Glossary

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D

Dead Weight Loss
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 (for example, a merchant's account), as if the chardholder were writing a check to pay for a purchase.
Debt
Money owed to someone else--as in I’ve got a debt of $900. Also the state or condition of owing money--as in Jones is always in debt.
Debt for Individual
Money a person owes to someone else, usually a financial institution.
Decision
A conclusion reached after considering alternatives and their results.
Decision Making
Reaching a conclusion after considering alternatives and their results.
Decision Making/Cost-Benefit Analysis
Decision-Making Grid
A graph-like form into which people may enter notations about the costs and benefits of various alternatives; used for assistance in making decisions.
Deductible
Regarding insurance policies: A set amount an insured person must pay per loss before the insurance company will pay a claim.
Definition of Money
A medium of exchange which can be conveniently circulated and is seen as an effective form of currency.
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 consumers are willing and able to buy at given prices during a period of time.
Demand-Pull Inflation
Inflation caused by increasing demand for output or "too much money chasing too few goods."
Deposit
A sum of money placed into a financial account, usually to gain interest. Also the act of placing money into an account--as in I’d like to deposit this check in my account.
Depreciation of a Currency
Depression
A severe, prolonged contraction in economic activity. The most famous example is the Great Depression of the 1930s. (See also Great Depression, Recession.)
Derived Demand
Demand resulting from what a good or service can produce, not demand for the good or service itself.
Determinants of Demand
Factors other than the price of a good or service that change (shift) the demand schedule, causing consumers to buy more or less at every price. Factors include income, number of consumers, preferences and prices of related goods.
Determinants of Supply
Factors other than the price of a good or service that change (shift) the supply schedule, causing producers to supply more or less at every price. Factors include number of producers, production costs, and technology and productivity.
Diminishing Marginal Utility
A widely observed relationship in which the additional satisfaction (marginal utility) associated with consuming additional units of the same product in a given amount of time eventually declines.
Direct Relationship
The relationship that exists when the values of related variables move in the same direction. Also known as a positive relationship.
Discount Rate
The interest rate the Federal Reserve charges commercial banks for loans.
Discouraged Workers
Unemployed people who have given up looking for work and are therefore not counted as part of the labor force.
Disincentive
A factor, often a monetary penalty or disadvantage, that discourages people from doing something—as in High prices for gasoline act as a disincentive to people considering long automobile trips.
Disposable Income
The amount of money a person has left to save or spend after income taxes, Social Security taxes, and other required deductions have been taken out of his or her gross pay.
Distribution
The allocation or dividing up of the goods and services a society produces.
Distribution of Income
The way in which the nation's income is divided among families, individuals or other designated groups.
Diversify
To invest in a variety of stocks, bonds, money market accounts, etc., in order to spread risk. Sometimes referred to as “not putting all of your eggs in one basket.”
Dividend
A share of a company’s net profits paid to stockholders.
Division of Labor
An arrangement in which workers perform only one step or a few steps in a larger production process (as when working on an assembly line).
Division of Labor/Specialization
The division of labor refers to the practice that the tasks of producing a good or service are divided up into separate tasks. When workers focus on performing separate tasks, specialization occurs. Within a company, for example, there are typically workers who specialize in buying supplies, different aspects of production, future planning, paying bills and taxes, collecting sales revenue, hiring and managing workers, and many other categories. Within the economy as a whole, the division of labor explains why even if you bake your own bread, you typically don't grow your own wheat, grind it into flour, build your own oven, make your own bread-pans and so on. Instead, people specialize in a few skills and then take the wages that they earn from those skills to purchase the other goods and services that they desire from other specialists. In this way, the division of labor and specialization is the basis for an economy to exist. Adam Smith started his classic book The Wealth of Nations with a discussion of the division of labor as the basis for understanding how an economy works. He identified three reasons why the division of labor increases output: workers who specialize on one job become much better at doing it; with specialization, the time that it would take to switch between jobs is eliminated; and workers who specialize on one job often invent more effective ways or new machines for doing the job. But as Adam Smith makes clear, specialization is possible only when people are able to coordinate their production and consumption decisions with each other. The study of economics is largely concerned with explaining how this coordination takes place.