Definitions and Glossary of Economic and Financial Terms

From: www.about.com

Here are some easy-to-understand definitions of terms most commonly used in discussing the U.S. economy. Arranged by sub-topic and in alphabetical order.

Adjustable Rate MortgageA definition of adjustable rate mortgages, and how adjustable rate mortgages work.
Asset-backed Commercial PaperAsset-backed Commercial Paper (ABCP) is short-term corporate debt that is backed by assets such as real estate, autos and other commercial assets.
Base BudgetA definition of the Base Budget, which is that portion needed to keep the department in readiness year after year.
Bear MarketThe definition of a bear market in the stock market.
Beige BookThe Federal Reserve's description of the US economy.
Bilateral Trade AgreementsDefinition of a bilateral trade agreements, which benefit both parties.
Budget DeficitWhen a government spends more than it makes.
Bull MarketDefinition of the bull market in a stock market.
Call OptionDefinition of a call option, which gives the holder the option to buy a stock at a certain price.
CapitalA definition that shows how capital is a key component of supply.
CDO's (Collateralized Debt Obligations)CDO's, or Collateralized Debt Obligations, are sophisticated financial tools that repackage individual loans into a product that can be sold on the secondary market.
Comparative AdvantageWhat makes a country more competitive.
Contractionary Monetary PolicyDefinition of contractionary monetary policy and how the Federal Reserve uses it.
Conventional MortgagesDefinition of conventional mortgages, which include fixed rate and adjustable rate mortgages.
Core InflationCore inflation is the inflation measurement without volatile food and energy prices.
Current Account DeficitWhat happens when the U.S. consumer buys more than U.S. companies sell.
DeregulationDeregulation is when the government seeks to allow competition in highly regulated industries, usually some form of utility.
DerivativesA definition of how financial derivatives, such as options and futures contracts, are used in to trade in the stock market.
Discount RateThe Federal Reserve Discount Rate is the rate that the Fed charges banks to borrow from its discount window.
Discount WindowThe Federal Reserve's discount window is how the Fed lends money overnight to banks.
Discretionary SpendingThe part of the U.S. budget that is negotiated between Congress and the President each year.
Diversified InvestmentThe definition of a diversified investment, and its advantages.
DumpingA definition of the trade violation known as dumping.
Economy of ScaleReducing cost per unit due to large size.
EmploymentHow the U.S. Government defines employment.
Expansionary Monetary PolicyA definition of expansionary monetary policy and how the Federal Reserve uses it.
Fed Funds RateA definition of the most important interest rate in the world.
Fed FundsFed funds, or Federal Reserve funds, are loans that banks make to each other to meet reserve requirements at Federal Reserve Banks.
FIRREAExplains what is FIRREA, or the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.
Fiscal PolicyA definition of fiscal policy and how it is different from monetary policy.
Fiscal YearA definition of the U.S. Government's fiscal year, which runs from October 1 through September 30th of that same calendar year.
Fixed Rate MortgageDefinition of fixed rate mortgages, how fixed rate mortgages work, and how they differ from other mortgages.
Futures ContractsA definition of futures contracts, which includes commodities futures contracts and oil futures contracts.
GDPGross Domestic Product. How big the economy is.
Goldilocks EconomyJust like Goldilocks' porridge - an economy that is neither too hot nor too cold.
Gross National ProductGross National Product is Gross Domestic Product plus overseas investments by U.S. residents minus U.S. investments by overseas residents.
Individual InvestorDefinition of the individual investor.
InflationAn easy-to-use definition of inflation.
Interest RateA definition of interest rate, including central bank interest rates.
Interest-only LoanA definition of an interest-only loan, in which the borrower's monthly payment goes only towards the interest.
Inverted Yield CurveA definition of the inverted yield curve, why it is happening, why it can often forecast a recession, and why that might not be true this time.
Irrational ExuberanceWhy investors create a stock market bubble.
LaborA definition that shows how labor is a key component of supply.
Lagging IndicatorA statistic that follows the economic trend.
Large CapA definition of large cap stocks, which represent the largest companies.
Leading IndicatorA statistic that precedes an economic trend.
LIBOR RatesThe LIBOR rate is that interest rate that banks charge each other.
LiquidityLiquidity is the amount of capital available for investment.
Mandatory SpendingThe part of the U.S. Budget that is mandated by entitlement programs.
Market CapitalizationAn easy-to-use definition of a company's market capitalization, or market cap.
Mid CapA definition of mid cap stocks, which represent mid size companies.
Monetary PolicyA definition of monetary policy and how it is different from fiscal policy.
Monetary ReportThe Federal Reserve's semi-annual report to Congress on the state of the U.S. economy.
MonopolyDefinition of monopoly and how monopolies used to threaten the U.S. economy by restricting free trade.
MortgageA mortgage is a specialized loan to make homeownership more accessible.
Mortgage-backed SecuritiesDefines how mortgages are packaged to be sold on the secondary market.
Most Favored Nation StatusDefinition of Most Favored Nation trading status.
Multilateral Trade AgreementsThe definition of a multilateral trade agreements, which benefit everyone.
Natural Unemployment RateNatural unemployment rate is a certain amount of unemployment due to job turnover, mismatch between jobs and skills, and minimum wage laws, for example.
New Home SaleThe first step in buying a new home.
New Home StartWhen ground is broken on a new home.
OECDAn association of 30 developed countries.
Off-BudgetA definition of off-budget revenue, which is primarily "borrowed" from the Social Security Trust Fund.
OPECOrganization of Petroleum Exporting Countries
OptionsA defintion of options, including stock options, futures options and options trading.
Outperform the MarketDefinition of outperform the market and how it relates to the stock market.
Pension FundsA definition of pension funds and why they are important to the stock market.
PegMany countries peg their currency to the dollar. This means this keep the value of their currency at a certain level relative to the dollar.
Price FixingDefinition of price fixing, and how price fixing affects the U.S. economy
Prime Interest RateThe prime interest rate is what banks charge their best customers.
Private Equity - Private Equity Firms - Private Equity FundsPrivate equity is private ownership, as opposed to stock ownership, of a corporation.
Profit MarginA definition of profit margin and how it relates to profit.
ProfitDefinition of profit and why it is important to the US economy.
Purchasing Power ParityUnderstand purchasing power parity and you can compare the standard of living in one country with another.
Put OptionDefinition of a put option, also known as a put, which is an option to sell a share of stock.
Real EstateA broad term which includes residential, commercial, industrial and vacant land.
RecessionWhen a good economy turns bad.
Reserve RequirementThe Federal Reserve requires that banks keep a certain amount of cash on hand each night.
Savings and LoansSavings and loans (S&L's) are special types of banks created to promote home ownership.
Secondary Mortgage MarketHow mortgages are sold by the banks to investors.
SecuritiesSecurities is a term used to loosely describe stocks, bonds and any other ownership investment.
Small CapA definition of small cap stocks, which represent smaller companies.
Social Security Trust FundWhat is the Social Security Trust Fund and how does it affect the U.S. economy? A definition of the Social Security Trust Fund.
StagflationStagflation is when the economy is stagnant while inflation is rising.
Stock Market CorrectionThe difference between a stock market correction and a stock market crash.
Stock Market CrashWhat makes a stock market crash different from a stock market decline.
Stock Market A broad definition of the stock market.
StocksHow a stock is a share of ownership of a corporation.
Strategic Petroleum ReservesA definition of the US governement's Strategic Petroleum Reserves aka US oil reserves.
Subprime MortgagesA definition of subprime mortgages, which are granted to borrowers with less than perfect credit.
TariffDefinition of tariffs and custom taxes which are levied on imported goods.
Trade DeficitWhat happens when a country consumes more than it produces.
Trade Promotion AuthorityThe President's Trade Promotion Authority allows the President to negotiate trade agreements efficiently.
Trading SidewaysHow to know when the stock market is trading sideways.
UnemploymentHow the U.S. Government defines unemployment.
Unfunded MandateA definition of unfunded mandates and how they are declining throught UMRA.
Unilateral Trade AgreementsA definition of unilateral trade agreements, which benefit only one side.
VolatilityDefinition of volatility, or risk, of a stock or the stock market.
Year-Over-YearComparing statistics year-over-year gives a better sense of the trend than month to month or week to week.