial assets.
Asset-backed Commercial Paper (ABCP) is short-term corporate debt that is backed by assets such as real estate, autos and other commercial assets.
Auction-Rate Securities
Auction-rate securities were sold as high yielding money market funds until the demand for them collapsed in October 2008.
Auction-rate securities were sold as high yielding money market funds until the demand for them collapsed in October 2008.
Banco del Sur
Banco del Sur is a Latin American development bank that would like to replace the World Bank in that region.
Banco del Sur is a Latin American development bank that would like to replace the World Bank in that region.
Banking
Banking definition and role of banking in the US economy.
Banking definition and role of banking in the US economy.
Base Budget
A definition of the Base Budget, which is that portion needed to keep the department in readiness year after year.
A definition of the Base Budget, which is that portion needed to keep the department in readiness year after year.
Bear Market
The definition of a bear market in the stock market.
The definition of a bear market in the stock market.
Beige Book
The Federal Reserve's description of the US economy.
The Federal Reserve's description of the US economy.
Bilateral Trade Agreements
Definition of a bilateral trade agreements, which benefit both parties.
Definition of a bilateral trade agreements, which benefit both parties.
Black Tuesday
Black Tuesday kicked off the Great Depression of 1929. What is Black Tuesday, and what caused it.
Black Tuesday kicked off the Great Depression of 1929. What is Black Tuesday, and what caused it.
Budget Deficit
When a government spends more than it makes.
When a government spends more than it makes.
Bull Market
Definition of the bull market in a stock market.
Definition of the bull market in a stock market.
Business Cycle
Definition of a business cycle, including the stages of a business cycle and business cycle indicators.
Definition of a business cycle, including the stages of a business cycle and business cycle indicators.
Call Option
Definition of a call option, which gives the holder the option to buy a stock at a certain price.
Definition of a call option, which gives the holder the option to buy a stock at a certain price.
Capital
A definition that shows how capital is a key component of supply.
A definition that shows how capital is a key component of supply.
CDO's (Collateralized Debt Obligations)
CDO's, or Collateralized Debt Obligations, are sophisticated financial tools that repackage individual loans into a product that can be sold on the secondary market.
CDO's, or Collateralized Debt Obligations, are sophisticated financial tools that repackage individual loans into a product that can be sold on the secondary market.
Comparative Advantage
What makes a country more competitive.
What makes a country more competitive.
Contractionary Monetary Policy
Definition of contractionary monetary policy and how the Federal Reserve uses it.
Definition of contractionary monetary policy and how the Federal Reserve uses it.
Conventional Mortgages
Definition of conventional mortgages, which include fixed rate and adjustable rate mortgages.
Definition of conventional mortgages, which include fixed rate and adjustable rate mortgages.
Core Inflation
Core inflation is the inflation measurement without volatile food and energy prices.
Core inflation is the inflation measurement without volatile food and energy prices.
Credit Card Debt
The definition of credit card debt, the statistics on the average credit card debt per family, what constitutes excessive credit card debt and how it influences the economy.
The definition of credit card debt, the statistics on the average credit card debt per family, what constitutes excessive credit card debt and how it influences the economy.
Credit Default Swaps
Credit default swaps are a form of insurance for bonds and mortgage-backed securities.
Credit default swaps are a form of insurance for bonds and mortgage-backed securities.
Current Account Deficit
What happens when the U.S. consumer buys more than U.S. companies sell.
What happens when the U.S. consumer buys more than U.S. companies sell.
Deregulation
Deregulation is when the government seeks to allow competition in highly regulated industries, usually some form of utility.
Deregulation is when the government seeks to allow competition in highly regulated industries, usually some form of utility.
Derivatives
A definition of how financial derivatives, such as options and futures contracts, are used in to trade in the stock market.
A definition of how financial derivatives, such as options and futures contracts, are used in to trade in the stock market.
Discount Rate
The Federal Reserve Discount Rate is the rate that the Fed charges banks to borrow from its discount window.
The Federal Reserve Discount Rate is the rate that the Fed charges banks to borrow from its discount window.
Discount Window
The Federal Reserve's discount window is how the Fed lends money overnight to banks.
The Federal Reserve's discount window is how the Fed lends money overnight to banks.
Discretionary Spending
The part of the U.S. budget that is negotiated between Congress and the President each year.
The part of the U.S. budget that is negotiated between Congress and the President each year.
Diversified Investment
The definition of a diversified investment, and its advantages.
The definition of a diversified investment, and its advantages.
Dumping
A definition of the trade violation known as dumping.
A definition of the trade violation known as dumping.
Economy of Scale
Reducing cost per unit due to large size.
Reducing cost per unit due to large size.
Emerging Markets
Definition of emerging markets.
Definition of emerging markets.
Employment
How the U.S. Government defines employment.
How the U.S. Government defines employment.
Euro
What is the euro, what is the history of the euro dollar exchange rate, and what is the impact of the euro on the U.S. economy?
What is the euro, what is the history of the euro dollar exchange rate, and what is the impact of the euro on the U.S. economy?
Expansionary Monetary Policy
A definition of expansionary monetary policy and how the Federal Reserve uses it.
A definition of expansionary monetary policy and how the Federal Reserve uses it.
Fed Funds Rate
A definition of the most important interest rate in the world.
A definition of the most important interest rate in the world.
Fed Funds
Fed funds, or Federal Reserve funds, are loans that banks make to each other to meet reserve requirements at Federal Reserve Banks.
Fed funds, or Federal Reserve funds, are loans that banks make to each other to meet reserve requirements at Federal Reserve Banks.
FIRREA
Explains what is FIRREA, or the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.
Explains what is FIRREA, or the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.
Fiscal Policy
A definition of fiscal policy and how it is different from monetary policy.
A definition of fiscal policy and how it is different from monetary policy.
Fiscal Year
A definition of the U.S. Government's fiscal year, which runs from October 1 through September 30th of that same calendar year.
A definition of the U.S. Government's fiscal year, which runs from October 1 through September 30th of that same calendar year.
Fixed Rate Mortgage
Definition of fixed rate mortgages, how fixed rate mortgages work, and how they differ from other mortgages.
Definition of fixed rate mortgages, how fixed rate mortgages work, and how they differ from other mortgages.
Futures Contracts
A definition of futures contracts, which includes commodities futures contracts and oil futures contracts.
A definition of futures contracts, which includes commodities futures contracts and oil futures contracts.
GDP
Gross Domestic Product. How big the economy is.
Gross Domestic Product. How big the economy is.
Goldilocks Economy
Just like Goldilocks' porridge - an economy that is neither too hot nor too cold.
Just like Goldilocks' porridge - an economy that is neither too hot nor too cold.
Gross National Product
Gross National Product is Gross Domestic Product plus overseas investments by U.S. residents minus U.S. investments by overseas residents.
Gross National Product is Gross Domestic Product plus overseas investments by U.S. residents minus U.S. investments by overseas residents.
Individual Investor
Definition of the individual investor.
Definition of the individual investor.
Inflation
An easy-to-use definition of inflation.
An easy-to-use definition of inflation.
Interest Rate
A definition of interest rate, including central bank interest rates.
A definition of interest rate, including central bank interest rates.
Interest-only Loan
A definition of an interest-only loan, in which the borrower's monthly payment goes only towards the interest.
A definition of an interest-only loan, in which the borrower's monthly payment goes only towards the interest.
Inverted Yield Curve
A definition of the inverted yield curve, why it is happening, why it can often forecast a recession, and why that might not be true this time.
A definition of the inverted yield curve, why it is happening, why it can often forecast a recession, and why that might not be true this time.
Irrational Exuberance
Why investors create a stock market bubble.
Why investors create a stock market bubble.
Labor
A definition that shows how labor is a key component of supply.
A definition that shows how labor is a key component of supply.
Lagging Indicator
A statistic that follows the economic trend.
A statistic that follows the economic trend.
Large Cap
A definition of large cap stocks, which represent the largest companies.
A definition of large cap stocks, which represent the largest companies.
Leading Indicator
A statistic that precedes an economic trend.
A statistic that precedes an economic trend.
LIBOR Rates
The LIBOR rate is that interest rate that banks charge each other.
The LIBOR rate is that interest rate that banks charge each other.
Liquidity
Liquidity is the amount of capital available for investment.
Liquidity is the amount of capital available for investment.
Mandatory Spending
The part of the U.S. Budget that is mandated by entitlement programs.
The part of the U.S. Budget that is mandated by entitlement programs.
Manufacturing Jobs
What are manufacturing jobs, and why they are important to the economy.
What are manufacturing jobs, and why they are important to the economy.
Mark to Market
Mark to market is a way of a valuing assets at their current price.
Mark to market is a way of a valuing assets at their current price.
Market Capitalization
An easy-to-use definition of a company's market capitalization, or market cap.
An easy-to-use definition of a company's market capitalization, or market cap.
Mid Cap
A definition of mid cap stocks, which represent mid size companies.
A definition of mid cap stocks, which represent mid size companies.
Monetary Policy
A definition of monetary policy and how it is different from fiscal policy.
A definition of monetary policy and how it is different from fiscal policy.
Monetary Report
The Federal Reserve's semi-annual report to Congress on the state of the U.S. economy.
The Federal Reserve's semi-annual report to Congress on the state of the U.S. economy.
Money Market Funds
Explains what money market funds are and how money markets affect the U.S. economy.
Explains what money market funds are and how money markets affect the U.S. economy.
Monopoly
Definition of monopoly and how monopolies used to threaten the U.S. economy by restricting free trade.
Definition of monopoly and how monopolies used to threaten the U.S. economy by restricting free trade.
Mortgage
A mortgage is a specialized loan to make homeownership more accessible.
A mortgage is a specialized loan to make homeownership more accessible.
Mortgage-backed Securities
Defines how mortgages are packaged to be sold on the secondary market.
Defines how mortgages are packaged to be sold on the secondary market.
Most Favored Nation Status
Definition of Most Favored Nation trading status.
Definition of Most Favored Nation trading status.
Multilateral Trade Agreements
The definition of a multilateral trade agreements, which benefit everyone.
The definition of a multilateral trade agreements, which benefit everyone.
Natural Unemployment Rate
Natural unemployment rate is a certain amount of unemployment due to job turnover, mismatch between jobs and skills, and minimum wage laws, for example.
Natural unemployment rate is a certain amount of unemployment due to job turnover, mismatch between jobs and skills, and minimum wage laws, for example.
New Home Sale
The first step in buying a new home.
The first step in buying a new home.
New Home Start
When ground is broken on a new home.
When ground is broken on a new home.
OECD
An association of 30 developed countries.
An association of 30 developed countries.
Off-Budget
A definition of off-budget revenue, which is primarily "borrowed" from the Social Security Trust Fund.
A definition of off-budget revenue, which is primarily "borrowed" from the Social Security Trust Fund.
OPEC
Organization of Petroleum Exporting Countries
Organization of Petroleum Exporting Countries
Options
A defintion of options, including stock options, futures options and options trading.
A defintion of options, including stock options, futures options and options trading.
Outperform the Market
Definition of outperform the market and how it relates to the stock market.
Definition of outperform the market and how it relates to the stock market.
Peg
Many countries peg their currency to the dollar. This means this keep the value of their currency at a certain level relative to the dollar.
Many countries peg their currency to the dollar. This means this keep the value of their currency at a certain level relative to the dollar.
Pension Funds
A definition of pension funds and why they are important to the stock market.
A definition of pension funds and why they are important to the stock market.
Ponzi Scheme
What is the definition of a Ponzi scheme.
What is the definition of a Ponzi scheme.
Preferred Stock
Preferred stock pays interest like a bond but also can increase in value like a stock.
Preferred stock pays interest like a bond but also can increase in value like a stock.
Price Fixing
Definition of price fixing, and how price fixing affects the U.S. economy
Definition of price fixing, and how price fixing affects the U.S. economy
Prime Interest Rate
The prime interest rate is what banks charge their best customers.
The prime interest rate is what banks charge their best customers.
Private Equity - Private Equity Firms - Private Equity Funds
Private equity is private ownership, as opposed to stock ownership, of a corporation.
Private equity is private ownership, as opposed to stock ownership, of a corporation.
Profit Margin
A definition of profit margin and how it relates to profit.
A definition of profit margin and how it relates to profit.
Profit
Definition of profit and why it is important to the US economy.
Definition of profit and why it is important to the US economy.
Purchasing Power Parity
Understand purchasing power parity and you can compare the standard of living in one country with another.
Understand purchasing power parity and you can compare the standard of living in one country with another.
Put Option
Definition of a put option, also known as a put, which is an option to sell a share of stock.
Definition of a put option, also known as a put, which is an option to sell a share of stock.
Real Estate
A broad term which includes residential, commercial, industrial and vacant land.
A broad term which includes residential, commercial, industrial and vacant land.
Recession
When a good economy turns bad.
When a good economy turns bad.
Reserve Requirement
The Federal Reserve requires that banks keep a certain amount of cash on hand each night.
The Federal Reserve requires that banks keep a certain amount of cash on hand each night.
SARPSCO - Indian Ocean Trade Protection
SARPSCO, an organization of countries bordering the Indian Ocean,
SARPSCO, an organization of countries bordering the Indian Ocean,
Savings and Loans
Savings and loans (S&L's) are special types of banks created to promote home ownership.
Savings and loans (S&L's) are special types of banks created to promote home ownership.
Secondary Mortgage Market
How mortgages are sold by the banks to investors.
How mortgages are sold by the banks to investors.
Securities
Securities is a term used to loosely describe stocks, bonds and any other ownership investment.
Securities is a term used to loosely describe stocks, bonds and any other ownership investment.
Shariah banking
Islamic banking follows shariah law.
Islamic banking follows shariah law.
Small Cap
A definition of small cap stocks, which represent smaller companies.
A definition of small cap stocks, which represent smaller companies.
Social Security Trust Fund
What is the Social Security Trust Fund and how does it affect the U.S. economy? A definition of the Social Security Trust Fund.
What is the Social Security Trust Fund and how does it affect the U.S. economy? A definition of the Social Security Trust Fund.
Sovereign Wealth Fund
Sovereign wealth funds are owned by foreign governments, and are changing the balance of global economic power.
Sovereign wealth funds are owned by foreign governments, and are changing the balance of global economic power.
Stagflation
Stagflation is when the economy is stagnant while inflation is rising.
Stagflation is when the economy is stagnant while inflation is rising.
Stock Market Correction
The difference between a stock market correction and a stock market crash.
The difference between a stock market correction and a stock market crash.
Stock Market Crash
What makes a stock market crash different from a stock market decline.
What makes a stock market crash different from a stock market decline.
Stock Market
A broad definition of the stock market.
A broad definition of the stock market.
Stocks
How a stock is a share of ownership of a corporation.
How a stock is a share of ownership of a corporation.
Strategic Petroleum Reserves
A definition of the US governement's Strategic Petroleum Reserves aka US oil reserves.
A definition of the US governement's Strategic Petroleum Reserves aka US oil reserves.
Subprime Mortgages
A definition of subprime mortgages, which are granted to borrowers with less than perfect credit.
A definition of subprime mortgages, which are granted to borrowers with less than perfect credit.
Swap Lines
A swap line is an arrangement between central banks to exchange currency.
A swap line is an arrangement between central banks to exchange currency.
Tariff
Definition of tariffs and custom taxes which are levied on imported goods.
Definition of tariffs and custom taxes which are levied on imported goods.
TARP Program
What are TARP funds, and what is TARP money to be used for? An explanation of the TARP capital purchase program.
What are TARP funds, and what is TARP money to be used for? An explanation of the TARP capital purchase program.
Trade Deficit
What happens when a country consumes more than it produces.
What happens when a country consumes more than it produces.
Trade Promotion Authority
The President's Trade Promotion Authority allows the President to negotiate trade agreements efficiently.
The President's Trade Promotion Authority allows the President to negotiate trade agreements efficiently.
Trading Sideways
How to know when the stock market is trading sideways.
How to know when the stock market is trading sideways.
Unemployment
How the U.S. Government defines unemployment.
How the U.S. Government defines unemployment.
Unfunded Mandate
A definition of unfunded mandates and how they are declining throught UMRA.
A definition of unfunded mandates and how they are declining throught UMRA.
Unilateral Trade Agreements
A definition of unilateral trade agreements, which benefit only one side.
A definition of unilateral trade agreements, which benefit only one side.
Volatility
Definition of volatility, or risk, of a stock or the stock market.
Definition of volatility, or risk, of a stock or the stock market.
World Currency
Definition of the one world currency. Explanation of the new single global currency idea.
Definition of the one world currency. Explanation of the new single global currency idea.
Year-Over-Year
Comparing statistics year-over-year gives a better sense of the trend than month to month or week to week.
Comparing statistics year-over-year gives a better sense of the trend than month to month or week to week.
Yen Carry Trade
A low yen vs strong dollar exchange rate all allowed currency traders to borrow yen at a low interest rate and invest it in a currency with a high interest rate. This was known as the yen carry trade.
A low yen vs strong dollar exchange rate all allowed currency traders to borrow yen at a low interest rate and invest it in a currency with a high interest rate. This was known as the yen carry trade.