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Economics Terms
Economics and Business Terms for Academic Team
| Term | Definition |
|---|---|
| Ability-to-pay principle | A tax theory according to which taxes should be levied according to the taxpayer's capacity to pay. Progressive income taxes are based on the ability to pay principle. |
| Absolute advantage | In international economics, the capability of one producer to produce a given good or service using fewer resources than any other producer. |
| Accelerated depreciation | Any one of a number of allowed methods of calculating depreciation that permit greater amounts of deductions in earlier years than permitted under the straight-line method, which assumes equal depreciation during each year of the asset's life. |
| Accelerationist theory | The economic theory that holds that unemployment cannot be permanently reduced through inflation. |
| Accelerator | In economics, the proposition that a firm's investment responds to its growth in output. If the rate of growth of output falls, say, from 4% to 2%, firms reduce their investment even though output continues to increase. |
| Accounting principles | Rules and guidelines of accounting. They determine such matters as the measurement of assets, the timing of revenue recognition, and the accrual of expenses. |
| Accrual accounting | Accounting method whereby income and expense items are recognized as they are earned or incurred, even though they may not have been received or actually paid in cash. |
| Actuarial science | Branch of knowledge dealing with the mathematics of insurance, including probabilities. |
| Ad valorem | Latin for according to value. An ad valorem tax is assessed on the value of goods or property; not on the quantity, weight, extent, etc. |
| Affirmative action | Steps taken to correct conditions resulting from past discrimination or from violations of a law, particularly with respect to employment. |
| AFL-CIO | The largest labor union in the United States. |
| Agency shop | Situation in which an employer may hire any worker without regard for whether the worker belongs to a union, but once hired the worker must either join or pay dues to a union as a condition for retaining his or her job. |
| Aggregate demand | The total amount of goods and services demanded by consumers, firms, and the government at different price levels in a given period of time. Keynesian economics focuses on aggregate demand |
| Aggregate demand curve | The aggregate demand curve describes the relationship between price levels and the sum of the quantity of output that consumers (for consumption), firms (for investment), and governments are willing to purchase. |
| Aggregate supply | In macroeconomics, the total amount of goods and services supplied to the economy at alternative price levels in a given period of time. Aggregate supply is at the center of supply-side economics. |
| Aggregate supply curve | The aggregate supply curve describes the relationship between price levels and the quantity of output that firms are willing to provide. The aggregate supply curve shows a positive relationship between the price level and quantity of output supplied. |
| Agribusiness | Large-scale production, processing and marketing of food and nonfood farm commodities and products. Agribusiness is a major commercial business. California has the largest concentration of agribusiness in the United States. |
| Alien corporation | Company incorporated under the laws of a foreign country regardless of where it operates. Alien corporation can be used as a synonym for the term foreign corporation. |
| Allocation of resources | Central subject of economics: manner in which scarce factors of production are apportioned among producers, and in which scarce goods are apportioned among customers. |
| Amortization | 1. Reduction of a debt by periodic charges to assets or liabilities, such as payments on mortgages. 2. In accounting statements, the systematic write-off of costs incurred to acquire an intangible asset. |
| Analytical review | Auditing process that tests relationships among accounts and identifies material changes. It involves analyzing significant ratios and trends for unusual change and questionable items. |
| Annuity | Contract sold by life insurance companies that builds investment value tax-deferred and guarantees that at a future time, typically retirement, payments will be made to the beneficiary, called the annuitant. |
| Antitrust acts | Federal statutes that regulate trade in order to maintain competition and prevent monopolies. |
| Applied economics | Use of principles and results of theoretical economic study in the real world, particularly in the formulation of governmental economic policy. |
| Appreciation | In general, any increase in the market value of an asset. |
| Arbitrage | Financial transaction involving the simultaneous purchase in one market and sale in a different market with a profitable price differential. True arbitrage positions are riskfree. |
| Arm's length transaction | Transaction among parties, each of whom acts in his or her own best interest. |
| Assets | Anything owned that has value. |
| Audit | Inspection of the accounting records and procedures of a business, government unit, or other reporting entity by a trained accountant, for the purpose of verifying the accuracy and completeness of the records. |
| Automatic stabilizers | Certain taxes and forms of government expenditures that fluctuate automatically with business conditions in such a way as to combat the business cycle. The prime example of an automatic stabilizer is unemployment insurance. |
| Balanced-budget multiplier | A proposition from Keynesian economics that asserts that a simultaneous increase in government spending financed by an equal increase in taxes raises the real gross domestic product by an amount equal to the increase in government spending. |
| Balance of payments | The system of recording all of a country's economic transactions with the rest of the world during a particular time period. The balance of payments is typically divided into subaccounts, such as the capital and current accounts. |
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