Dictionary - Economics
# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z


Microeconomics is a social science that examines the allocation of resources to produce goods and services, and the distribution of goods and services produced.In the modern era, this involves the study of markets and the consumers and suppliers who trade in them. Read more

80-20 Rule

The 80-20 rule, also known as the Pareto Principle, states that 80% of outcomes arise from 20% of inputs.The idea is applied in business and economics to identify and prioritize the most productive or problematic inputs to maximize value or minimize cost. Read more

A. Michael Spence

A.Michael Spence is an economist who won the 2001 Nobel Prize for his work in market-signaling theory. Read more

Abandonment Option

An abandonment option is a clause in a contract that permits either party to leave the contract before obligations have been fulfilled. An abandonment option gives either party participating in a contract the right to leave without having to fulfill obligations. Read more


In the strictest terms, abeyance means temporary inactivity.In the finance world, the term generally refers to unknown ownership. Read more

Above Full-Employment Equilibrium

Above full-employment equilibrium occurs when a country's gross domestic product (GDP) is higher than normal. For example, let's say Country X's normal rate of GDP growth is 2% per year. Read more

Accord and Satisfaction

Accord and satisfaction is a legal term that denotes accepting compensation in lieu of some contractual obligation from another party. An accord is an agreement with conditions. Read more

Adam Smith

Adam Smith is one of the world's most famous economists.Modern capitalism owes its roots to Adam Smith and his Wealth of Nations, which many consider the single most important economic work in history. Read more

Affordable Care Act (ACA)

The Affordable Care Act (ACA), typically referred to as "Obamacare" but formally known as the Patient Protection and Affordable Care Act (PPACA), is a bill signed into law on March 23, 2010, by President Barack Obama.The Affordable Care Act works in conjunction with the Health Care and Education Reconciliation Act of 2010, which also reforms many aspects of the student loan industry. Read more

Alan Greenspan

Alan Greenspan was the chairman of the Federal Reserve Board of Governors from 1987 to 2006. Alan Greenspan was born in 1926 in New York. Read more

American Rule

The American Rule, in law, is a rule by which each party pays its legal fees resulting from litigation.  This contrasts with the English Rule, which is the global norm, where the losing party pays the legal fees of the winning party. For example, assume the plaintiff (the party suing that claims to have been wronged by the defendant's actions) files a lawsuit against a defendant and hires an attorney on a contingent fee basis (whereby the attorney doesn't charge fees but gets a percentage of the settlement if the suit is victorious). Read more

Anti-Takeover Statute

An anti-takeover statute is a law designed to deter companies from launching hostile takeovers of other companies. Anti-takeover statutes exist in some places in order to protect the autonomy and interests of companies incorporated in those states. Read more


Arbitration is a process in which impartial parties (arbitrators) help disagreeing parties resolve a dispute.Contracts, particularly financial ones, with disputes often go to arbitration. Read more

Baby Boomer

A baby boomer is a member of the generation born between 1946 and 1964. The term baby boom refers to the increase in births after the end of World War II. Read more

Baby Boomer Age Wave Theory

The baby boomer age wave theory, developed by economist Harry S.Dent, Jr., theorizes that the age of the baby boom generation can predict major changes in economic trends. Read more

Bad Bank

A bad bank is a new company created to buy poorly-performing assets from another bank. For example, let's assume that Bank XYZ has made an extraordinary number of loans to borrowers who can't pay them back. Read more


A bailee is a person who has been entrusted with custody of a piece of property.A bailee does not have ownership of the property. Read more

Bailee's Customers Insurance

Bailee's customers insurance covers any damage or destruction that a bailee might do to a bailor's property. Bailment is a transfer of custody of property rather than a transfer of ownership of property. Read more


Bailment is a transfer of custody of a piece of property rather than a transfer of ownership of a piece of property. For example, let's say John Doe owns a big piece of farmland on the eastern shore of Maryland. Read more


A bailor is a person who entrusts a piece of his or her property to another person (the bailee).A bailee does not have ownership of the property. Read more


A bailout is financial help for ailing companies. Company XYZ is in the newspaper industry and has seen a dramatic downturn in its advertising sales. Read more

Bait and Switch

Bait and switch is a sales tactic that tricks consumers into buying something other than an advertised item. John Doe sees an ad in the paper for $1 orange juice at a local retailer. Read more

Bait Record

A bait record is a fake file on a computer that is used to see whether anyone is improperly accessing data. Let's assume Company XYZ's magazine covers keep leaking to the competition before they are published, causing competitors to scoop them on several stories. Read more

Balance of Payments (BOP)

The balance of payments (BOP) reflects all payments and obligations to foreigners vs.all payments and obligations received from foreigners. Read more

Balance of Trade (BOT)

Balance of trade (BOT), also known as the trade balance, is the calculation of a country's exports minus its imports. When a country imports more than it exports, the resulting negative number is called a trade deficit. Read more

Balanced Budget

A balanced budget exists when a household's (or country's) revenues are equal to its expenses. For example, let's assume that John Doe and his wife Jane Doe earn $100,000 a year. Read more

Baltic Dry Index (BDI)

The Baltic Dry Index (BDI)  is a leading economic indicator that measures demand for dry bulk shipping services worldwide relative to supply.  Every business day, researchers for the London-based Baltic Exchange survey prices of booking cargo around the world and compile the Baltic Dry Index. Read more

Bank for International Settlements (BIS)

Based in Basel, Switzerland, the Bank for International Settlements (BIS) acts as a bank for central banks around the world. The BIS's main role is setting capital adequacy requirements and ensuring capital adequacy, which is one of the biggest challenges among central banks. Read more

Bank Holiday

A bank holiday is a day on which a bank or banking system is closed. In the United States, banks and financial markets generally cannot be closed for more than four calendar days in a row, which puts some limits on the timing and quantity of bank holidays. Read more

Bank Reserve

A bank reserve is a portion of a bank's deposits that are set aside in a liquid account to ensure that the bank has enough cash on hand to fulfill withdrawal requests. Reserve requirements are Federal Reserve rules that require banks and other financial institutions to keep a strict percentage of their deposits on reserve at a Federal Reserve bank. Read more


A barter (or bartering) is an exchange between two parties using goods and services for payment instead of currency. The barter system enables two parties to exchange goods or services based on mutually perceived value. Read more

Basket of Goods

In economics, a basket of goods is a group of items used for price comparisons or other analytical purposes. The consumer price index (CPI) is the most common measure of price levels. Read more

Beige Book

The Beige Book is the informal name for the Federal open Market Committee's (FOMC) ongoing reports titled Summary of Commentary on Current Economic Decisions by Federal Reserve District. The purpose of the Beige Book is to provide information to FOMC members about the economic changes and conditions occurring in each of the 12 Federal Reserve districts. Read more

Ben Bernanke

Ben S.Bernanke is the chairman of the United States Federal Reserve (the Fed). Read more

Best Efforts

Best efforts is a legal agreement between a securities underwriter (usually an investment bank) and a securities issuer, whereby the underwriter agrees to do the best it can to sell as many of the issuer’s securities as possible to the public.  A best efforts agreement does not guarantee that all of the securities in the issue must be sold.An issuer and underwriter agree upon a minimum level of sales and once the minimum has been reached, the underwriter is not responsible for any unsold securities.  Let’s assume Company XYZ plans to go public and it hires an investment bank to become their underwriter and arrange the offering. Read more

Big Box Store

A big box store is a large company that is more efficient but less specialized than other firms in a particular niche or industry. Wal-Mart is a classic example of a big box store. Read more

Black Market

A black market is the illegal purchase and sale of goods and services. Drug dealing is one of the most prominent black markets in the United States. Read more

Blue Sky Laws

Blue sky laws require the registration of brokers, brokerage firms and investment professionals in order to provide transparency of financial offerings and protect investors from investment fraud.Each state has its own blue sky law. Read more

Board of Governors

The Board of Governors is the decision-making body at the Federal Reserve. The Federal Reserve system is the United States' central bank. Read more

Book-Entry Securities

Book-entry securities are securities issued in electronic form rather than in paper form. The commercial book-entry system is a system whereby the investor's ownership of the security is reflected only in the investor's account records at his or her financial institution, brokerage firm or dealer. Read more

Break-Even Point

In accounting, economics, and business, the break-even point is the point at which cost equals revenue (indicating that there is neither profit nor loss).At this point in time, all expenses have been accounted for, so the product, investment, or business begins to generate profit. Read more

Bretton Woods Agreement

Under the Bretton Woods Agreement of 1944, the world's allied industrial countries established a fixed currency exchange rate based on the gold standard.    The Bretton Woods Agreement also led to the creation of the International Bank for Reconstruction and Development (what is now the World Bank) and the International Monetary Fund (IMF).The agreement's name comes from the New Hampshire site where the conference was held. Read more

Bureau of Labor Statistics (BLS)

The Bureau of Labor Statistics (BLS) of the U.S.Department of Labor is a Federal agency that measures and reports labor market activity, working conditions and price changes in the economy. Read more

Bureau of Public Debt (BPD)

The Bureau of Public Debt is responsible for borrowing the money needed to run the U.S.government. Read more

Business Cycle

The business cycle refers to an economy's periodic patterns of growth, recession, and recovery. An expanding economy is characterized by low unemployment, high productivity, and high consumer spending. Read more

Buyer's Market

A buyer's market exists when there are more sellers than buyers in the market for a certain good or service. Housing is a common place to find a buyer's market. Read more

Buying Power

In the financial world, the phrase "buying power" has two meanings.One is the amount of money a person can use to invest in securities (and that can include money the investor borrows in order to buy securities). Read more

Call Report

A call report is a quarterly report that banks and all regulated financial institutions must file with the Federal Financial Institutions Examination Council (FFIEC). The formal name of the call report is the Consolidated Reports of Condition and Income. Read more


Capital is anything a business uses to generate income.In simple terms, capital is the potential for any item to create wealth. Read more

Capital Account

A capital account is a national account that shows the changes in a nation's assets.These assets can be physical or financial. Read more

Capital Intensive

Capital intensive refers to the degree that a company must invest money in physical or financial assets in order to produce a profit. Airlines, auto manufacturers, and drilling operations are often considered capital-intensive businesses because they require large amounts of expensive equipment and raw materials to make their products. Read more


Capitalism is an economic and social system in which participants privately own the means of production -- called capital.Free market competition, not a central government or regulating body, dictates production levels and prices.  Under capitalism, prices and wages are determined by the forces of supply and demand. Read more

Carding Forum

Designed to facilitate the sharing of stolen credit card information, a carding forum is an illegal website where fraudsters also share info, tips and techniques about obtaining credit card information as well as how to use the illicit information effectively.A card holder's complete profile, called “fullz” in slang, provides the criminal with all the information they would need to impersonate the legitimate cardholder online or in person. Read more


A cartel is a group of companies, countries or other entities that agree to work together to influence market prices by controlling the production and sale of a particular product. Cartels tend to spring from oligopolistic industries, where a few companies or countries generate the entire supply of a product. Read more

Category Killer

A category killer is a large, dominant company that is more efficient but less specialized than other merchants in a particular niche or industry. Wal-Mart is a classic example of a category killer. Read more

Caveat Emptor

Caveat emptor is Latin for let the buyer beware, meaning the buyer assumes the risk in a transaction. Garage sales are great examples of caveat emptor. Read more

Central Bank

A central bank is an institution responsible for determining the monetary policy of a nation or group of nations.  Exact duties vary by country, but generally a central bank's main goals are to maintain a stable currency, control inflation and maximize employment through the promotion of reasonable economic growth.Examples include the Federal Reserve Bank (U.S.), the European Central Bank (EU) and the Bank of Japan (Japan). Read more

Chapter 10

Chapter 10 (formally referred to as Chapter X) is a former portion of the bankruptcy code that dictated bankruptcy processes and procedures for companies and individuals. Chapter X was originally part of the Bankruptcy Act of 1898 and the subsequent Chandler Act of 1938. Read more

Class Action

Class action is a type of civil lawsuit brought by a group of people who are "similarly situated" -- that is, they have been harmed in a similar way.In the business world, this group is most often shareholders, customers or employees. Read more


Collusion, also known as price rigging or price fixing,  occurs when several individuals and/or businesses agree to set the price for something.  For example, let’s assume that there are four major cable providers in the U.S.The four companies meet secretly and agree not to compete with one another for customers in certain geographic areas of the country. Read more

Command Economy

A command economy (also known as a “planned economy”) occurs when decisions about the production and allocation of all goods and services are made by one central government authority. Command economies are characterized by centralized control, forecasting, and pricing. Read more


Commerce is the exchange of goods, services or commodities on a large scale. Nearly every business transaction is a form of commerce: purchasing food at a restaurant, buying stocks on the stock market, selling goods in a store, drilling for oil, etc. Read more

Comparative Advantage

A firm's comparative advantage is its ability to produce a good or service at a lower opportunity cost than another entity. Famed economist David Ricardo first coined the term "comparative advantage" in the early 1800s. Read more

Consolidated Reports of Condition

Consolidated Reports of Condition are reports that are filed quarterly by banks and all regulated financial institutions with the Federal Financial Institutions Examination Council (FFIEC) Consolidated Reports of Condition are commonly refered to as a call report.They are not the same as the Uniform Bank Performance Report, which is often filed in conjunction with the Consolidated Reports of Condition. Read more

Constant-Price GDP

Also called real GDP, constant-price gross domestic product (GDP) is inflation-adjusted GDP. Gross domestic product (GDP) is the broadest quantitative measure of a nation's total economic activity. Read more

Consumer Confidence Index (CCI)

The Consumer Confidence Index (CCI) is an index based on the monthly Consumer Conference Board survey that measures consumer sentiment regarding current and future economic conditions.note that the CCI is not the same as the Consumer Sentiment Index published by the University of Michigan. Read more

Consumer Cyclical

Consumer cyclical refers to a stock or group of stocks that are affected by changes in the economic cycle. Consumer cyclicals perform well when the economy grows and suffer when the economy stagnates or shrinks. Read more

Consumer Durables

Consumer durables are a category of consumer products that do not have to be purchased frequently because they last for an extended period of time (typically more than three years). Consumer goods are divided into two categories: durable goods and non-durable goods. Read more

Consumer Financial Protection Bureau (CFPB)

Created by President Obama’s Administration in 2010, the Consumer Financial Protection Bureau (CFPB) serves as a federal watchdog over the consumer financial industry.Responsible for regulating financial services companies in the credit card and mortgage industry as well as other financial services products, the CFPB guides policy and enforcement in order to protect consumers from fraud and abuse. Read more

Consumer Price Index (CPI)

The consumer price index (CPI) measures changes in consumer prices.The Bureau of Labor Statistics (BLS) calculates and publishes CPI data monthly. Read more

Consumer Staples

Consumer staples are household necessities -- products that most of us use on an everyday basis and would continue to use with little regard to their cost or the overall economy. Examples of consumer staples include food, drugs, beverages, tobacco, and basic household products. Read more

Country Risk

Country risk is the risk that a foreign government will default on its bonds or other financial commitments.Country risk also refers to the broader notion of the degree to which political and economic unrest affect the securities of issuers doing business in a particular country. Read more

Credit CARD Act

The Credit Card Accountability, Responsibility, and Disclosure Act is better known as the Credit CARD Act.The law's main purpose is to prevent certain business practices in the credit card industry that were considered unfair or even deceptive to consumers.  The act was signed into law in May 2009 and took effect in phases. Read more

Critical Mass

Critical mass refers to the size a company needs to reach in order to efficiently and competitively participate in the market.This is also the size a company must attain in order to sustain growth and efficiency. Read more

Crowding Out Effect

The crowding out effect describes the idea that large volumes of government borrowing push up the real interest rate, making it difficult or close to impossible for individuals and small companies to obtain loans. The theory behind the crowding out effect assumes that governmental borrowing uses up a larger and larger proportion of the total supply of savings available for investment. Read more


Currency is a medium of exchange for goods or services within an economy. Currency can be either fiat or tied to an underlying asset. Read more

Cyclical Industry

A cyclical industry is an industry whose performance (revenues, profits, etc.) is tied to the business cycle.Thus, when the economy is grows quickly, the industry does well and vice versa. Read more

Cyclical Unemployment

Cyclical unemployment is the fluctuating rate of unemployment resulting from swings in the business cycle. This type of unemployment increases during a recession and decreases during an expansion. Read more

Daisy Chain

In finance, a daisy chain is an investment scam whereby a group of fraudulent investors inflate the price of a security and then sell it at a profit. In a daisy chain scenario, an investor or group of investors holding a long position in a low-price, small-cap stock unfoundedly publicize the stock as a promising opportunity. Read more

Date Certain

A date certain is a legal term identifying a date on which an action or process must occur or complete. For example, let's say that John Doe rents a house from Jane Smith. Read more

Daylight Overdraft

A daylight overdraft occurs when a bank transfers out more in a day than it has in its reserves. Let's say Bank XYZ has assets of $100 million. Read more

Dead Presidents

In the finance world, dead presidents are slang for U.S.currency. Read more

Deadweight Loss

When supply and demand are out of equilibrium, the market inefficiency created and the societal cost is known as deadweight loss.When used in economics, deadweight loss will be applied to the deficiency that has occurred due to the inefficient allocation of economic resources. Read more


Decoupling refers to instances in which security prices behave contrary to normally-occurring correlations. Movements in the price of different securities may be directly or indirectly correlated. Read more

Defensive Company

A defensive company is a company that does well or at least remains stable during economic contractions and expansions. Defensive companies are most famous for their ability to weather economic dips, but it is important to note that they also tend to ignore economic upswings. Read more


A deficit occurs when expenses exceed revenues, imports exceed exports, or liabilities exceed assets.A deficit is the opposite of a surplus. Read more

Deficit Spending

Deficit spending is spending that reduces or offsets a surplus.In the business world, the term often refers to situations where expenses exceed revenues, imports exceed exports, or liabilities exceed assets. Read more


Deflation describes the general decline in the prices of goods and services in an economy, which in turn increase the purchasing power of money.It is the opposite of inflation, but is not the same as disinflation (which is the slowing of inflation). Read more

Demand Elasticity

Demand elasticity is a measure of how sensitive the demand for a product or service is to changes in the price of that product or service.The formula for demand elasticity is: Elasticity = % Change in Quantity/% Change in Price Let's assume that when gas prices increase by 50%, gas purchases fall by 25%. Read more


Demonetization is the act of removing a currency from use as legal tender. Demonetization occurs when a governing body cancels the legal tender status of a currency unit in circulation. Read more


Usually associated with currency, a denomination is the value specified on a monetary instrument. Denomination values are graduated and usually divisible by some common denominator (hence, 'denomination'). Read more


A depression is a sustained downturn in economic activity characterized by high unemployment, decreased output and reduced levels of trade.  Low levels of consumer confidence during times of depression generally result in a severe drop in consumer demand and spending.This leads companies to cut costs by reducing their workforces, resulting in high unemployment and even lower consumer confidence and spending. Read more


Deregulation occurs when there is a significant decrease or elimination of government regulation over an industry, market, or economy. The transportation industry is one of the most famous industries to feel the effects of deregulation. Read more

Direct Cost

A direct cost is any cost related to the production method of a good or service.It is the opposite of an indirect cost. Read more

Disclosure Statement

A disclosure statement is an official document that outlines the terms, conditions, risks and rules of a financial transaction, such as a loan or an investment. In the case of a loan, the disclosure statement describes the terms of the loan, such as the interest rate, the amount borrowed, the repayment schedule, fees, disbursement conditions, collateral requirements, insurance requirements, prepayment rights (or penalties), and any other expectations of the lender and any additional obligations of the borrower. Read more

Discount Rate

The discount rate, also known as the Fed discount rate, is the interest rate charged to commercial banks and other institutions on loans from a Federal Reserve bank.This process is a key tool of Federal Reserve monetary policy and an integral part of the Federal Reserve’s role in the broader financial system. Read more

Discount Window

The discount window is the method that banks use to borrow money from a central bank on a short-term basis, named after an actual teller window at the Federal Reserve where such transactions used to be carried out.The discount window is used only in financial emergencies, such as major stock market collapses or liquidity crises. Read more

Diseconomies of Scale

Diseconomies of scale lead the marginal cost of a product to increase as a company grows.This is the opposite of economies of scale which cause the marginal cost for a product to decrease as a result of efficiencies achieved as a company grows and can spread its fixed costs over a larger quantity of products/services offered.  As a firm grows, it seeks to reduce the marginal cost of its products, increasing efficiency as it increases production. Read more

Double-Dip Recession

A double-dip recession occurs when the economy experiences a recession followed by a brief recovery and then another period of recession. Recessions occur when the gross domestic product (GDP) declines for two consecutive quarters. Read more

Dow Jones Transportation Average (DJTA)

The Dow Jones Transportation Average (DJTA) is the most widely recognized gauge of the transportation sector.It is also the oldest index used today, even older than its more famous brother, the Dow Jones Industrial Average (DJIA). Read more

Dow Jones Utilities Average (DJUA)

The Dow Jones Utilities Average (DJUA) is the most widely cited utilities index in the United States and the most widely recognized gauge of the utilities sector. The Dow Jones Utilities Average is comprised of fifteen of the largest utilities companies in the U.S. Read more


A duopoly is a form of oligopoly occurring when two companies (or countries) control all or most of the market for a product or service. There are two kinds of duopolies. Read more

Durable Goods

Durable goods are a category of tangible (physical) products that last three years or longer.Typically, these goods are a bit more expensive because they tend to last for long periods of time. Read more


Durables are a category of consumer products that do not have to be purchased frequently because they are made to last a long time (typically more than three years).They are also called durable goods or consumer durables. Read more


Duress is pressure that one person or entity puts on another person to do something that he or she would normally not do. Let's say Artie owns a restaurant called Vesuvio. Read more

Easy Money

Easy money is a phrase that often refers to the presence of low interest rates.In the context of the Federal Reserve, easy money is a method of helping the economy expand by increasing the money supply. Read more


Econometricians are economists who use math and statistics to measure economic data. Econometricians measure things such as gross domestic product, inflation, or to predict changes in the economy. Read more


Econometrics is the use of math and statistics to measure economic data. Econometricians use econometrics to measure things such as gross domestic product, inflation, or to predict changes in the economy. Read more

Economic Blight

Economic blight occurs when an area of a town shows visible signs of age, disrepair, and crime. For many people, thinking about the "bad side of town" is to think about economic blight. Read more

Economic Exposure

Economic exposure is the risk that a company's cash flow, foreign investments, and earnings may suffer as a result of fluctuating foreign currency exchange rates. The extent to which a company may be affected by economic exposure depends very much on the company's specific industry and business interests. Read more

Economic Indicator

An economic indicator is an index or other data that suggests whether the economy is expanding or contracting. For example, the U.S. Read more

Economic Recovery

An economic recovery is a period of economic expansion, typically after a recession. Let's assume that there has been a significant decline in industrial production, employment, and wholesale or retail trade. Read more

Economic Refugee

An economic refugee is a person who moves to another country in search of a higher standard of living. Let's say John Doe lives in Cyprus. Read more

Economic Rent

Economic rent is the minimum amount of money that an owner of land, labor or capital must receive in order to let someone else use that land, labor or capital. For example, your economic rent is the amount of money that makes you get out of bed in the morning. Read more

Economic Risk

Economic risk is the chance that macroeconomic conditions like exchange rates, government regulation, or political stability will affect an investment, usually one in a foreign country. For example, let's assume American Company XYZ invests $1,000,000 in a manufacturing plant in the Congo. Read more

Economic Stimulus

An economic stimulus occurs when a federal government attempts to use targeted monetary or fiscal policies to stimulate an economy (especially when it enters a recession or depression). Sometimes referred to as “priming the pump”, an economic stimulus is thought to revive a stagnant economy. Read more

Economic Tsunami

An economic tsunami is a set of circumstances that produce an event that triggers considerable distress in the financial markets and/or the economy. In the meteorology world, a tsunami is a wave or series of waves caused by the movement of a large body of water. Read more


Economics is the academic study of the production, distribution, and consumption of goods and services. Economics can be broken down into two main disciplines: macroeconomics and microeconomics. Read more

Economies of Scale

Economies of scale is a term that refers to the reduction of per-unit costs through an increase in production volume.This idea is also referred to as diminishing marginal cost. Read more

Economies of Scope

Economies of scope is a term that refers to the reduction of per-unit costs through the production of a wider variety of goods or services. Let's assume Company XYZ strictly manufactures vacuum cleaners. Read more


An economist is a social scientist devoted to the study of the relationship between human behavior and supply and demand. The study of economics is generally divided into two areas: microeconomics and macroeconomics. Read more


In its broadest sense, the economy is the organized system of human activity involved in the production, consumption, exchange, and distribution of goods and services. Derived from the Greek word oikonomos, meaning "one who manages a household," economy was not used in the modern sense of the economic system of a country or area until the nineteenth and twentieth centuries. Read more


Something is elastic when its price varies with the price of another item.It the business world, the term most often refers to how much the price of a good or service changes when the supply of that good or service changes. Read more


Elasticity is a measure of the change in one variable in response to a change in another.In economics, elasticity generally refers to variables such as supply, demand, income, and price. Read more

Elasticity of Supply

The elasticity of supply, also known as price elasticity of supply, measures the responsiveness of the quantity supplied to a change in the price of a good, with all other factors remaining the same. The formula for elasticity of supply is: Elasticity of Supply = (% change in quantity supplied) / (% change in price) As demand for a good or product increases, the price will rise and the quantity supplied will increase in response. Read more

Employment Cost Index

The employment cost index, or ECI, is a quarterly report compiled by the Bureau of Labor Statistics within the U.S.Department of Labor that offers wage and benefit information and provides a leading indicator of potential inflation. Read more

Equal Credit Opportunity Act (ECOA)

The Equal Credit Opportunity Act (ECOA) is legislation designed to ensure that all qualified people have access to credit.It prevents lenders from rejecting credit applicants based on race, gender, marital status, age, religion, or national origin and requires lenders to consider public assistance in the same light as other forms of income. Read more

Existing Home Sales

Existing home sales is an economic indicator released by the National Association of Realtors.The data reflect the number of homes that have previously been constructed (and therefore accounted for by the new home sales indicator) and are now being resold. Read more

Expansionary Policy

Expansionary policy, or expansionary monetary policy, is when the Federal Reserve uses tools at its disposal in order to increase the money supply for the purpose of stimulating or growing the economy. An expansionary policy is typically implemented by the Federal Reserve by enacting one or more of these tactics: Lowering the federal discount rate By lowering the discount rate, the fees it charges banks to borrow from it, the Fed seeks to lower overall interest rates, thereby lowering the cost of money and its availability. Read more

External Debt

External debt, otherwise known as "foreign debt," is the component of total debt held by creditors of foreign countries, i.e.non-residents of the debtor's country. Read more

Factors of Production

In economics, the term factors of production refers to land, labor, and capital: the three inputs that make all commerce possible.Some economists also include entrepreneurship a factor of production. Read more

Factory Orders

Factory orders are the dollar value of orders for goods from factories. The U.S. Read more

Fair Labor Standards Act (FLSA)

The Fair Labor Standards Act (FLSA) contains well-known American labor law standards regarding minimum wage, overtime pay and child labor, among others. The FLSA is enforced by the U.S. Read more

Fair Market Value

Fair market value is the price at which a willing seller sells a good or service to a willing buyer. Let's assume John Doe wants to sell his house. Read more

Federal Discount Rate

The federal discount rate is the interest rate at which a bank can borrow from the Federal Reserve. To understand the federal discount rate, it is important to understand that banks derive income from making loans. Read more

Federal Funds Rate

The federal funds rate is the interest rate banks charge each other on loans used to meet reserve requirements. The federal funds rate is often confused with the discount rate, which is the interest rate the Federal Reserve charges on loans directly from the Federal Reserve Bank.But they are not the same. Read more

Federal Insurance Contributions Act (FICA)

The Federal Insurance Contributions Act (FICA) is a US payroll tax used to fund the Social Security and Medicare programs.These programs are designed to support those without wage income: retirees, dependents of non-working adults, and those with disabilities. Read more

Federal Reserve Bank

Federal Reserve Bank refers to any of the 12 branches of the Federal Reserve System overseeing the implementation of U.S.monetary policy.  As the country's central banking authority, the Federal Reserve System operates in 12 designated regions (or districts) throughout the United States. Read more

Federal Reserve Board (FRB)

The Federal Reserve Board (FRB), officially called the Federal Reserve Board of Governors, is the Federal Reserve System's primary decision-making body. There are seven members on the FRB, each appointed to a 14-year term by the President of the United States with the advice and consent of the Senate. Read more

Federal Reserve Note

A Federal Reserve note is the formal name of U.S.currency. Read more

Federal Reserve System (FRS)

The Federal Reserve System (FRS) is the U.S.'s central bank.The Federal Reserve manages the economy's money supply, regulates the banking industry, acts as a clearinghouse for checks and other payments conducted through the banking system, operates the U.S. Read more

Federal Trade Commission (FTC)

The Federal Trade Commission (FTC) protects consumers and businesses from practices that can cause markets to become unfair and anti-competitive. The Federal Trade Commission is divided into three bureaus that have different regulation and protection responsibilities. Read more

Fiat Money

Fiat money refers to any currency lacking intrinsic value that is declared legal tender by a government.  As valid currency solely by virtue of a government declaration, fiat money is not backed by any commodity, such as gold, but only by the faith of the bearer.In this respect, unlike currencies backed by gold or silver, fiat money does not have any intrinsic value (e.g., paper money and much coinage). Read more

Financial Industry Regulatory Authority (FINRA)

The Financial Industry Regulatory Authority (FINRA) is an independent non-profit corporation that regulates the actions of securities firms in the United States.  In order to deal in securities in the United States, firms are required to become members of FINRA, unless they are regulated by another self-regulatory organization (SRO). This self-regulatory body helps to protect investors and preserve market integrity by establishing, overseeing, and enforcing rules that govern brokers and dealers. Read more

Fiscal Deficit

Fiscal deficits occur when a government's expenditures exceed its revenue. A deficit is the opposite of a surplus. Read more

Fiscal Policy

Fiscal policy refers to a government's spending and taxation policies intended to maintain economic stability, which is indicated by levels of unemployment, interest rates, prices and economic growth. A government is capable of directly affecting economic activity in response to fluctuations in macroeconomic growth. Read more

Fisher Effect

The Fisher Effect is an economic hypothesis stating that the real interest rate is equal to the nominal rate minus the expected rate of inflation. In the late 1930s, U.S. Read more

Fixed Costs

Fixed costs are independent expenses that companies must pay, regardless of what their business does.Because they cover expenses that help keep the business up and running, they are sometimes referred to as overhead costs.  Fixed costs do not change when goods or services produced or sold by a company move up or down. Read more

Flight to Quality

A flight to quality is the act of moving capital away from "risky" investments and toward "safer" investments due to uncertainty about the overall economy. Anything that increases uncertainty in the markets can cause a flight to quality . Read more

Free Market

A free market is a type of economy with little to no interference from a central government.Instead, a free market is based on supply (from producers) and demand (from consumers).   The term free market is also referred to as laissez-faire (French for “leave to do”) economics. Read more

Free On Board (FOB)

Free on board (FOB) is a contractual term that refers to the requirement that the seller deliver goods at the seller's cost via a specific route to a destination designated by the buyer. To understand how FOB terms work, let's look at an example. Read more

Frictional Unemployment

Frictional unemployment refers to the portion of the unemployment rate that results from labor market turnovers.This unemployment is ongoing and includes job transitions and communication lags between employers and potential employees, people entering and exiting the labor force and from the constant creation and destruction of jobs. Read more

Game Theory

Game theory is a tool used to analyze strategic behavior by taking into account how participants expect others to behave.Game theory is used to find the optimal outcome from a set of choices by analyzing the costs and benefits to each independent party as they compete with each other. Read more


Also called wage execution, a garnishment is a process under which money owed or paid to a borrower is given to a creditor instead. Let's say John Doe has stopped paying child support to his ex-wife. Read more


GDP gap refers to the disparity between an economy's actual total output and its possible total output. A country's GDP gap is mathematically expressed in the following way and serves as an indicator of where an economy stands in the business cycle: Gap GDP = GDP Actual – GDP Potential Measured as an indication of the number of jobs in an economy (labor productivity) a positive gap value indicates an expansion. Read more

GDP Per Capita

GDP per capita is a country's gross domestic product (GDP) per person.Essentially, this measures the amount of goods and sales a country produced per person, on average. Read more

Generation Gap

A generation gap is a difference in philosophies between generations. The most famous generation gap is the baby boomers, many of whom came of age in the 1960s, and their parents, who grew up around the Great Depression and tended to have traditional values. Read more

Glass Steagall Act

The Glass Steagall Act was passed by Congress in 1933.It prohibited commercial banks from conducting brokerage or investment banking activities. Read more

Global Investment Performance Standards (GIPS)

Global Investment Performance Standards (GIPS) are ethical standards for asset-management companies.They were established by the Association for Investment Management Research. Read more

Global Recession

A global recession occurs when global gross domestic product growth is 3% or less. The International Monetary Fund (IMF) identifies global recessions, which have some things in common with national recessions. Read more


Countries have built economic partnerships that include trade, investment, capital flow, labor migration, and technology.Globalization is a term used to describe the integration of national economies through these partnerships. Read more

Gold Standard

The gold standard is a monetary system in which the representative currency is based on a fixed amount of gold held by the central government. Paper currency is actually a "legal note," i.e. Read more

Golden Rule

The golden rule is very simple: treat people the way you want to be treated.In the business world, it also refers to fundamental principles of government spending: cover current spending with existing taxes and borrow only to fund investments that benefit more than one generation of citizens. Read more

Goldilocks Economy

A Goldilocks Economy is one which enjoys sustained economic growth and low inflation.  This balance is attractive to investors because it allows for a market-friendly monetary policy from the Federal Reserve Bank.  Market pundits look for ways to characterize the economic climate.  A bullish economy, with steep growth in market values and low losses due to inflation, denotes strong economic growth, though it may lead to rising inflation.   In contrast, a bearish economy is the opposite, with stagnant economic performance and inflation rates soaking up any gains.  In either extreme, the Federal Reserve acts to either cool off or heat up the economy, primarily by raising or lowering the official interest rates.  When there is a balance, i.e. Read more

Government Accountability Office (GAO)

The Government Accountability Office (GAO) investigates, with congressional approval, the federal government's spending. The GAO started in 1921, when the Budget and Accounting Act transferred the government's auditing and accounting functions away from the Treasury Department. Read more

Government Accounting Office (GAO)

Founded in 1921, the Government Accounting Office (GAO) is an independent, nonpartisan agency that studies how the federal government spends taxpayer money. The head of the GAO is the Comptroller General of the United States. Read more

Government Sponsored Enterprise (GSE)

In the US, government sponsored enterprises, or GSEs, are quasi-governmental, privately-held entities established to improve, and at times make possible, the flow of credit to specific sectors of the economy or to otherwise provide essential services to the public.  GSEs are established by Congress. Government sponsored enterprises have been established in key areas of the economy.  For example in the housing sector, Congress created the Federal Home Loan Bank in 1932, to act as a wholesale bank providing support for housing mortgages issued by private banks.  Today, the network of 12 Federal Home Loan Banks provides loans to local banks at preferred interbank lending rates to enhance commercial and mortgage bank liquidity.  In education, Congress established the Student Loan Marketing Association, known as Sallie Mae, to guarantee student loans issued by local financial institutions.   The Federal National Mortgage Association, known as Fannie Mae, and the Federal Home Loan Mortgage Corporation, known as Freddie Mac, provide guarantees and low cost credit that allow housing loans. Read more

Grandfather Clause

A grandfather clause is a clause that is included as part of a new law that exempts specific parties from the law due to practices that were in place prior to the law's implementation. For example, consider a law that is passed stating that all buildings with three or more stories must be equipped with two elevators.  There may be buildings that were built before the passing of that law that are structurally unable to accommodate this law. Read more


In the business world, a grant usually refers to a stock option grant.However, the term can also refer to federal funding for research, business ventures or partnerships. Read more


In the legal world, a grantee is a person who receives something. In real estate, a grantee is a person who receives property after a sale or other transfer of title. Read more


In the legal world, a grantor is a person or entity creating a trust. A trustee is a person or entity that has a fiduciary duty to another person or entity, called the beneficiary. Read more


Greenback is a slang term for the U.S.dollar. Read more

Gross Domestic Product (GDP)

Gross Domestic Product (GDP) is a quantitative measure of how much an economy produces.It includes the monetary value of both goods and services within a specific nation’s borders. Read more

Gross National Product (GNP)

Gross national product (GNP) is the sum of all domestic and foreign output created by citizens of a given country.It can be measured by spending or by income. Read more


In general, a guarantee is a promise to take responsibility for another company's financial obligation if that company cannot meet its obligation.The entity assuming this responsibility is called the guarantor. Read more

Hard Landing

A hard landing refers to an abrupt downward shift in economic growth resulting from monetary policy. Inflation historically accompanies periods of economic expansion. Read more


Hardening refers to stabilization or steady increases in a price level. Financial instruments and derivatives frequently experience volatile market-price fluctuations. Read more

Harry Markowitz

Harry Markowitz is a famous economist who won the Nobel Prize in Economics in 1990. Born in Chicago in 1927, Markowitz earned his bachelor's degree in economics at the University of Chicago and then joined the RAND Corporation in 1952, where he worked on the optimization techniques and algorithms that would lead to his famous theory: the efficient frontier. Read more


A hawk is a person, usually in a politically oriented profession, who favors government efforts to control inflation or who favors reducing the federal budget deficit. Let's assume John Doe works for the presidential administration as an economic advisor. Read more

Head Trader

Head traders have to be licensed, which means they have to pass at least one relevant exam administered by FINRA.There are several exams that can make a person eligible to become a head trader, and the correct one depends on the nature of the trading (i.e., commodities, municipal bonds, stocks, etc.). Read more

Health Insurance Portability and Accountability Act (HIPAA)

The Health Insurance Portability and Accountability Act (HIPAA) is a federal law that promises continued health insurance coverage and ensures health information privacy for those covered by health insurance plans. HIPAA was passed in 1996 as an amendment to two previous laws: the Public Health Service Act (PHSA) and the Employee Retirement Income Security Act (ERISA). Read more

Healthcare Power of Attorney (HCPA)

A healthcare power of attorney (HCPA) is a document that legally authorizes someone to make health-related decisions on someone else's behalf. Individuals sometimes become too unwell or unfit to make decisions regarding their healthcare treatments. Read more

Hedge Clause

A hedge clause is a disclaimer found in financial documents that protects a financial reports' authors from liability for errors within the report. A hedge clause simply absolves the authors of wrongdoing in connection with the presented information. Read more

Herfindahl Index

The Herfindahl Index, also known as the Herfindahl-Hirschman Index (HHI), measures the market concentration of an industry's 50 largest firms in order to determine if the industry is competitive or nearing monopoly. The Herfindahl Index formula is calculated by squaring the market share for each firm (up to 50 firms) and then summing the squares. Read more

Holder of Record

A holder of record is the registered owner of a stock, bond or other security. Let's say John Doe buys 100 shares of Company XYZ. Read more

Housing Starts

Housing starts is a measure of new private homes built during a given month.  This statistic is viewed as a key economic indicator reflecting the state of the economy. Homes are usually purchased from a previous homeowner. Read more


Hyperinflation is a period of extremely high inflation. Imagine if $30,000 -- money that could buy you a car today -- was only enough to buy you dinner tomorrow. Read more

Identity Theft

Identity theft is the crime of using another person's personal information, credit history or other identifying characteristics in order to make purchases or borrow money without that person's permission. Let's say John Doe is at work and happens to see some paperwork on a co-worker's desk. Read more


The term impairment refers to assets that are no longer of the same value as in a prior period.An impairment charge is used and the asset is revalued downward and a "charge" is made to net assets. Read more

Implementation Lag

An implementation lag is the time elapsed between an adverse macroeconomic shock and an effort to counter the shock. Let's say the United States experiences a huge increase in unemployment and huge resulting decrease in home sales in January. Read more

Implied Warranty

An implied warranty is an unwritten guarantee that a product or service works as expected. An implied warranty is a lot like an assumption. Read more

Import Duty

In the tax and import/export world, an import duty (or customs duty) is money collected under a tariff. A duty is a federal tax on imports (or exports). Read more

In Specie

In specie is a Latin term describing the provision of an asset in its physical form rather than in the cash value of the asset. Let's say Company XYZ wants to purchase Company ABC for $10 million. Read more


Inchoate is a legal term indicating that a transaction or activity has been discussed or even agreed upon but is not final or is still incomplete. Let's say Company XYZ wants to buy Company ABC. Read more

Inefficient Market

In economic terms, an inefficient market is a market in which securities prices are random and not influenced by past events.The idea is also referred to as weak form efficient-market hypothesis or the random walk theory (coined by Princeton economics professor Burton G. Read more


Something is inelastic when its price does not vary with the price of another item.It the business world, the term most often refers to how little the price of a good or service changes when the supply of that good or service changes. Read more

Infant Industry Theory

Infant Industry Theory promotes an economic policy that protects young industries in less developed economies until they become established, financially stronger, and capable of withstanding competitive pressures. Just as an infant is defenseless and vulnerable upon its entry into the world, young or “infant” industries are weak and vulnerable to a variety of market challenges and economic pressures.  For example, they usually lack a skilled workforce, efficient production processes, experienced managers, and established sales channels and market share even in their own domestic markets. Read more

Inferior Good

An inferior good is a product for which demand goes down as income goes up. As opposed to demand for "normal goods," which goes up as income increases, demand for inferior goods goes down as income increases.  Consumers of inferior goods "trade up" to higher priced goods as soon as they can afford it.Transportation provides a good example. Read more


Inflation is the rate at which prices rise and purchasing power falls.It is why something that cost $1 in 1980 cost $2.37 in 2005. Read more

Initial Jobless Claims

Initial Jobless Claims is a report issued by the U.S.Department of Labor every Thursday at 8:30am EST.  The data in the Initial Jobless Claims report reflect how many people filed for unemployment in the previous week. Read more


Injunctions are an alternative to monetary judgments, in which the court might order a party to pay damages to another party.In some cases, they are much better for defendants to deal with; in Jane's case, the monetary damages could have come with a much higher cost if Donuts and Company alleged that it lost business in Arizona due to Jane's knock-off. Read more

Institute for Supply Management (ISM)

The Institute for Supply Management (ISM) is a professional association for individuals and companies with an interest in supply management. The ISM publishes two important monthly surveys, the Manufacturing ISM Report on Business and the Non-Manufacturing ISM Report on Business.  Both the Manufacturing and Non-Manufacturing ISM Reports include surveys of purchasing and supply executives around the country on topics such as the number of new orders they're placing, production levels, hiring/employment, supplier deliveries, inventories, prices, order backlogs, exports and imports. Read more

Interest Rate

An interest rate is the cost of borrowing money, or conversely, the income earned from lending money.Interest rates are expressed as percentage of the principal per period. Read more

International Monetary Fund (IMF)

The International Monetary Fund (IMF) is the central institution embodying the international monetary system and promotes balanced expansion of world trade, reduced trade restrictions, stable exchange rates, minimal trade imbalances, avoidance of currency devaluations, and the correction of balance-of-payment problems.The IMF's goal is to prevent and remedy international financial crises by encouraging countries to maintain sound economic policies. Read more

Invisible Hand

In The Theory of Moral Sentiments, Adam Smith theorized that as every individual intends to seek out his own gains, he is “led by an invisible hand to promote an end which was no part of his intention.”  What does the invisible hand of the marketplace do?Does it suggest that at all times, there is a higher influence that guides how free markets run? Read more

IPO Lockup

IPO Lockup refers to the period of time after a company initially goes public during which company insiders are not allowed to sell company shares. In an initial public offering (IPO) often receive stock or can exercise options and warrants that have been given during the non-public phase of the company's growth. Read more

IPO Lockup

IPO Lockup refers to the period of time after a company initially goes public during which company insiders are not allowed to sell company shares. In an initial public offering (IPO) often receive stock or can exercise options and warrants that have been given during the non-public phase of the company's growth. Read more

Irrational Exuberance

The phrase irrational exuberance was coined by Alan Greenspan, chairman of the Federal Reserve, in a December 5, 1996, speech to the American Enterprise Institute.In the speech, Greenspan asked, “How do we know when irrational exuberance has unduly escalated asset values which then become the subject of unexpected and prolonged contractions as they have in Japan over the past decade? Read more

Irrational Exuberance

The phrase irrational exuberance was coined by Alan Greenspan, chairman of the Federal Reserve, in a December 5, 1996, speech to the American Enterprise Institute.In the speech, Greenspan asked, “How do we know when irrational exuberance has unduly escalated asset values which then become the subject of unexpected and prolonged contractions as they have in Japan over the past decade? Read more

J Curve

The J curve represents a hypothetical short-term increase in a country's trade deficit that occurs immediately following a decline in the value of its currency. When a country experiences a sustained decline in the value of its currency relative to its trading partners, its import volume (goods and services purchased from outside countries) temporarily exceeds its export volume (goods and services sold to outside countries). Read more

J-Curve Effect

The J-curve effect refers to a "J" shaped section of a time-series graph in which the curve falls into negative territory and then gradually rises to a higher level than before the decline. The J-curve effect is a phenomenon in which a period of negative or unfavorable returns is followed by a gradual recovery that stabilizes at a higher level than before the decline. Read more

Jackson Hole Economic Summit

The annual Jackson Hole Economic Summit focuses on prominent economic issues that face the U.S.along with the rest of the world. Read more

Jackson Hole Economic Symposium

The Jackson Hole Economic Symposium, held in Jackson Hole, Wyoming, is a conference focusing on important economic issues that face the United States and the rest of the world. The Jackson Hole Economic Symposium is also referred to as the Jackson Hole Economic Summit. Read more


A jitney is an illegal scheme in which two brokers trade a stock back and forth in order to increase the trading volume and earn commissions.In some circles, a jitney is also scheme in which a broker performs trades for another broker who does not have access to a certain exchange. Read more

Job Market

The job market is the group of individuals seeking employment within an economy. As with any market, there is a supply and a demand for employment opportunities that directly affects wage and salary levels. Read more

Job Openings and Labor Turnover Survey

The Job Openings and Labor Turnover Survey (JOLTS) is the name of a detailed report on the U.S.job market published each month by the Bureau of Labor Statistics. Read more

Jobless Claims

Jobless claims refer to the unemployment benefits claims filed by unemployed individuals each week. People who have lost their jobs or have been unemployed for some length of time are entitled to relief payments from the federal government. Read more

Jobless Recovery

A jobless recovery refers to a sustained economic upturn accompanied by persistent or increasing unemployment levels. The New York Times first used the term "jobless recovery" in the 1930s to express a span of time during which the economy experiences growth, but the employment level does not. Read more

Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA)

The Jobs and Growth Tax Relief Reconciliation Act of 2003 was a bill passed by the U.S.Congress in 2003 as an economic stimulus measure. Read more

Jobs Growth

Jobs growth is a U.S.economic indicator that represents the number of new jobs created in a given month. Read more

Joint and Several Liability

Joint and several liability means an obligation to make a payment either together or individually. For example, let's say John and Jane Doe buy a car. Read more

Joint Liability

Joint liability refers to the individual and collective obligation of more than one party on a loan. Joint liability is best illustrated by two married people who apply jointly for a credit card to maximize the amount of money they can borrow. Read more

Jointly and Severally

Jointly and severally is a legal phrase that means two or more persons are fully responsible equally for the liability. Jointly means that both parties have joint liability, giving responsibility for the full amount of the obligation to each party.  In this case, for example, if one party dies or declares bankruptcy, the full amount of the obligation falls to the other party.  As such, one or both of the parties can be sued for the full obligation. Read more


A judgment is a court order to pay someone else a sum of money or other remedy. Let's say John Doe owns a pit bull he hasn't trained very well. Read more

Juris Doctor (JD)

A Juris Doctor (JD) is a law degree.The term first came into use in 1969. Read more

K-Percent Rule

The K-percent rule is a monetary theory that states that the Federal Reserve should grow the money supply by a set amount per year ("K percent").Economist Milton Friedman developed the theory. Read more

Katie Couric Clause

A Katie Couric clause was a proposed provision of SEC executive compensation disclosure rules that would have required public companies to disclose compensation paid to several non-executive employees whose total compensation exceeded that of the most highly paid executive officers. The Katie Couric clause is named after former "Today Show" co-host Katie Couric, who, like many media personalities, receive high compensation but are not company officers. Read more

L-Shaped Recovery

An L-shaped recovery refers to substantial losses in economic growth followed by a period of stagnation.Represented graphically, GDP data looks like the letter "L." For example, suppose country ABC experiences a decline in gross domestic product (GDP) from $100 billion to $80 billion between 2002 and 2003. Read more

Labor Intensive

Labor intensive is used to describe any production process that requires higher labor input than capital input in terms of cost. The production of goods and services requires labor and capital in varying amounts, depending on the product. Read more

Labor Market Flexibility

Labor market flexibility is the degree to which a company is able to modify its labor force to maximize productivity. A company is constantly adjusting its labor force via variables like staff size, total productive hours, and wages. Read more

Labor Productivity

Labor productivity measures the hourly productive output for a country's economy during a period of time.  A country's labor productivity is a function of technological innovation, labor resources and capital investment.  The formula for labor productivity is:  Labor Productivity = Total Output / Total Productive Hours  Gross domestic product (GDP) is generally used as the measure of total output.For example, suppose a country's total output for 2010 was $5 trillion. Read more

Labor Theory of Value

The labor theory of value says that the value of a finished good correlates solely with the number of labor hours required to produce it. Economist Adam Smith, the founder of the idea of modern capitalism, first conceived of the labor theory of value in the second half of the 18th century -- the time of the industrial revolution. Read more

Labor Union

A labor union is an organization that advocates for workers' rights and benefits through collective bargaining. Labor unions represent workers in both the public and private sector. Read more

Laffer Curve

The Laffer curve is a graphic representation of the relationship between an increasing tax rate and a government's total revenues.The relationship suggests that revenues decline beyond a peak tax rate. Read more

Lagged Reserves

Lagged reserves are currency reserves banks are required to hold with the Federal Reserve.Lagged reserves must be equal to the sum of all demand deposits from two weeks in arrears.  The United States Federal Reserve regulates the U.S. Read more

Lagging Indicator

A lagging indicator is a financial gauge that becomes measurable only after an economic shift has taken place. There are certain economic indicators that rely on changes in productivity or economic growth. Read more

Laissez Faire

Laissez faire is a capitalist precept that states that market economies function at optimal efficiency in the absence of government regulation. The term laissez faire is French for "leave to do," or more accurately, "leave to be." It was first coined by French economic theorists Dr. Read more

Law of Large Numbers

The law of large numbers states that as additional units are added to a sample, the average of the sample converges to the average of the population. Applied to finance, the law of large numbers implies that the more a company grows, the harder it is for the company to sustain that percentage of growth.  For example, let's assume recently founded Company XYZ has a market capitalization of $10 million. Read more

Law of Supply

The law of supply is the microeconomic theory stating that all else being equal, as the price of a good or service increases, the number of goods or services offered will also increase.The law of supply states that as the price of an item goes up, and thus profit increases, suppliers will attempt to make more profits by increasing the amount produced. Read more

Leading Indicator

A leading indicator is an index, stock, report or other measurement that signals the economy or market's direction in advance.  Popular leading indicators include average weekly hours worked in manufacturing, new orders for capital goods by manufacturers, and applications for unemployment insurance.Lagging indicators include things like employment rates and consumer confidence. Read more


Leakage occurs when money leaves an economy.In the investor relations world, leakage also refers to the unauthorized or unanticipated dissemination of information. Read more

Lender of Last Resort

The term "Lender of Last Resort" refers to financial institutions or individuals that provide credit and/or liquidity to other financial institutions and/or individuals who have exhausted their remaining alternatives for credit or liquidity. There are generally two types of lenders of last resort: (1) financial institutions that provide credit to other financial institutions that require credit to remain solvent for their depositors; (2) institutions or individuals providing credit to individuals, commonly referred to as retail lending. Read more


A levy is the seizure of property in order to repay debt.In the U.S., the IRS has the authority to levy. Read more

Liquidity Trap

Liquidity trap describes the macroeconomic conditions under which interest rates cannot be pushed any lower, rendering monetary policy ineffective.  Named in reference to the associated overabundance of money held in depository savings accounts, a liquidity trap occurs upon the convergence of low interest rates and a widely-held perception of an imminent economic downturn.Consumers, consequently, choose to save their money in depository bank accounts rather than purchase debt securities out of concerns that a subsequent rise in interest rates will reduce the market value of their investment. Read more

Macro Accounting

Macro accounting, also called national accounting, is a method of calculating the economic activity of a country or region. In the United States, federal government agencies typically use macro accounting to calculate employment rates, inflation rates and many other statistics that indicate how the country's economy is faring. Read more

Macro Environment

A macro environment is a wide, broad set of economic conditions rather than the conditions in a specific sector or industry within an economy. The macro environment in the American economy, for example, revolves largely around the business cycle and includes trends in inflation, employment, gross domestic output or other factors that measure and encompass conditions throughout the whole economy. Read more

Macroeconomic Factor

A macroeconomic factor is a characteristic, trend or condition that comes from or applies to a broad aspect of an economy rather than a certain population. Common macroeconomic factors include gross domestic product, the rate of employment, the phases of the business cycle, the rate of inflation, the money supply, the level of government debt, and the short-term and long-term effects of trends and changes in these measures. Read more


Macroeconomics involves the study of aggregate factors such as employment, inflation, and gross domestic product, and evaluating how they influence the economy as a whole. The Great Depression and its resulting high unemployment rate greatly influenced the development of macroeconomics. Read more

Macroprudential Analysis

Macroprudential analysis is analysis of the stability of an economy's financial institutions. In the United States, stress tests are the most common example of macroprudential analysis. Read more

Magnet Employer

A magnet employer is an employer to which people are attracted or especially interested in working for. For example, let's say Company XYZ is located in Anywhere, USA. Read more


Malfeasance is the legal term for intentionally doing something that is illegal. Let's say John Doe is Jane Smith's broker. Read more


A mancession is a situation in which the employment rate of men is lower than the employment rate for women. Let's say the employment rate for women is 95%. Read more

Marital Property

Marital property is property owned by a married couple. Let's say John Doe and Jane Smith get married. Read more


A market is a location where buyers and sellers meet to exchange goods and services at prices determined by the forces of supply and demand. A market may be a physical location or a virtual one over a network (for example, the internet). Read more

Market Basket

A market basket is a group of items that simulate the overall price movements in a market. At an economic level, a market basket is a permanent set of goods and services that are bought and sold as staples in a functional economy. Read more

Market Capitalization Rule

The market capitalization rule is a regulation that places a floor on the total value of a company's stock for 30 consecutive days. The market capitalization rule was established by the New York Stock Exchange (NYSE) in 2004. Read more

Market Cycles

Market cycles are the periods of growth and decline in a market, sector or industry. In a quantitative sense, market cycles are visible in price movements that rise, fall, and return to their point of origin. Read more

Market Discipline

Market discipline refers to the obligation by banks and financial institutions to manage their stakeholders' risk in the course of their day-to-day operations. Banks and other financial institutions assume some level of risk with each loan they disburse. Read more

Market Disruption

A market disruption is a sharp, rapid weakening of market performance in response to external forces. A market disruption often occurs as a result of an event or group of events that are widely perceived as economically detrimental. Read more

Market Distortion

A market distortion occurs as a result of a government's involvement in a market through monetary or fiscal policies. Governments frequently intervene in a country's economy and implement policy measures. Read more

Market Dynamics

Market dynamics are the interaction of supply and demand as the basis for setting prices. A fundamental concept of macroeconomics is the relationship between supply and demand as the principle forces behind the price of goods and services. Read more

Market Economy

A market economy is structured to allow market forces to determine prices with little or no government involvement. In theory, a market economy's functions are based on fluctuations in supply and demand for specific goods and services across an entire market. Read more

Market Failure

A market failure occurs when the supply of a good or service is insufficient to meet demand.This results in an inefficient distribution of resources among market participants. Read more

Market Indicators

Market indicators are quantitative factors that predict the future behavior of market indices. Market indicators are used in technical analysis to forecast market trends. Read more

Market Jitters

Market jitters refers to apprehension among buyers and sellers resulting in choppy and unpredictable market performance. Unfavorable news regarding economic indicators, earnings reports, interest rates, etc. Read more

Market Out Clause

A market out clause is a provision that allows an underwriter to withdraw from a stock underwriting contract. When an investment bank serves as an underwriter for an initial public offering (IPO), it has a contract with the issuing company to market and sell new shares of stock to investors in the primary market. Read more

Market Penetration

Market penetration is the percentage of a target market that consumes a product or service.Market penetration can also be a measure of one company's sales as a percentage of all sales for a product. Read more

Market Performance Committee

The Market Performance Committee is responsible for maintaining effective and organized trading operations on the New York Stock Exchange (NYSE). The Market Performance Committee consists of several members of the NYSE who closely observe the performance of trading specialists for individual stocks. Read more

Market Power

Market power refers to a single company's ability to control the market price of a good or service. The macroeconomic concept of perfect competition assumes that no one producer can set a price for the whole market. Read more

Market Price

Market price is the price of an asset or product as determined by supply and demand. In the broadest sense, an item's market price lies at the point of intersection between the available supply of the good or service and market demand for it. Read more

Market Saturation

Market saturation is the maximum sales volume for a product or service under current market conditions assuming a constant level of demand. When the number of units of a given product or service has leveled off, resulting in a decline in further sales, that product or service has reached its market saturation. Read more

Market Segment

A market segment is a discrete group of individuals who bear a number of similar characteristics. A market segment is characterized as a homogeneous population within a given market whose members display similar responses to certain stimuli and bear distinct social, cultural, and economic features. Read more

Market Segmentation Theory

Market segmentation theory posits that the behavior of short-term and long-term interest rates are mutually exclusive. Market segmentation theory suggests that the behavior of short-term interest rates is wholly unrelated to the behavior of long-term interest rates. Read more

Market Surveillance

Market Surveillance is a unit of the NASDAQ stock exchange whose function is to ensure that all trading is conducted in a compliant manner. The Market Surveillance unit of the NASDAQ stock exchange is responsible for monitoring trading activity. Read more

Material Insider Information

Material insider information is material, nonpublic information about a security or its issuer.Information is material if it might reasonably influence the users of the issuer’s financial statements. Read more

Mature Industry

A mature industry has passed the rapid growth stage and has an established pattern of market share, earnings, and profits. All industries pass through various stages of growth, stability and decline. Read more


The mean is the average of a series of numbers.  The formula for calculating a mean is: Mean = (X1 + X2 + X3 + ...+XN) / N where X1, X2, X3, XN are the values of the observations being averaged and N equals the number of observations Let's assume that you would like to find the mean price of Company XYZ for the last four years. Read more

Mean Reversion

Mean reversion is the theory that interest rates, security prices, or various economic indicators will, over time, return to their long-term averages after a significant short-term move. Mean reversion is a strategy practiced by many quantitative hedge funds and day traders, and can be a self fulfilling prophecy. Read more

Mergers & Acquisitions (M&A)

Mergers & acquisitions (M&A) refer to the management, financing, and strategy involved with buying, selling, and combining companies. A merger or an acquisition usually starts out with a series of informal discussions between the boards of the companies, followed by formal negotiation, a letter of intent, due diligence, a purchase or merger agreement, and finally, the execution of the deal and the transfer of payment. Read more

Mineral Rights

Mineral rights are a landowner's rights regarding natural resources located on his or her land. When an individual buys or owns a piece of land, there is the possibility that the land may contain valuable minerals and or natural resources like precious metals (for example, gold and silver), iron ore or oil. Read more


A mini-tender is an offer from an outside buyer for up to 5% of a company's stock. In a traditional tender offer, a company offers to repurchase shares of stock from its investors at a certain price per share. Read more

Minimum Wage

Minimum wage is the lowest hourly amount an employer may legally pay an employee.In the United States, the amount varies from state to state. Read more

Minimum-Interest Rules

Minimum-interest rules are federal regulations requiring that all loans bear interest. Many companies and individuals make loans. Read more

Minsky Moment

A Minsky moment refers to a sharp decline in prevailing market sentiment and economic productivity after a long period of widespread optimism. Times of robust economic growth, like that experienced by the U.S. Read more


Monetarism is a well-known macroeconomic school of thought developed by Milton Friedman. The Great Depression and its resulting high unemployment greatly influenced the development of macroeconomics. Read more

Monetary Policy

Monetary policy is the means by which the Federal Reserve manipulates the U.S.money supply in order to influence the U.S. Read more


Money is a medium of exchange for goods or services within an economy. Philosophically, anything can be money, but coins and paper notes are the most generally accepted forms. Read more


A monopoly is a market environment where there is only one provider of a certain economic good or service. For a true monopoly to be in effect, each of the following characteristics would typically be evident: A sole provider of a viable product or service. Read more

Mortgage Forbearance Agreement

A mortgage forbearance agreement is a contractual arrangement between a mortgage lender and a borrower to help the borrower catch up on payments when he/she is behind schedule. A borrower makes monthly payments of principal and interest over the term of the mortgage (usually 30 years). Read more

Mortgage Fraud

Mortgage fraud refers to an applicant's untruthful representation of information on a mortgage application. Mortgage applications ask for a variety of details concerning an applicant's financial position. Read more

Mortgage Putback

A mortgage putback is a mandatory buyback of a mortgage by its original lender. Once a lender completes a mortgage, the lender often sells it to another investor in the secondary mortgage market. Read more

Nakahara Prize

The Nakahara Prize is an award from the Japanese government to Japanese economists under age 45 who have made significant contributions to the world of economics. The board of directors of the Japanese Economic Association determines who wins the Nakahara Prize, which was first awarded in 1995. Read more

Named Fiduciary

A named fiduciary is a person or entity responsible for managing a qualified retirement plan in accordance with the Employee Retirement Income Security Act (ERISA). For example, let's say Company XYZ gets a 401(k) plan. Read more

Narrow Moat

Narrow moat refers to the size of a company's competitive advantage.The term is an adaptation of the term "economic moat." Long ago, castles were traditionally part city and part defensive fortress. Read more

Narrow Money

Narrow money is a colloquial term for the total of a country's physical currency plus demand deposits and other liquid assets held by the central bank.The economic term for narrow money is M1. Read more

NASD Rule 2790

NASD Rule 2790 is a rule prohibiting FINRA members from buying IPO shares for personal gain.The rule is now just called Rule 2790, because NASD became FINRA in 2007. Read more

Nash Equilibrium

In economics, a Nash equilibrium occurs when two companies in a duopoly react to each other's production changes until their prices reach an equilibrium.The term is named after John Nash, who is an American mathematician who won the Nobel Prize in Economics in 1994. Read more

National Accounting

National accounting, also called macro accounting, is a method of calculating the economic activity of a country or region. In the United States, federal government agencies typically use national accounting to calculate employment rates, inflation rates and many other statistics that indicate how the country's economy is faring. Read more

National Association of Securities Dealers (NASD)

The National Association of Securities Dealers (NASD) was a regulatory organization that oversaw the securities industry.The Financial Industry Regulatory Authority (FINRA) superseded NASD in 2007. Read more

National Bank

A national bank is a bank that is a member of the Federal Reserve system and the Federal Deposit Insurance Corp. In global terms, a national bank is a country's central bank. Read more

National Bank Surveillance System

The National Bank Surveillance System is a computer system that collects financial information about banks. The U.S. Read more

National Bureau of Economic Research (NBER)

The National Bureau of Economic Research (NBER) is a private, nonprofit, nonpartisan research organization that studies the economy. Founded in 1920, the NBER undertakes and distributes unbiased economic research to public policymakers, business professionals and the academic community. Read more

National Credit Union Administration (NCUA)

The National Credit Union Administration (NCUA) is an agency of the United States government that charters and oversees federal credit unions.It was created by Congress in 1970. Read more

National Currency

A national currency is simply the currency issued by a country's central bank.Currency is a medium of exchange for goods or services within an economy. Read more

National Income Accounting

National income accounting is a government accounting system to measure economic activity. For example, national income accounting measures the revenues earned in the nation's companies, wages paid, or tax revenues. Read more

National Savings Rate

The national savings rate is the percentage of gross domestic product that households, governments and businesses save rather than spend. There are only two things to do with money: spend it or save it. Read more

Natural Unemployment

Natural unemployment is the level of unemployment always present in an economy as industries expand and contract, as technological advances occur, as new generations enter the labor force and as workers voluntarily search for better opportunities. The unemployment rate measures the percentage of employable people in a country's workforce who are over the age of 16 and who have either lost their jobs or have unsuccessfully sought jobs in the last month and are still actively seeking work. Read more

Negative Amortization Limit

A negative amortization limit is a clause in a loan that restricts the amount of negative amortization that can occur during the contract. Negative amortization occurs when the principal balance on a loan (usually a mortgage) increases because the borrower's payments don't cover the total amount of interest that has accrued. Read more

Negative Authorization

Negative authorization is the term for a credit card system that approves or disapproves a credit card transaction based on whether the card appears on lists of stolen, canceled, closed, or lost account numbers. For example, let's assume John purchases $200 worth of widgets at Sears. Read more

Negative Carry

Negative carry means that the price of borrowing money is higher than the returns earned on borrowed money.It is the opposite of positive carry. Read more

Negative Float

Negative float is the amount of time between when a person writes a check and when that check clears the account. In banking, the formula for negative float is: Negative Float = Account's Ledger Balance - Account's Available Balance For example, let's assume John has $1,000 available in his checking account today. Read more

Negative Growth

In economics, negative growth usually refers to shrinking gross domestic product (GDP). For example, if the United States' GDP falls from $14.4 trillion to $14.1 trillion, we would say that the U.S. Read more

Negative Verification

Negative verification is a bank method for verifying bank records. For example, let's assume Bank XYZ is performing an internal audit of the computer system that generates customers' monthly bank statements. Read more


Negotiable refers to an item that can be sold or transferred to another party as a form of unconditional payment.Negotiable also means that the terms of an agreement can be adjusted. Read more

Negotiable Instrument

A negotiable instrument is a signed document that gives the bearer of the document permission to obtain a certain amount of money.   Checks are the most common negotiable instrument. Read more

Nellie Mae

Nellie Mae is a subsidiary of Sallie Mae (SLM), the largest originator, funder and servicer of student loans in the United States.Specifically, it is responsible for originating Federal Stafford Loans, PLUS loans, consolidation loans and private loans for students and parents. Read more

Net Borrowed Reserves

Net borrowed reserves are a measure of the difference between what a bank has borrowed from the Federal Reserve and the cash reserves it holds above the required minimum.The opposite of net borrowed reserves is free reserves. Read more

Net Debt Per Capita

Net debt per capita is a government's total debt (less cash on hand) per person.  The formula for net debt per capita is: Net Debt per Capita = (Short-Term Debt + Long-Term Debt - Cash and Cash Equivalents) / Population For example, let's assume that Country XYZ has $100 billion in short-term debt, $400 billion in long-term debt, $10 billion in cash and cash equivalents, and 250 million people.According to the formula, Country XYZ's net debt per capita is: Net Debt Per Capita = ($100 billion + $400 billion - $10 billion)/250,000,000 = $1,960 Net debt per capita is a measure of a government's ability to repay its debts if they were all due today. Read more

Net Domestic Product (NDP)

Net domestic product (NDP) represents the net book value of all goods and services produced within a nation's geographic borders over a specified period of time. Gross domestic product (GDP) is the broadest quantitative measure of a nation's total economic activity. Read more

Net Exporter

A net exporter is a country that sells more to other countries than it buys from other countries.Countries are often net exporters in some industries (natural gas, for example) but net importers in others. Read more

Net Exports

Net exports are the difference between a country's total value of exports and total value of imports.Depending on whether a country imports more goods or exports more goods, net exports can be a positive or negative value. Read more

Net Free Reserves

Net free reserves is a measure of how much cash a bank holds above the Federal Reserve's required minimum.The opposite of net free reserves is net borrowed reserves. Read more

Net Importer

A net importer is a country that buys more from other countries than it sells to other countries.Often, countries are net importers in some industries (natural gas, for example) but net exporters in others. Read more

Net Interest Rate Spread

In banking, the net interest rate spread is the difference between interest earned on loans, securities, and other interest-earning assets and the interest paid on deposits and other interest-bearing liabilities. For example, let's assume XYZ Bank earned a weighted-average interest rate of 5% on its assets and paid a weighted-average interest rate of 3% on its liabilities. Read more

Net Lending

Net lending is an economic measure of whether governments are either providing financial resources to other sectors of the economy or using resources from other sectors of the economy (the latter is called net borrowing). The formula for net lending is: Net Lending = Revenue - Expenditures Or, more precisely: Net Lending = (Net Savings + Net Capital Transfers) - (Value of Acquisitions - Disposed Nonfinancial Assets - Fixed Capital Used) In the simplest terms, if a government receives $1 trillion in revenue and has $250 billion in expenditures, it is a net lender of $750 billion. Read more

Net National Product (NNP)

Net national product (NNP) is the market value of a nation's goods and services minus depreciation (often referred to as capital consumption). The formula for NNP is: NNP = Market Value of Finished Goods + Market Value of Finished Services - Depreciation Alternatively, NNP can be calculated as: NNP = Gross National Product - Depreciation Let's assume Country XYZ's companies, citizens and entities produce $1 trillion worth of goods and $3 trillion worth of services this year. Read more

Neutrality of Money

The neutrality of money is a theory stating that changes in the money supply only affect prices and wages rather than overall economic productivity. For example, when the Federal Open Market Committee (an agency within the Federal Reserve) purchases U.S. Read more

New Economy

The new economy refers to the convergence of manufacturing, services and technologies to produce high value-added, technology-enabled, and adaptable industries. Industry trends have always adapted to changes in technologies, incorporating and often initiating changes to improve productivity, quality, and profitability. Read more

New Paradigm

A new paradigm is a new logical framework for understanding a situation.In the financial markets, a new paradigm refers to the shift in the underlying economic rules and factors that affect the markets. Read more

New York Clearing House Association

The New York Clearing House Association, founded in 1853, is the country's first and largest bank clearing house.The Clearing House was created to streamline the bank settlement process, which had grown convoluted during America's "Expansionist" period of unregulated capitalism. Read more

Nominal Value

Also referred to as face value or par value, nominal value is the value shown on the face of a security certificate or instrument, including currency.The concept most commonly applies to stocks and bonds but is especially important to bond and preferred stock investors. Read more


A nominee is a person or entity that takes possession of securities or other assets for the purpose of making transactions on behalf of the owner of the securities or other assets. For example, let's say that John Doe owns several positions in about 200 companies in his brokerage account. Read more

Non-Accredited Investor

A non-accredited investor is an individual or organization that does not meet the description of a "sophisticated" investor as defined by the Securities and Exchange Commission. According to the Securities Act of 1933, a person or entity must meet any of the following criteria to be deemed an accredited investor: An accredited investor can be a bank, insurance company, registered investment company, business development company or small-business investment company. Read more


The descriptors "exempt" and "non-exempt" are used to describe different categories of employees as defined by the Fair Labor Standards Act (FSLA) according to US Federal employment law.Typically, a non-exempt employee is an hourly wage earner who is entitled to overtime pay at a rate of 1.5 times the usual hourly rate. Read more


Non-negotiable refers to something that cannot be bought, sold, exchanged or transferred.Non-negotiable also can refer to a term or condition that is not open to negotiation. Read more

Nonfarm Payrolls

Nonfarm payrolls is an economic indicator released by the Department of Labor on the first Monday of each month at 8:30am EST.The data reflect the change in nonfarm payrolls from the previous month. Read more

North American Free Trade Agreement (NAFTA)

The North American Free Trade Agreement (NAFTA) is an agreement among the United States, Canada and Mexico designed to remove tariff barriers between the three countries. NAFTA was implemented on January 1, 1994, and supersedes the U.S.-Canada Free-Trade Agreement (CFTA) that took effect on January 1, 1989. Read more


To notarize means to have a notary affix his or her seal and signature to a document signifying that he or she witnessed the signing of the document. For example, when John and Jane Doe buy a house, they must sign the closing paperwork that makes them responsible for a large mortgage, title insurance and other responsibilities. Read more


Notaries are important people because they give documents legal weight.Notaries are commonly involved in the creation of wills, trusts, deeds and powers of attorney. Read more


Obamanomics refers to the economic policies of former United States President Barack Obama. In general terms, the primary focus of Obamanomics was economic stimulation in the wake of recession. Read more


An obligation is a legal requirement to fulfill a responsibility.In the finance world, this often involves making specific payments by specific dates and/or ensuring that a company meets certain performance requirements. Read more


An obligor is a person or entity legally required to provide a payment, service, or other benefit to another person or entity (the obligee). Companies that issue bonds are perhaps the most well-known obligors. Read more

Occupancy Fraud

Occupancy fraud occurs when a mortgage borrower lies to a bank about his or her intention to occupy the home that he or she is purchasing with the mortgage. For example, let's say John lives in Denver. Read more

Occupational Labor Mobility

Occupational labor mobility is the ease with which a workforce can switch industries, retrain for new jobs and transfer to other sectors. For example, consider ice delivery or typewriter repair. Read more


An offer is a communication of interest in buying or selling an asset.In other contexts, it might refer to the act of making something available for sale. Read more

Offering Memorandum

An offering memorandum is a legal document that discloses the terms, conditions, risks, and other information about a private placement.It is not the same thing as a prospectus (those are for issuances of publicly-traded securities). Read more

Office of the Comptroller of the Currency (OCC)

The Office of the Comptroller of the Currency (OCC) is a division of the U.S.Treasury. Read more

Office of Thrift Supervision (OTS)

The Office of Thrift Supervision (OTS) was a regulatory agency that provided oversight to thrift institutions.On July 21, 2011, the OTS became part of the Office of the Comptroller of the Currency (OCC). Read more

Official Settlement Account

An official settlement account is an account that records transactions of foreign exchange reserves, bank deposits and gold at a central bank. For example, the Federal Reserve uses official settlement accounts to keep track of its transactions in gold, dollars or other assets with other countries' central banks. Read more

Official Staff Commentary

An official staff commentary is a set of written answers from the Federal Reserve or the Treasury department regarding various interpretations and regulatory guidance on a myriad of topics. The Federal Reserve provides official staff commentaries when addressing new regulations and interpretations of regulations and offering guidelines to consumers and institutions. Read more

Okun's Gap

Okun's gap occurs when a country's actual gross domestic product differs from its predicted gross domestic product when applying Okun's law. Named after economist Arthur Okun, Okun's law states that for every 1% increase in the employment rate, gross domestic product increases 3%. Read more

Okun's Law

Named after economist Arthur Okun, Okun's law states that for every 1% increase in the employment rate, gross domestic product increases 3%. Let's say the unemployment rate decreases by 2% (that is, employment increases by 2%). Read more

Old Economy

Old Economy describes an economy or even a group of industries that does not rely on technology or technological advancement.   For example, horse farms, bread baking, landscaping and prostitution are old economy industries. Read more


An oligopoly is an economic market whereby a small number of companies or countries generate and control the entire supply of a good or service. Let's assume that Company XYZ, Company ABC, and Company 123 produce 95% of the country's carrots. Read more


An oligopsony is a market in which only a few buyers purchase all of an industry's output. Let's assume that Company XYZ, Company ABC and Company 123 buy 95% of the country's carrots. Read more

One-Stop Shop

A one-stop shop is a single location where all of the needed services for a particular activity are provided. One-stop shopping is a popular concept for packaging products and service oriented businesses. Read more

Organization for Economic Cooperation and Development (OECD)

The Organization for Economic Cooperation and Development (OECD) is an international economic forum that pursues cooperative approaches to common issues affecting individual members as well as the global community. The OECD was formed in 1948 as part of the plan to rebuild Europe following the Second World War, known as the Marshall Plan. Read more

Overnight Rate

The overnight rate is the interest rate banks charge each other on loans for meeting reserve requirements.The overnight rate is frequently confused with the discount rate, which is the interest rate the Federal Reserve charges on loans from the Federal Reserve Bank, but they are different rates. Read more

Pale Recession

A pale recession is a term describing a recession that does not have much impact on an economy. Former Federal Reserve Chairman Alan Greenspan coined this term in a 2008 television interview. Read more

Paper Money

Paper money is a medium of exchange for goods or services within an economy.It is printed on paper, rather than in coin form. Read more

Paradox of Thrift

The paradox of thrift is an economic theory that states that the more people save, the less they spend and thus the less they stimulate the economy. Developed by economist John Maynard Keynes, the paradox of thrift works this way: Assume everybody receives $1,000 of income. Read more

Parallel Shift

A parallel shift in the yield curve occurs when the interest rates among bonds (or T-Bills) with different maturity dates change at the same rate. For example, if the yield on a five-year Treasury increases by five basis points, then the yields on all other Treasuries also increase by five basis points. Read more


Pari-passu is a latin term that means "at an equal rate or pace." The term is often used in venture capital. Let's assume Company XYZ is looking for $10 million of capital. Read more

Paris Club

The Paris Club is slang for 19 developed countries who meet in Paris to discuss issues with nations to which they have lent money. The Paris Club has several members, including the United States, United Kingdom, Japan, Belgium, Canada, France, Germany, Italy, Netherlands, Sweden, Switzerland and Russia. Read more

Participation Rate

Participation rate usually refers to the portion of the economy's working age population that is in the civilian labor market. The participation rate measures the number of people who are in the labor force who are working, willing to work, or are actively looking for work.  It is the ratio between the active labor force and the overall size of the potential labor force (i.e. Read more

Patent Troll

A patent troll is a person or company whose main business purpose is to sue other people or companies for patent infringement. For example, John Doe buys a patent for the design and manufacture of a flat, rotating disc used to hold objects on a countertop or other flat surface. Read more

Per Capita

Per capita measures help analysts and investors get a better feel for whether a company, country, or other entity is productive, efficient, or profitable.For instance, the per capita measure of GDP indicates whether the country’s workforce is generally becoming more or less productive – that is, whether the country’s workforce is efficiently producing goods and services that consumers want. Read more

Permanent Open Market Operations (POMO)

Permanent open market operations (POMO) are used by the Federal Reserve to either add to or drain the capital reserves available in the banking system. If the Federal Reserve wants to increase the amount of capital available to the banking system, it will buy Treasury securities from banks in exchange for Federal Reserve Notes (aka, cash dollars). Read more

Personal Consumption Expenditures (PCE)

Personal Consumption Expenditures (PCE), or the PCE price index, is a statistic compiled and released quarterly by the U.S.Bureau of Economic Analysis (BEA) that synthesizes a host of data, chief among them the U.S. Read more

Personal Income and Outlay Report

The Personal Income and Outlay report is compiled by the U.S.Department of Commerce. Read more

Phillips Curve

The Phillips curve refers to the theory that unemployment rates relate inversely to inflation rates. Proposed by British economist A. Read more


A plutocracy is a system of government where the wealthiest people in a country rule or possess the power, and thus govern directly or indirectly.Plutocracy is often linked to the term “dynastic wealth.”  A plutocracy may not be the result of a planned system of government. Read more

Pork Barrel Spending

Pork barrel spending is a type of appropriated expenditure that is added into a non-related Congressional bill.  Pork barrel spending may also be referred to as earmarking.The Oxford English dictionary differentiates pork barrel spending from normal appropriation spending as government funded projects "designed to please... Read more

Predictive Indicator

A predictive indicator is a ratio, index, report or other measurement that signals a company or market's direction in advance.  The business cycle has highs and lows.That's why predicting what's around the corner is one of the best (but most difficult) ways to protect and grow portfolios. Read more

Preemptive Rights

Preemptive rights are a clause in an option, security or merger agreement that gives the investor the right to maintain his or her percentage ownership of a company by buying a proportionate number of shares of any future issue of the security. Preemptive rights are sometimes called "subscription rights," "anti-dilution provisions," or "subscription privileges." Preemptive rights are particularly relevant for convertible preferred stock. Read more

Price Ceiling

A price ceiling is the maximum price a seller can legally charge a buyer for a good or service.Regulators usually set price ceilings. Read more

Price Creep

Price creep refers to a gradual increase in the price of a good or service. Price creep usually occurs because production costs have increased. Read more

Price Discovery

Price discovery refers to the act of determining the proper price of a security, commodity, or good or service by studying market supply and demand and other factors associated with transactions. In a simple sense, price discovery involves finding where supply and demand meet. Read more

Price Discrimination

Price discrimination is the act of charging different customers different prices for the same good or service. A common example of price discrimination is ladies' night: men must pay full price for drinks at the bar, but women pay only 50% of the regular price. Read more

Price Elasticity of Demand (PED)

Price elasticity of demand (PED) is a way to measure the change in the demand for a product or service in response to a change in its price.With most goods, an increase in price will lead to a decrease in demand, and a decrease in price will lead to an increase in demand. Read more

Price Improvement

Price improvement is the often unexpected event of obtaining a better bid or ask price than the price quoted at the time the buy or sell order is made. For example, assume you own 1,000 shares of Company XYZ. Read more

Price Inflation

Price inflation is simply an increase in the price of a good or service over time. The consumer price index (CPI) is the most common measure of price inflation. Read more

Price Leadership

Price leadership is the act of setting the price for a good or service in an industry. Let's assume that Company XYZ manufactures windshield wipers. Read more

Price Maker

In economics, a price maker is a monopolistic company that can dictate the prices of its goods because there are no substitutes for it.In trading, a price maker is a stockholder who controls a large number of shares and is able to affect the stock's price. Read more

Price Rigging

Also known as collusion or price fixing, price rigging occurs when a group of people or businesses agree to set the price for something.  In the stock market, traders with inside information might conspire to work together on trades in order to benefit from the inside information.Likewise, sellers might inflate the price of an asset to realize more profits. Read more

Price Sensitivity

In consumer behavior, price sensitivity (also called the elasticity of demand) is the degree to which price affects the sales of a product or service. Thus, the formula for price sensitivity is:Price Sensitivity = % Change in Quantity Purchased/% Change in Price In the bond world, duration is a measure of a bond’s price sensitivity to changes in interest rates. Read more

Price Stickiness

Price stickiness refers to the price persistence of a good, service, security or economic measure (like wages) despite changing economic conditions. Prices can be sticky on the way up or sticky on the way down, meaning that they move in one direction easily but require great effort to move in the other direction.  Wages are a good example of price stickiness. Read more

Price War

A price war is an event whereby two or more companies continually lower prices to undercut each other. Airline companies are famous for their price wars. Read more

Price-Level Targeting

Price-level targeting is an economic strategy whereby a central bank tries to reestablish an overall price level rather than reestablish a particular inflation rate. For example, let's assume that inflation is usually 4% per year in the United States, but then it drops to 1% per year. Read more

Priced Out

"Priced out" refers to something being too expensive.Alternatively, priced out refers to the adjustment in a security's market price in response to new information. Read more

Pricing Power

Pricing power is the effect the price of a good or service has on the demand for that good or service. For example, a company that manufactures a pill that cures cancer has a lot of pricing power: the demand for the pill will probably change very little if the price goes up. Read more

Primary Downtrend

When financial assets and markets -- as with the broader economy -- fall steadily for an extended period of time, it is known as a primary downtrend, or "bear market." A primary downtrend is when each successive decline of the primary trend carries the market to lower lows and lower highs, lasting from several months to several years.This is illustrated in Figure 1 below. Read more

Primary Uptrend

When financial assets and markets -- as with the broader economy -- move in an upward direction for extended periods of time, it is known as a primary uptrend, or “bull market.” A primary uptrend is when each successive advance of the primary trend peaks and troughs higher than the one preceding it, and can last from several months to several years.This is illustrated in Figure 1 below. Read more

Private Placement

A private placement is an offering of securities that is not registered with the U.S.Securities and Exchange Commission (SEC) Companies issuing stock in the U.S. Read more

Pro Bono

Pro bono refers to any work or service that someone provides free of charge for the common good. From the Latin phrase "pro bono publico" meaning "for the public good," the motivation behind pro bono work is to benefit society as opposed to making money. Read more


Procurement is a purchasing process that controls quantity, quality, sourcing and timing to ensure the best possible total cost of ownership. Procurement may be a simple purchasing arrangement with a supplier. Read more

Producer Price Index (PPI)

The Producer Price Index (PPI) is used to measure the change over time of the average price of goods produced domestically. The producer price index consists of a weighted index of goods prices at wholesale. Read more


Productivity refers to the measure of output (e.g.products) from a production process per unit of input (e.g. Read more

Proxy Statement

A proxy statement is the common name for the Securities and Exchange Commission (SEC) Form 14-A.It is the document containing the voting ballot and material information related to the propositions to be determined. Read more

Purchasing Power

Purchasing power is a phrase to describe the quantity of goods or services that a dollar can buy.A decrease in purchasing power is called inflation. Read more

Qualified Eligible Participant (QEP)

A qualified eligible participant (QEP) is a person who is allowed to trade in investment funds as defined in Rule 4.7 of the Commodity Exchange Act. In order to be a QEP, a person must own at least $2,000,000 of securities and other investments, have an open account with a futures commission merchant for at least six months, have at least $200,000 of initial margin and option premiums for commodity interest transactions and have a portfolio of those investments. Read more

Qualified Exchange Accommodation Arrangements

Qualified exchange accommodation arrangements are a strategy to simplify and assist with real estate exchanges made under Section 1031. For example, let's assume that John wants to sell his commercial property for $600,000. Read more

Qualified Institutional Buyer (QIB)

A qualified institutional buyer (QIB or QUIB) is a company that manages at least $100 million of securities on a discretionary basis or is a registered broker-dealer investing at least $10 million in non-affiliate securities. A QIB can be an insurance company, a bank, a 401(k) plan, an employee benefit plan, a trust fund, a business development company (BDC), a charity, or even an entity owned by qualified investors. Read more

Qualified Institutional Placement (QIP)

A qualified institutional placement (QIP) occurs when the Securities and Exchange Board of India (SEBI) allows an Indian company to issue securities in India without providing preliminary filings regarding the issue. QIPs are similar to private placements in the United States. Read more

Quantitative Easing (QE)

Quantitative easing (sometimes abbreviated "QE") is a strategy used by a central bank -- like the Federal Reserve -- to add more money to that which is in circulation. The premise (which is largely theoretical and untested) is that if money supply is increased faster than the growth rate of Gross Domestic Product (GDP), the economy will grow. To understand the rationale behind the strategy, it helps to look at the basic relationship among GDP, money supply and the velocity of money. Read more

Quantity Theory of Money

The quantity theory of money argues that the size of the money supply influences the price of goods. The quantity theory of money (sometimes called QTM) says that prices rise when there is more money in an economy and they fall when there is less money in an economy. Read more

Quarterly Services Survey

The Quarterly Services Survey is an estimate of the operating revenue by customer class for communications firms, IT firms, hospitals and nursing services providers.   The Census Bureau administers the Quarterly Services Survey every quarter for companies in NAICS sectors 51, 54 and 56, and subsectors 622 and 623. Read more

Quiet Filing

A quiet filing is an IPO filing that intentionally excludes certain information. When a company is getting ready to go public, it files an SEC Form S-1, which is also called a prospectus. Read more


When most people think of racketeering, thoughts of 1930s mobsters come to mind.Gangs of this time period are often associated with organized crime and operating “rackets” to illicitly earn and move money throughout criminal networks.  Today, racketeering takes place through complex operations which may crossover from physical to digital, while law enforcement actively pursues these illegal enterprises. Read more


Reaganomics is a reference to U.S.president Ronald Reagan's economic policies between 1981 and 1989. Read more

Real Estate Settlement Procedures Act (RESPA)

The Real Estate Settlement Procedures Act, abbreviated as RESPA, is a federal ordinance that was established by the U.S.Department of Housing and Urban Development (HUD). Read more

Real GDP

Real gross domestic product, or real GDP, is a measure of the value of all goods and services produced by an economy in a period.Because the value is adjusted for inflation it can separate out the effects of changes in price levels and can provide a more detailed measure of economic productivity growth. Read more

Real Income

Real income is inflation-adjusted income or wages. For example, let's say John Doe works for Company XYZ. Read more


A recession is two consecutive quarters of declining gross domestic product (GDP) Let's assume that there has been a significant decline in industrial production, employment, and wholesale or retail trade.These things may cause GDP to decline for a three-month period (a quarter). Read more

Recession Resistant

A stock or other investment is recession resistant when it tends to rise in value when the economy falters (and the markets falter with it).Recession-resistant investments are usually countercyclical, meaning they tend to move in opposition to the overall business cycle. Read more

Red Herring

A red herring is a registration statement filed with the Securities and Exchange Commission (SEC) by a company that intends to make a public equity offering.The red herring is a rough draft of the company's prospectus and includes a description of the company's business, financial condition, strategy, management, litigation and risk factors. Read more

Registered Investment Advisor (RIA)

A Registered Investment Advisor (RIA) is an investment manager who is registered with the Securities Exchange Commission (SEC) and who must comply with SEC regulations. An investment manager who is an RIA has not necessarily completed a level of education that qualifies him or her to provide a higher level of service. Read more

Regulation DD

Regulation DD is a directive created by the Federal Reserve.It was enacted to fulfill the Truth in Savings Act (TISA) that was passed in 1991, which requires lenders to provide accurate information about fees and interest to account holders when they begin banking with that institution. Read more

Regulation Fair Disclosure (Reg FD)

Regulation Fair Disclosure (Reg FD) requires all publicly traded companies to disclose material information to all investors simultaneously. The Securities and Exchange Commission (SEC) issued a ruling in 2000 requiring publicly traded companies to disclose important information pertaining to the business finances, market, competition, and principals (i.e. Read more

Regulatory Data

Regulatory data is information that must be provided by a company to a regulatory agency.  Protecting consumers is the main rationale offered by governments looking to regulate economic activity, and they try to do so in two primary ways.The first is by preventing market failures. Read more


Rescission is the cancelling of a contract so that it is no longer legally binding.A court can release parties from any obligations under the contract and revert them to their positions before the contract was executed. Read more

Reserve Ratio

The reserve ratio is the percentage of deposits that the Federal Reserve requires a bank to keep on hand at a Federal Reserve Bank. For example, let's assume that Bank XYZ has $400 million in deposits. Read more

Reserve Requirements

Reserve requirements are Federal Reserve rules that require banks and other financial institutions to keep a strict percentage of their deposits on reserve at a Federal Reserve bank.The Federal Reserve determines the appropriate percentage. Read more

Right of First Refusal

Right of first refusal grants the terms of a transaction to one party to determine if they are interested (i.e., the holder of the right of first refusal) before it is given to a third party. Right of first refusal is a contractual term giving its holder the option to buy or sell something before the owner is allowed to buy or sell the same item to a third party. Read more

Routing Number

A routing number is a exclusive identification number assigned to banking institutions by the American Bankers Association (ABA). For those banks and banking institutions that qualify as account holders with the Federal Reserve, the ABA assigns a routing number for identification. Read more


A run occurs when a flood of depositors withdraw their funds from a bank within a short time frame. It’s important to remember one thing about banks: They don’t keep your money in cash in a vault. Read more

Sacrifice Ratio

A sacrifice ratio measures the costs of lower economic production as a percentage of the change in inflation. The formula for the sacrifice ratio is: Sacrifice Ratio = Dollar Cost of Production Losses/Percentage Change in Inflation Let's say the economy is slowing and factory output has slowed down as a result. Read more

Sarbanes-Oxley Act (SOX)

The Sarbanes-Oxley Act, officially named the Public Company Accounting Reform and Investor Protection Act of 2002, became law on July 30, 2002.The law was informally named after its sponsors, Senator Paul Sarbanes (D-MD) and Representative Michael G. Read more

Schedule 13-D

A beneficial ownership report, known as SEC Schedule 13-D, is a public notice of anyone who has acquired 5% or more of a voting class of a company's equity securities. For example, let's say you really like Company XYZ stock. Read more

SEC Form 11-K

An SEC Form 11-K is an annual report that is filed with the Securities and Exchange Commission (SEC) for employee stock purchase plans and similar savings plans that constitute securities registered under the Securities Act of 1933. A Form 11-K requires the following: Audited financial statements for the past two fiscal years Audited statement of income and changes in plan equity for each of the latest three fiscal years of the plan Companies aren't the only organizations that must file annual reports with the SEC. Read more


SEC Form BD is an application with the Securities and Exchange Commission (SEC) to register as a broker-dealer. A Form BD makes public the information about any broker-dealer that wishes to trade securities. Read more

Securities Act of 1933

The Securities Act of 1933 was the first law passed that imposed regulations on the securities industry following the stock market crash of 1929. The stock market crash of 1929 resulted from more than a decade of unsavory and imprudent business and investment practices. Read more

Securities and Exchange Commission (SEC)

The Securities and Exchange Commission, also known as the SEC, is a regulatory body that was established as a result of the Securities Act of 1934.Founded after the stock market crash of 1929, the SEC is the federal agency responsible for the oversight and enforcement of laws pertaining to the securities industry. Read more

Seller's Market

A seller's market exists when there are more sellers than buyers in the market for a certain good or service. Housing is a common place to find a seller's market. Read more

Semi-Variable Cost

A semi-variable cost has characteristics of both fixed costs and variable costs once a specific level of output is surpassed. Semi-variable costs remain fixed up to a particular production volume. Read more

Series 63

The Series 63 (formally known as the Uniform Securities Agent State Law Exam) primarily covers a specific state's laws and ethical standards.Some states require brokers to obtain this license before soliciting clients and taking orders. Read more

Series 7

Series 7 is a license that is required before an individual can sell securities.Those who pass the exam for a Series 7 license are eligible to become a registered representative of broker-dealers in the United States. Read more

Series 82

The Series 82 is an exam for individuals who want to be licensed to do primary offerings of private placements. The Financial Industry Regulatory Authority (FINRA) administers the Series 82 exam as mandated by the Gramm-Leach-Bliley Act of 1999. Read more

Shelf Registration

A shelf registration is the filing and registration with the Securities and Exchange Commission (SEC) for a security offering that is released to the public market incrementally over a period of time (shelf offering). Under Rule 415, the SEC allows an issuer to register new securities, and then shelve the public offering for up to two years.   A shelf registration requires that the company file quarterly and annual reports with the SEC. Read more

Stock Market Crash of 1929

The stock market crash of 1929 is the most famous stock market crash of all time.On just one day (October 24, 1929), panicked sellers traded nearly 13 million shares on the New York Stock Exchange (more than three times the normal volume at the time), and investors suffered $5 billion in losses. Read more

Stock Market Crash of 1987

The stock market crash of 1987, also called Black Monday, refers to the 509-point fall in the Dow Jones Industrial Average on October 19, 1987, one of the worst days in the average's history.  Black Monday is perhaps the most famous trading day in Wall Street history. Read more

Strong-Form Efficiency

Strong-form efficiency is a component of the random walk theory and states that market and securities prices are not random and are influenced by past events.Strong-form efficiency is the opposite of weak form efficiency. Read more

Structural Unemployment

Structural unemployment is a category of unemployment arising from the mismatch between the jobs available in the market and the skills of the available workers in the market. Structurally unemployed people usually have skills that are not needed in the market or have a specialized background or experience that cannot be used in the current market. Read more

Taft-Hartley Act

The Taft-Hartley Act, officially known as the Labor-Management Relations Act, is a federal labor law that regulates the actions of labor unions. Ratified in 1947, the Taft-Hartley Act sought to reform labor union law, largely to oversee management and collective bargaining practices were concerned. Read more

Tax Bracket

A tax bracket is range of incomes for which a certain tax rate applies. The United States has a progressive tax system, which means that different portions of a person's income is taxed at increasing rates (often referred to as "marginal rates"). Read more

Tax Evasion

Tax evasion is the act of illegally avoiding tax liability. Tax evasion is a felony. Read more

Tax Exempt

Generally, tax exempt means free from federal income taxation. Tax exemptions can apply to a portion of an individual's income or to the nature of an organization. Read more

Tax Fraud

Tax fraud is the willful and intentional act of lying on a tax return for the purpose of lowering one's tax liability. For example, let's say John owns a painting business. Read more

Tax Incidence

Tax incidence is a term that describes whether producers or consumers bear the burden of a new tax. For example, let's assume that Congress passes a bill that places a $0.10 per ounce tax on potato chips in an effort to curb obesity in the United States. Read more

Tax Reform Act of 1993

Also called the Revenue Reconciliation Act of 1993, the Tax Reform Act of 1993 was a major revision to the United States tax system. The Tax Reform Act of 1993 had several components that received a lot of attention. Read more

Tax Roll

A tax roll is a list of taxable property in a city, county, state or other taxing authority. For example, let's assume that the city of Investon has 1,500 residents. Read more

Tax Treaty

A tax treaty is an agreement between two countries regarding how they tax each other's citizens. In the U.S., residents of foreign countries that have tax treaties with the U.S. Read more

Taxation Without Representation

"Taxation without representation" is a phrase commonly thought to have been first made famous by Boston lawyer James Otis in 1765.It refers to the idea of imposing taxes on people who have no recourse against or control over the taxing authority. Read more

Taxpayer Relief Act of 1997

The Taxpayer Relief Act was created in 1997 and signed by President Bill Clinton.It represented a major overhaul of the U.S. Read more

Time Deposit

A time deposit is an interest-bearing deposit held by a bank or financial institution for a fixed term whereby the depositor can only withdraw the funds after giving notice. Time deposits generally refer to savings accounts or certificates of deposit, and banks and financial institutions usually require 30 days notice for withdrawal of these deposits. Read more

Trade Balance

The trade balance, also known as the "balance of trade (BOT)", is the calculation of a country's exports minus its imports. When a country imports more than it exports, the resulting negative number is called a trade deficit. Read more

Trade Deficit

When the value of a country's imports exceeds the value of its exports, the resulting negative number is called a trade deficit. Balance of trade (BOT; also called the "trade balance") is a measure of a country's exports minus its imports. Read more

Trade Surplus

When the value of a country's exports exceeds the value of its imports, the resulting positive number is called a trade surplus. First, let's back up and define another important term. Read more


A trademark is any legally-protected abstract or figural representation or slogan associated with a company or product that deliberately differentiates it in the market. A trademark is a marketing device that visually sets a company or product apart from similar items trying to gain market share. Read more


Treasuries refer to all the tradable and negotiable debt obligations issued by a country's government.Broadly speaking, when an investor is referring to "Treasuries," he or she is referring to U.S. Read more

Trickle Down Theory

Trickle down theory suggests that a policy of tax cuts and other financial benefits to businesses and rich individuals will indirectly benefit the broader and poor population. The basic principle of trickle down theory is that if top income earners have more money, they will invest their money in businesses that will produce goods at lower prices and employ more people. Read more

U.S. Agency for International Development (USAID)

The U.S.Agency for International Development (USAID) is a federal agency that works to encourage foreign markets for American goods. Read more

U.S. Bureau of Engraving and Printing (BEP)

The U.S.Bureau of Engraving and Printing creates and produces U.S. Read more

U.S. Department of the Treasury

The United States Department of the Treasury protects and manages many American economic and financial systems.The Secretary of the Treasury is the Chief Financial Officer of the U.S. Read more

U.S. House Financial Services Committee

The U.S.House Financial Services Committee is a group of 60 Congressional representatives that make decisions regarding the economy, the banking system, housing, insurance, securities rules and financial markets. Read more

Uncle Sam

Uncle Sam is a fictional character who represents the United States government.His predecessor was a character named Brother Jonathan. Read more


Underemployment occurs when one does not have a job that is full-time or that reflects his or her training and financial needs.It is not the same as unemployment, which is the percentage of employable people in a country’s workforce who are over the age of 16 and who have either lost their jobs or unsuccessfully sought jobs in the last month and are actively seeking work. Read more


Unemployment occurs when one does not have a job.In the financial world, the term is often short for unemployment rate, which is the percentage of employable people in a country’s workforce who are over the age of 16 and actively seeking work. Read more

Unemployment Rate

The unemployment rate measures the percentage of employable people in a country's workforce who are over the age of 16 and who have either lost their jobs or have unsuccessfully sought jobs in the last month and are still actively seeking work.The formula for unemployment rate is: Unemployment Rate = Number of Unemployed / Total Labor Force In the U.S., the Bureau of Labor Statistics reports the unemployment rate in its Employment Situation report, which is released on the first Friday of each month at 8:30 AM EST. Read more

Uniform Gifts to Minors Act (UGMA)

The Uniform Gifts to Minors Act (UGMA) is a set of rules under which adults can give money to a minor via a custodial account in the minor's name.In some states, the UGMA has been superseded by the Uniform Transfers to Minors Act (UTMA). Read more

Universal Banking

Universal banking refers to the practice of offering clients retail banking as well as investment services. Investment services and retail banking services (savings and checking accounts, loans, mortgages, etc.) have customarily been housed in separate banking institutions: investment banks and retail banks, respectively. Read more


Usury is lending money at an interest rate thought to be irrationally high or higher than permitted by law.  Usury is another word for predatory lending, which is the act of imposing unfair and abusive loan terms on borrowers.Predatory lenders charge unreasonably high-interest rates and usually target borrowers with poor credit and few other options to borrow money at reasonable rates.  To prevent usury, some jurisdictions limit the annual percentage rate (APR) that a lender may charge, while others outlaw the practice entirely.  The concept of usury may be an interesting academic topic, but regrettably it has little relevance in consumer lending. Read more

Value Proposition

A value proposition is a marketing statement that positions a company’s products in the mind of the consumer as the best one for their needs.It clearly, easily, and concisely articulates what the company sells and why it is better to buy this particular product or service (instead of a competitor’s product or service).  While value propositions are meant to be easily remembered, they definitely aren’t easy to create. Read more

Variable Costs

Variable costs are the direct costs a company incurs when producing goods or services.Variable costs are incurred in direct proportion to the quantity of goods or services produced.  Simply put: As a company’s production output increases, the variable costs increase. Read more

Veblen Good

A Veblen good is a good or service whose demand increases when its price increases.The term is named after economist Thorstein Veblen. Read more

Velocity of Money

The velocity of money is the average frequency with which a unit of money is spent in an economy. For example, assume a very small economy that has a money supply of $100 and only two people. Read more

Vladimir Lenin

Vladimir Illyic Ulyanov, also known as Vladimir Lenin, was the first leader of the Soviet Union and a key player in its October Revolution. Born in 1870 as Vladimir Ulyanov, Lenin's revolutionary roots date to early in his life. Read more

Voodoo Economics

Also called “Reaganomics,” voodoo economics is the nickname for the hallmark economic policy of Ronald Reagan, the 40th President of the United States (1981-1989), who was trying to stimulate an economy that lay stagnant after the Jimmy Carter years. The program, which rolled out in 1981 and was famously dubbed "voodoo economics" by George H.W. Read more

W-Shaped Recovery

A W-shaped recovery refers to two consecutive cycles of economic decline and growth that graphically resemble the letter "W." A W-shaped recovery graphically expresses what is frequently termed a "double-dip recession." In a W-shaped recovery, the first phase of economic expansion follow a recession does not last, and the economy falls back into recession relatively soon thereafter.However, the second recovery, shown as the right upward stroke of the W, does gain traction and long-term economic expansion persists. Read more

Wage Execution

Also called garnishment, a wage execution is a process under which money owed or paid to a borrower is given to a creditor instead. Let's say John Doe has stopped paying child support to his ex-wife. Read more

Wage-Price Spiral

Also called cost-push inflation, a wage-price spiral is an economic term that describes how prices increase when wages increase. The general idea behind a wage-price spiral is a simple one of supply and demand. Read more

Wage-Push Inflation

Also called cost-push inflation or a wage-price spiral, wage-push inflation is an economic term that describes how prices increase when wages increase. The general idea behind a wage-push inflation is a simple one of supply and demand. Read more

Waiting Period

The waiting period refers to the time period between a company filing a registration statement with the US Securities and Exchange Commission (SEC) and the SEC declaring that statement to be effective.This is also referred to as the "quiet period." Under the SEC rules, once a company makes its SEC registration filing for its initial public offering, it must not release information about its activities or related parties to the public until the SEC approves the registration for the offering.  The SEC interprets this rule broadly, even including board members, management, and employees talking about the company. Read more


A waiver is a party's voluntary renunciation of rights in a contractual arrangement. When two parties enter into a contract, they often agree to forfeit some of their respective rights or claims. Read more

Waiver of Exemption

A waiver of exemption is a clause in a contract that allows a creditor to seize property that state laws may exempt from seizure. Let's assume 65-year-old John Doe borrows $250,000 to buy a house. Read more

Waiver of Notice

A waiver of notice is an agreement that allows people to conduct certain legal procedures without giving formal notification that he or she is going to do so. For example, let's assume that John Doe dies and his estate goes to a probate court so that the judge can dole out the assets to heirs and beneficiaries. Read more

Waiver of Premium Rider

A waiver of premium rider is language in an insurance policy that allows the insured to stop making premium payments if he or she becomes ill or disabled. For example, let's assume that John Doe has a life insurance policy with Company XYZ. Read more

Waiver of Subrogation

A waiver of subrogation prevents an insurer from seeking payments from third parties that cause losses to the person or business it is insuring. For example, let's say ABC Insurance sells a property insurance policy to 123 Shopping Center. Read more

Wall Street

Wall Street is the name used to describe the place in New York City where much of the United States' financial industry is concentrated.The name "Wall Street" is also used frequently used to describe the financial services industry, generally. Read more

Walmart Effect

The Walmart effect refers to the economic impact of a large discount retailer on a local market.Named after the large discount retailer, it is used to describe the crowding out and shuttering of smaller, local businesses that attempt to operate in the same market as a big box store. Read more

Walras's Law

Walras's law is the concept that a surplus in one market indicates the presence of a shortage in another. In 1844, neoclassical French economist Leon Walras posited that the existing markets of the world economy are predisposed toward equilibrium between supply and demand. Read more

War Economy

A war economy centers on producing goods and services that support war efforts. For example, if Country X spends most of its tax dollars on defense and/or uses most of the proceeds from borrowing money for maintaining military and defense efforts, Country X may be a war economy compared with, say, Country Y, which spends most of its tax revenue and borrowed money on infrastructure and domestic programs. Read more


A warranty is a guarantee, usually written, that a product or service works as expected. For example, when you buy a new car from a car dealer, the warranty states that the car works. Read more

Water Rights

Water rights are the legal permissions to use water in a specific way. For example, let's assume that John buys a house on the famous Yellowstone River in Livingston, Montana. Read more

Weak Form Efficiency

The random walk theory states that market and securities prices are random and not influenced by past events.The idea is also referred to as weak form efficiency or the weak form efficient-market hypothesis. Read more

Wells Notice

A Wells Notice is a letter from a regulator such as the Securities and Exchange Commission that warns a financial institution or financial professional that the SEC is beginning an investigation into the institution's or professional's activities. Specifically, a Wells Notice informs a person or institution that a regulator intends to recommend that the Justice Department or other authority begin enforcement proceedings against the person or institution. Read more

Wide Economic Moat

A wide economic moat is a significant competitive advantage that is extremely difficult to copy or emulate, thereby creating a barrier to entry for competing firms. Castles were traditionally part city and part defensive fortress. Read more

World Trade Organization (WTO)

The World Trade Organization (WTO) establishes rules of trade among its member nations.To this end, the WTO also handles trade disputes, monitors trade policies, provides technical assistance for developing countries and cooperates with other international trade organizations.The WTO was created on January 1, 1995, and is headquartered in Geneva, Switzerland. Read more


X-efficiency describes a company's inability to get the maximum output for its inputs due to a lack of competitive pressure. Economist Harvey Leibenstein, a Harvard professor who studied the psychological aspects of economics, first used the term. Read more

X-Mark Signature

An X-mark signature is a mark made by a person who is not able to sign his or her name. Let's say John Doe suffers a traumatic brain injury and can no longer read or write. Read more

Young and Wealthy but Normal (YAWN)

The Young and Wealthy but Normal (YAWN) demographic is a group of people who typically have generated their own wealth but live modest lifestyles. Let's say John and Jane Doe each has a job that pays $175,000 per year. Read more


Zero-bound is a scenario in which the Federal Reserve lowers interest rates to zero or near zero.Traders sometimes also use the term to describe stocks that seem to be quickly losing value. Read more


Zoning is a method of determining how people can use land and buildings within a certain area. Zoning typically delineates areas within a town acceptable for residential construction, commercial construction, industrial construction and agricultural space. Read more

Zoning Ordinance

A zoning ordinance is a rule regarding how people can use land and buildings within a certain area. Zoning ordinances typically delineate acceptable areas within a town for residential construction, commercial construction, industrial construction and agricultural space. Read more