Glossary Terms:

Balance of Payments (BOP)

Glossary terms from:
http://www.econedlink.org/e820


Balance of Payments

The record of all transactions (in goods, services, physical and financial assets) between individuals, firms and governments of one country with those in all other countries in a given year, expressed in monetary terms.

Borrow

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.

Business

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

Capacity

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.

Capital

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.

Capital Account

Part of a nation's balance of payments accounts; records capital outflows, i.e., expenditures made by the nation's residents to purchase physical capital and financial assets from the residents of foreign nations; also records capital inflows, i.e., expenditures by residents of foreign nations to purchase physical capital and financial assets from residents of the nation in question.

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.

Comparative Advantage

The ability to produce a good or service at a lower opportunity cost than some other producer. This is the economic basis for specialization and trade.

Consumption

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

Corporation

A legal entity owned by shareholders whose liability for the firm's losses is limited to the value of the stock they own.

Credit

The opportunity to borrow money or to receive goods or services in return for a promise to pay later.

Currency

The money in circulation in any country.

Current Account

Part of a nation's balance of payments accounts; records exports and imports of goods and services, net investment income and transfer payments with other countries.

Current Account Balance

The inflow of the goods, services, investment income and transfer accounts into the United States from foreign countries netted against the outflow of goods, services, investment income and transfer accounts from the United States to foreign countries.

Debit Card

A small, specially coded plastic card issued by a bank; allows the cardholder to transfer funds electronically and immediately from his or her checking account, as if the cardholder were writing a check to pay for a purchase.

Debt

Money owed to someone else. Also the state or condition of owing money. Can be individual, corporate or government debt.

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.

Economics

The study of how people, firms and societies choose to allocate scarce resources with alternative uses.

Exchange

Trading a good or service for another good or service, or for money.

Exports

Goods and services produced in one nation and sold in other nations.

Foreign Investment

The purchase of financial and/or physical assets in one county by businesses or people in another county. This term can refer to either foreign direct investment or investment in foreign financial assets, such as stocks.

Goods

Tangible objects that satisfy economic wants.

Human Capital

The health, education, experience, training, skills and values of people. Also known as human resources.

Imports

Goods and services bought from sellers in another nation.

Income

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

Income Statement

The report of the revenue generated and expenses incurred by a firm in a designated time period, such as a month, a quarter or a year.

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.

Interest Rate

The price paid for using someone else's money, expressed as a percentage of the amount borrowed.

Investment

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.

Labor

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

Lend

To grant someone the use of something, on condition that the object borrowed or its equivalent will be returned (often with interest, in the case of money).

Markets

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.

Money

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.

Net Exports

Exports minus imports.

Producers

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

Production

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

Productivity

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

Profit

Income received for entrepreneurial skills and risk taking, calculated by subtracting all of a firm's explicit and implicit costs from its total revenues.

Services

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

Spend

Use money now to buy goods and services.

Stock

An ownership share or shares of ownership in a corporation.

Supply

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.

Surplus

The situation that results when the quantity supplied of a product exceeds the quantity demanded. Generally happens because the price of the product is above the market equilibrium price.

Trade

The exchange of goods and services for money or other goods and services.

Transfer Payments

Money collected by the government from one group and given to others. Examples include Social Security benefits, unemployment insurance payments and agricultural subsidies.

Work

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.