Glossary Terms:

Monetary or non-monetary gain received because of an action taken or a decision made.

The Federal Reserve's governing and monetary policy-making body; consists of seven governors appointed by the President to staggered 14-year terms.

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.

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.

Inflation caused by rising costs of production.

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

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

Inflation caused by increasing demand for output or "too much money chasing too few goods."

The interest rate the Federal Reserve charges commercial banks for loans.

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

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.

Tangible objects that satisfy economic wants.

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

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).

A practice or arrangement whereby a company provides a guarantee of compensation for specified forms of loss, damage, injury or death. People obtain such guarantees by buying insurance policies, for which they pay premiums. The process allows for the spreading out of risk over a pool of insurance policyholders, with the expectation that only a few policholders will actually experience losses for which claims must be made. Types of insurance include automobile, health, renter's, homeowner's, disability and life.

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

The process of putting money someplace with the intention of making a financial gain. Investment possibilities include stocks, bonds, mutual funds, real estate, and other financial instruments or ventures.

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.

The people in a nation who are aged 16 or over and are employed or actively looking for work.

The labor supply and labor demand curves. The intersection of the labor supply and labor demand curves determines the equilibrium wage and the quantity of hours people work at this equilibrium wage.

Places, institutions or technological arrangements where or by means of which goods or services are exchanged. Also, the set of all sale and purchase transactions that affect the price of some good or service.

Anything that is generally accepted as final payment for goods and services; serves as a medium of exchange, a store of value and a standard of value. Characteristics of money are portability, stability in value, uniformity, durability and acceptance.

A special type of loan for the purchase of a house or other real estate.

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.

The amount of output (goods and services) produced per unit of input (productive resources) used.

The amount of goods and services that a monetary unit of income can buy.

Property such as land, houses and office buildings.

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).

The basic kinds of resources used to produce goods and services: land or natural resources, human resources (including labor and entrepreneurship), and capital.

Payments for labor resources; unlike wages, not explicitly based on the number of hours worked. See also Wages.

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

A period of time long enough for existing firms to change some--but not all--of the resources they use.

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.

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

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.

People employed to do work, producing goods and services.