Glossary Terms:

One of many choices or courses of action that might be taken in a given situation.

To receive and use something belonging to somebody else, with the intention of returning or repaying it--often with interest in the case of borrowed money.

Any activity or organization that produces or exchanges goods or services for a profit.

In the context of credit transactions, capacity is one of the Three Cs of Credit. It is an indicator of how creditworthy a prospective borrower is likely to be, as determined by the borrower's current and future earnings relative to current debt. High earnings and low debt, for example, indicate a strong capacity to make payments on the loan in question.

Resources and goods made and used to produce other goods and services. Examples include buildings, machinery, tools and equipment. In the context of credit transactions, capital is one of the Three Cs of Credit. It is an indicator of how creditworthy a prospective borrower is likely to be as determined by the borrower's current financial assets and net worth.

A price index that measures the cost of a fixed basket of consumer goods and services and compares the cost of this basket in one time period with its cost in some base period. Changes in the CPI are used to measure inflation.

People who use goods and services to satisfy their personal needs and not for resale or in the production of other goods and services.

Spending by households on goods and services. The process of buying and using goods and services.

An amount that must be paid or spent to buy or obtain something. The effort, loss or sacrifice necessary to achieve or obtain something.

A sustained decrease in the average price level of all the goods and services produced in the economy.

The quantity of a good or service that buyers are willing and able to buy at all possible prices during a period of time.

An increase in real output as measured by real GDP or per capita real GDP.

Payments for goods and services.

The central bank of the United States. Its main function is controlling the money supply through monetary policy. The Federal Reserve System divides the country into 12 districts, each with its own Federal Reserve bank. Each district bank is directed by its nine-person board of directors. The Board of Governors, which is made up of seven members appointed by the President and confirmed by the Senate to 14-year terms, directs the nation's monetary policy and the overall activities of the Federal Reserve. The Federal Open Market Committee is the official policy-making body; it is made up of the members of the Board of Governors and five of the district bank presidents.

The natural rate of employment; generally considered to be about 93-95 percent of the labor force, allowing for frictional unemployment of 5-7 percent.

Tangible objects that satisfy economic wants.

Accommodation in houses, apartments, etc.

A rise in the general or average price level of all the goods and services produced in an economy. Can be caused by pressure from the demand side of the market (demand-pull inflation) or pressure from the supply side of the market (cost-push inflation).

Money paid regularly, at a particular rate, for the use of borrowed money.

The purchase of capital goods (including machinery, technology or new buildings) that are used to produce goods and services. In personal finance, the amount of money invested in stocks, bonds, mutual funds and other investment instruments.

The quantity and quality of human effort available to produce goods and services.

Government actions designed to affect economic activity in an attempt to reach one or more macroeconomic goals, such as reducing unemployment and inflation. Also called economic policies, the most common types are fiscal policy and monetary policy.

Changes in the supply of money and the availability of credit initiated by a nation's central bank to promote price stability, full employment and reasonable rates of economic growth.

The fee paid for insurance protection.

The amount of money that people pay when they buy a good or service; the amount they receive when they sell a good or service.

The weighted average of the prices of all goods and services in an economy; used to calculate inflation.

The absence of inflation or deflation; a broad social goal and criterion for measuring the performance of an economic system.

People and firms that use resources to make goods and services.

A good or service that can be used to satisfy a want.

A process of manufacturing, growing, designing, or otherwise using productive resources to create goods or services used to to satisfy a want.

A decline in the rate of national economic activity, usually measured by a decline in real GDP for at least two consecutive quarters (i.e., six months).

Activities performed by people, firms or government agencies to satisfy economic wants.

A federal system of old-age, survivors', disability and hospital care (Medicare) insurance which requires employers to withhold (or transfer) wages from employees' paychecks and deposit that money in designated accounts.

A good or service that may be used in place of another good or service; examples include tap water for bottled water (or vice versa) and movies for concerts (or vice versa).

The amount of a good or service that producers are willing and able to offer for sale at each possible price during a given period of time.

Compulsory payments to governments by households and businesses.

The number of people without jobs who are actively seeking work.

The number of unemployed people, expressed as a percentage of the labor force.

The ability of money to buy goods and services. A wide variety of items has been used as money. Money need not have any intrinsic value. It is people's willingness to accept it that gives it value.

Payments for labor services that are directly tied to time worked, or to the number of units of output produced.

Effort applied to achieve a purpose or result, often for pay; skills and knowledge put to use to get something done; employment at a job or in a position; occupation, profession, business, trade, craft, etc.

People employed to do work, producing goods and services.