Glossary Terms:

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

Something of monetary value owned by an individual or an organization.

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.

A spending-and-savings plan, based on estimated income and expenses for an individual or an organization, covering a specific time period.

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

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.

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

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

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

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

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.

Economic units that demand productive resources from households and supply goods and services to households and government agencies.

Something a person or organization plans to achieve in the future; an aim or desired result.

Tangible objects that satisfy economic wants.

The market value of all final goods and services produced in a country in a calendar year.

Individuals and family units that buy goods and services (as consumers) and sell or rent productive resources (as resource owners).

A price index that compares the prices of all the goods and services produced in the current-year gross domestic product (GDP) to the price levels that prevailed for those same goods and services in an earlier year or years. The implicit price deflator is used to adjust values of nominal or current-price GDP to obtain values for real GDP.

Goods and services bought from sellers in another nation.

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

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

The study of economics concerned with the economy as a whole, involving aggregate demand, aggregate supply, and monetary and fiscal policy.

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.

Narrowly defined by economists as currency in the hands of the public plus checking-type deposits; also called M1. Other definitions of the money supply (M2, M3) include various savings deposits, money market deposits and money market mutual fund balances.

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.

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.

Goods, often supplied by the government, for which use by one person does not reduce the quantity of the good available for others to use, and for which consumption cannot be limited to those who pay for the good.

In a credit arrangement, the total amount spent during the billing cycle.

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

Disposable income (income after taxes) minus consumption spending.

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

Use money now to buy goods and services.

The level of subsistence of a nation, social class or individual with reference to the adequacy of necessities and comforts of daily life.

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.

Improvements in a firm's ability to produce due to improved processes, methods and machines.

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

An abstract measure of the satisfaction consumers derive from consuming goods and services.

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

People employed to do work, producing goods and services.