Small Simple Dictionary of Economics (Part 6 of 8)

Economics, like other sciences and arts, has its own language. Without knowledge of this language, it is very difficult to understand economics. This has stopped many from following local, national and international economic developments. When I mention that economics is my field of interest, it often creates a sense of uneasiness since, unlike politics and sports, where almost everyone has an opinion, no one has much to say, and the conversation quickly changes to other things. This is unfortunate because economics is everywhere and is one of the most important factors in our lives. It touches almost every activity we undertake. But also, it isn’t easy to have an economics dictionary handy, so I explain about 200 common economic terminologies in a simple way. For some, it may be overly simplified; if that is the case, they can always refer to the Oxford Dictionary of Economics.

Labour: work, especially physical work.

Labour intensive: needing a large workforce or a large amount of work in relation to the output.

‘Laissez-faire’ is an economic system in which transactions between private parties are free from government interference, such as regulations, privileges, tariffs, and subsidies. The phrase laissez-faire is part of a larger French piece and translates to “let (it/them) do,” but in this context usually means “let it be” or “let it go.”

Land: considered a factor of production, along with labour and capital. Selling land results in a capital gain or loss.

Lease: a contractual arrangement calling for the lessee (user) to pay the lessor (owner) for use of an asset. Broadly put, a lease agreement is a contract between two parties, the lessor and the lessee.

Linear programming: a method to achieve the best outcome (such as maximum profit or lowest cost) in a mathematical model whose requirements are represented by linear relationships.

Liquid: How quickly can you get your hands on your cash? In simpler terms, liquidity is to get your money whenever you need it.

Liquidation: the process by which a company (or part of a company) is brought to an end, and the assets and property of the company are redistributed.

Lump-sum tax: a fixed amount, no matter the change in circumstance of the taxed entity.

Macroeconomics is a branch of economics dealing with the performance, structure, behaviour, and decision-making of an economy as a whole rather than individual markets. This includes national, regional, and global economies.

Market: one of the wide varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange.

Market share: the percentage of an industry or market’s total sales that a particular company earns over a specified period. Market share is calculated by dividing the company’s sales over the period by dividing it by the industry’s total sales over the same period.

Maturity: the date on which the principal amount of a note, draft, acceptance bond or other debt instrument becomes due and is repaid to the investor and interest payments stop. It is also the termination or due date on which an installment loan must be paid in full.

Microeconomics is a branch of economics that studies the behaviour of individuals and small impacting organizations in making decisions on the allocation of limited resources.

Mixed economy: an economic system that features characteristics of both capitalism and socialism. A mixed economic system allows private economic freedom in capital use and allows governments to interfere in economic activities to achieve social aims.

Monetary policy: the authority of a country controlling the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.

Money market: as money became a commodity, the money market became a component of the financial markets for assets involved in short-term borrowing, lending, buying and selling with original maturities of one year or less. Trading in money markets is done over the counter and is wholesale.

Money supply: the total amount of monetary assets available in an economy at a specific time.

Monopoly: a market structure in which there is only one producer/seller for a product. In other words, the single business is the industry.

Mortgage: used by individuals and businesses to make large real estate purchases without paying the entire purchase value upfront.

Mutual funds: a type of professionally managed investment fund that pools money from many investors to purchase securities.

National debt: the total amount of money that a country’s government has borrowed by various means.

National income: the total amount of money earned within a country.

Net domestic product: equals the gross domestic product (GDP) minus depreciation on a country’s capital goods.

Net income: calculated by taking revenues and adjusting for the cost of doing business, depreciation, interest, taxes and other expenses.

New classical economics: a school of economic thought that originated in the early 1970s in the work of economists centred at the Universities of Chicago and Minnesota—particularly Robert Lucas (recipient of the Nobel Prize in 1995), Thomas Sargent, Neil Wallace, and Edward Prescott (co-recipient of the Nobel Prize in 2004).

New York Stock Exchange (NYSE): Sometimes known as the “Big Board,” it is an American stock exchange located at 11 Wall Street, New York, in the United States. It is the world’s largest stock exchange by market capitalization of its listed companies.

Net national product (NNP): the total market value of all final goods and services produced by a country’s production factors during a given time period, minus depreciation.

Non-tariff barriers: a form of restrictive trade where trade barriers are set up and take a form other than a tariff. Nontariff barriers include quotas, levies, embargoes, sanctions and other restrictions and are frequently used by large and developed economies.