Common Terms

When reading economic news and reports, you will encounter some words you’re not familiar with. Below are a few common terms that you need to understand in order to read financial news and understand what’s going on in the economy.

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Common Terms

CENTRAL BANK – government entity that decides monetary policy

CONSUMER GOODS – products available for use or consumption by customers

DEFLATION – decrease of general prices in an economy

FEDERAL RESERVE – the United States’ central bank

GDP – total value of goods and services produced in a certain area

GOVERNMENT SPENDING – purchases of goods and services for the public, financed by taxes

INFLATION – increase of general prices in an economy

INTEREST RATE – costs associated with borrowing money as a percentage of the loan; in savings, interest is the amount paid on money deposited

MACROECONOMIC – focus on country and government decisions, affecting things overall

MICROECONOMIC – focus on individuals and business decisions, affecting things on a small scale

MONETARY POLICY – how much money is available for spending, controlled by central banks

RAW MATERIALS – basic materials that are used to create finished goods

RECESSION – general decline in economic activity, typically two quarters of GDP decline

TRADE – buying and selling of goods and services, can occur locally and globally

UNEMPLOYMENT – people who are jobless, looking for a job, and are available to work