Glossary Terms:

Focus on Economic Data: Consumer Price Index and Inflation, February, 2013

Glossary terms from:
http://www.econedlink.org/e1156


Bank

A financial institution that provides various products and services to its customers, including checking and savings accounts, loans and currency exchange.

Business

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

Check

A written order to a financial institution directing the financial institution to pay a stated amount of money, as instructed, from the customer's account.

Consumer Price Index (CPI)

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.

Consumers

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

Costs

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

Deflation

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

Demand

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

Federal Reserve

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.

Fixed Income

Income that stays the same from week to week or month to month. Usually refers to income from pensions or bonds.

Goods

Tangible objects that satisfy economic wants.

Income

Payments earned by households for selling or renting their productive resources. May include salaries, wages, interest and dividends.

Inflation

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).

Interest

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

Labor

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

Price

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.

Price Level

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

Producers

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

Product

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

Production

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

Recession

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).

Services

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

Spend

Use money now to buy goods and services.

Wage

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

Wants

Desires that can be satisfied by consuming or using a good or service. Economists do not differentiate between wants and needs.

Workers

People employed to do work, producing goods and services.