Study & Practice

Financial Literacy Glossary

378 terms in plain language, A to Z — the vocabulary a Challenge Bowl team is expected to know.

Two known gaps: the tail of the C section and the entire N section — roughly 25–35 terms in total — were truncated during extraction from the source material. They are not fabricated here; an admin will add them once the missing definitions are recovered.

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A

Actuary: An individual, often holding a professional designation—for example, Fellow of the Casualty Actuarial Society (FCAS)—who uses historical information and mathematical models to help predict the future. Individuals with strong math and statistics skills are drawn to this profession, often ranked as one of the best jobs in the U.S. (Listed under "Insurance industry specific careers".)
Ad Valorem Tax: A tax that is specified as a percentage of value. Sales, income, and property taxes are three of the more popular ad valorem taxes devised by government. The total ad valorem tax paid increases with the value of what's being taxed.
Adam Smith: A Scottish professor (born 1723, died 1790) who is considered the father of modern economics for his revolutionary book, entitled An Inquiry into the Nature and Causes of the Wealth of Nations published in 1776.
Adjustable Rate Mortgage: A mortgage loan whose interest rate fluctuates (goes up or down) according to the movements of an assigned index or a designated market indicator–such as the weekly average of one-year U.S. Treasury Bills–over the life of the loan.
Adverse Selection: A phenomenon that occurs when those applying for insurance coverage have more information than the insurer. If the insurer does not have enough information, they cannot price the policy correctly and thus can end up overcharging some and undercharging others. […]
Affordable Care Act (ACA): 2010 U.S. legislation signed by President Obama regarding health insurance requirements of employers and employees
All Risk Coverage: An insurance policy that does not specifically list all covered perils. The policy protects against all perils as defined by the general policy unless specifically excluded.
Allocation: The process of distributing resources for the production of goods and services, and of distributing goods and services for consumption by households. This process of allocation is essential to an economy's effort to address the problem of scarcity. An allocation is efficient if the resources, goods, and services are distributed according to the economy's highest valued uses.
Amortization: The process of paying off a debt liability and accrued interest through a series of equal, periodic payments. Car loans and mortgages are two debts commonly paid off through amortization. Your monthly car payment, for example, partially pays for interest accrued on the outstanding balance and partly reduces that balance. […]
Annual Percentage Rate (APR): The terms annual percentage of rate (APR), nominal APR, and effective APR (EAR) describe the interest rate for a whole year (annualized), rather than just a monthly fee/rate, as applied on a loan, mortgage loan, credit card, etc
Annual Report: An annual report is a comprehensive report on a company's activities throughout the preceding year. Annual reports are intended to give shareholders and other interested people information about the company's activities and financial performance
Annuity: The receipt of payments at regular intervals from a established fund. Annuities are commonly used for insurance and retirement programs. It works in this way: A fund, which can be established either through a one-time sum of money or a series of payments, is exhausted over time with fixed, periodic payments. […]
Antitrust Laws: Federal and state laws prohibiting, among other things, monopolies, monopolistic practices, restraint of trade, and price fixing to allow a free and open market.
Apple, Inc.: Apple Inc. (; previously Apple Computer, Inc.) is an American multinational corporation that designs and markets consumer electronics, computer software, and personal computers. The company's best-known hardware products include the Macintosh computers, the iPod, the iPhone and the iPad.
Appraisal: An expert estimate of the value of something.
Appreciation: An increase in the monetary value of something.
Arbitrage: Buying something in one market then immediately (or as soon as possible) selling it in another market for (hopefully) a higher price. Arbitrage is a common practice in financial markets. For example, an aspiring financial tycoon might buy a million dollars worth of Japanese yen in the Tokyo foreign exchange market then resell it immediately in the New York foreign exchange market for more than a million dollars. […]
Arbitration: Intervention of an impartial third party to settle disputes between two others. The decisions of this third party — the arbitrator — are legally binding, much like the ruling of a judge in a court of law. Arbitration is commonly used to interpret a collective bargaining agreement between unions and employers. […]
Asset: Something that you own. For a person, assets can be financial, like money, stocks, bonds, bank accounts, and government securities, or they can be physical things, like cars, boats, houses, clothes, food, and land. The important assets for our economy are the output we have produced and the resources, capital, and natural resources used to produce that output.

B

Baby Boomer: A citizen of the good old U. S. of A. born between the years 1946 and 1960. These Boomers represent a relatively large segment of the population and outnumber any other group born during a similar period, such as those born from 1931 to 1945 or from 1961 to 1975. Over the years, they've tended to set the standard for consumption, production, and politics. […]
Balance Sheet: A statement of the assets, liabilities, and net worth of a company at a given point in time. The basic relationship illustrated by a balanced sheet is that assets minus liabilities are equal to net worth. Or alternatively, assets are equal to liabilities plus net worth. […]
Balance of Trade: The difference between funds received by a country when exporting merchandise and the funds paid for importing merchandise. The balance of trade is a major part of the current accounts portion of the balance of payments. A balance of trade surplus results if exports exceed imports, commonly termed a favorable balance of trade, and a balance of trade deficit exists if imports exceed exports, analogously termed an unfavorable balance of trade. […]
Balanced Budget: An equality between the revenues and expenditures that constitute a budget. The notion of a budget is most important for governments, where revenues are taxes and expenditures are assorted public goods, administrative expenses, etc. While the federal government has been notorious for its failure to maintain a balanced budget, except for periods of unexpected prosperity, many state and local governments are very good at this sort of thing.
Bank: Financial intermediaries that function as depository institutions, maintaining deposits, making loans, and directly controlling the checkable deposits portion of the economy's money supply. As financial intermediaries, banks match up lenders and borrowers, using deposits for loans. However, banks are also responsible for maintaining liquid checkable deposits that are used as money for the economy. […]
Bank Run: A situation in which a relatively large number of a bank's customers attempt to withdraw their deposits in a relatively short period of time, usually within a day or two. While common throughout the 1800s and early 1900s, government deposit insurance has largely eliminated banks runs in the modern economy. Historically a bank run was prompted by fears that the bank was on the verge of collapse, causing deposits to become worthless. […]
Bank of the United States: This was actually two central banks that preceded the Federal Reserve System as the nation's monetary authority. The First Bank of the United States, under the design of Alexander Hamilton, commenced operations in 1791, almost immediately after the U.S. Constitution was written and George Washington became the first U.S. President. Its charter was not renewed and it ceased to operate in 1811. […]
Bankruptcy: A legal declaration that the liabilities of a proprietor (individual), partnership, or corporation are greater than assets. In other words, a consumer or business that is unable to pay the bills can go to court and be formally declared bankrupt. The impetus for entering a court can come voluntarily from the deadbeat who has acquired more liabilities than assets, or involuntarily from the creditors who have been unable to collect from the deadbeat.
Barter: A method of trading goods, commodities, or services, directly for one another without the use of money. In a barter exchange one good is traded directly for another. This sort of exchange ultimately requires a double coincidence of wants, meaning that each trader has what the other trader wants and wants what the other has. […]
Basis Point: One hundredth of one percent, used chiefly in expressing differences of interest rates.
Bear Market: A condition of the stock market in which stock prices are generally declining and most of the participants expect this decline to continue. In other words, the stock market is into an extended period of “hibernation” that could last for months or even years. This isn't the same as a “crash” of falling stock prices over a short time (like one day). […]
Berkshire-Hathaway: Berkshire Hathaway is a conglomerate holding company headquartered in Omaha, Nebraska, United States, that oversees and manages a number of subsidiary companies. Warren Buffett is the company's chairman and CEO.
Beta: A measure of the variability of rate of return or value of a stock or portfolio compared to that of the overall market. A beta below 1 implies lesser volatility. A beta above 1 implies greater volatility.
Binder: A temporary insurance contract provided by an insurance agent (who “binds” the insurer to the promised coverage) until the permanent contract is in place.
Black Knight: The company that makes a hostile takeover offer on a target company.
Black Market: An illegal market in which the price of the goods sold is above a legally set maximum price. A black market invariable results whenever the government imposes a price ceiling on a good. A common example of a price ceiling is rent controls on apartments in many large cities. […]
Blue Chip Stock: The corporate stock of relatively large, good old U. S. of A. companies that tend to be consistently profitable, pay out consistently high dividends, and are consistently stable force in the economy. The blue chip stocks are often considered synonymous with those included in Dow Jones averages.
Board of Governors: The policy-making head of the Federal Reserve System. The Board is comprised of 7 members, each serving 14-year terms, with one term expiring every two years. This Board, when joined by five Federal Reserve District Bank presidents forms the Federal Open Market Committee. […]
Bond: The general term for a long-term loan in which a borrower agrees to pay a lender an interest rate (usually fixed) over the length of the loan and then repay the principal at the date of maturity. Bond maturities are usually 10 years or more, with 30 years quite common. Bonds are used by corporations and federal, state, and local governments to raise funds. […]
Bond Funds: Mutual funds that invest in bonds.
Bond Rating: A measure of the ability of a firm to meet its debt obligations or credit worthiness. Basically, a bond rating summarizes the assessment of a firm's net worth, cash flow and viability of projects so that investors can assign the size of the default-risk premium to the bond. These measurements are so important that investors frequently pay professional analysts to collect, monitor and process information about firms. […]
Boycott: An organized effort to reduce the sales of a particular good that's intended to punished the producer or seller. Boycotts are promoted by labor unions to inflict harm on their companies and (hopefully) encourage their employers to settle labor distributes. Special interest groups also use boycotts to achieve assorted political goals. […]
Brand Name: That part of a brand that can be spoken. McDonald's use both its name and the “Golden Arches” as part of its brand. McDonald's would be the brand name.
Broker: Anyone who is paid to bring together buyers and sellers to complete a market transaction. Common examples of brokers are real estate agents, stock brokers, and insurance agents. The thing to note about brokers is that they don't buy or sell anything, but merely bring buyers and sellers together. […]
Budget: A statement of the financial position of an entity–especially household, business, or government–based on estimates of anticipated revenues and expenditures. A budget is balanced if the revenues and expenditures are equal. A budget deficit arises if expenditures exceed revenues and a budget surplus exists if revenues are greater than expenditures.
Budget Deficit: An excess of budgetary expenditures over revenues. The federal government is well known for its inclination to operate with a budget deficit. But it is not alone. Consumers also find themselves in this position on many occasions. […]
Budget Surplus: An excess of budgetary revenues over expenditures. This seemingly rare event is in fact commonly practiced by many state and local governments — albeit often because of constitutional mandates. The federal government has even accomplished this feat once or twice. Consumers operate a budget surplus whenever they're able to put a little bit of their income into saving.
Bull Market: A condition of the stock market in which stock prices are generally rising and most of the participants expect this to continue. In other words, the stock market is into an extended period of “charging ahead” like a mad bull. A bull market usually occurs because investors see a healthy, vibrant, profitable economy on the horizon. Compare bear market.
Business: A profit-motivated organization that combines resources for the production and supply of goods and services. The term business is often used synonymously with the term firm. If there is any difference, and a subtle difference at that, the term business usually refers to a productive organization that is privately owned and motivated by the pursuit of profit. […]
Business Cycle: The recurring expansions and contractions of the national economy (usually measured by real gross domestic product). A complete cycle typically lasts from three to five years, but could last ten years or more. It is divided into four phases — expansion, peak, contraction, and trough. […]
Business Plan: A business plan defines your business, identifies your goals, and serves as a company's resume. The basic elements include a current and pro forma balance sheet, an income statement, and a cash flow analysis. It helps the company allocate scarce resources properly and functions as a road map to make good business decisions. […]
Business Sector: The basic macroeconomic sector containing the private, profit-seeking firms in the economy that combine scarce resources into the production of wants-and-needs satisfying goods and services. The key economic function of the business sector is the production of goods and services. The three basic types of business organizations that comprise the business sector are proprietorship, partnership, and corporation. […]
Buyer's Market: A disequilibrium condition in a competitive market that has a surplus, such that buyers are able to force the price down. Note that a buyers' market does not mean that a lack of competition among demanders have given buyers market control. A buyers' market is a competitive market that simply has a temporary imbalance between the quantity demanded by the buyers and the quantity supplied by the sellers. […]
Buyer's Remorse: The post purchase behavior a consumer experiences when one has doubts as to whether the purchase decision was correct or not. This is a possible step five in the decision making process (post-purchase behavior). It can be overcome by effective decision making up-front on the part of the consumer. […]
Buying on Margin: A risky short-term strategy where a buyer borrows money from a broker to make an investment. The buyer believes the stock price will rise and is trying to maximize profits by investing more money in the stock.

C

C Corporation: The term used for a standard corporation to distinguish it from the new S corporation. As such, it is established as a separate legal entity, sells ownership shares, and owners have limited liability. The difference is that a C corporation is subject to double taxation but an S corporation is not.
Call Option: The option to buy a given stock (or stock index or commodity future) at a given price before a given date.
Capital (resource): One of the four basic categories of resources, or factors of production. It includes the manufactured (or previously produced) resources used to manufacture or produce other things. Common examples of capital are the factories, buildings, trucks, tools, machinery, and equipment used by businesses in their productive pursuits. […]
Capital Gains Tax: A tax on the difference between the sales price of a “capital” asset and it's original purchase price. The capital assets subject to this tax include such things real estate, stocks, and bonds. This tax is frequently a source of controversy between the second and third estates. […]
Capital Good: A good that is a manufactured (or previously produced) factor of production that is used to manufacture or produce other things. Common examples of capital goods re the factories, buildings, trucks, tools, machinery, and equipment used by businesses in their productive pursuits. The acquisition of capital goods is the primary goal of business investment.
Capitalism: A type of economy based on — (1) private ownership of most resources, goods, and other stuff (private property); (2) freedom to generally use the privately-owned resources, goods, and other stuff to get the most wages, rent, interest, and profit possible; and (3) a system of relatively competitive markets. While government establishes the legal “rules of the game” for capitalism and provides assorted public goods, like national defense, education, and infrastructure, most production, consumption, and resource allocation decisions are left up to individual businesses and consumers. […]
Capitalization: The total amount of securities issued by a corporation. This may include: bonds, debentures, preferred stock, common stock and surplus.
Cartel: A formal agreement between businesses in the same industry, usually on an international scale, to get market control, raise the market price, and otherwise act like a monopoly. A cartel tends to be unstable because the artificially high prices it sets gives each member of the cartel an incentive to “cheat” with a slightly lower price. When only one member of the cartel lowers the price, it can make oodles of profit by taking customers away from the other members. […]
Central Bank: The banking authority of a nation that's in charge of ensuring a sound money supply and conducting the country's monetary policy. It's usually authorized by, and works closely with, the government to achieve full employment, low inflation rates, economic growth, and all of the other goals that make people happy, healthy, and wise. Unlike many other nations, which have a single central bank, the good old U. S. of A. actually has a de-central bank.
Certificate of Coverage: A document explaining the health benefits you and your dependents have under the health insurance plan provided by the group (usually an employer). It details the services that will and will not be covered. Services that are not covered are called exclusions. […]
Certificate of Deposit (CD): A type of savings account, commonly termed CDs, maintained by banks and other depository institutions that pays higher interest rates that normal savings accounts, but requires the funds not be withdrawn for a specified time period
Checking Account: Money kept in a bank or savings and loan for safekeeping. Money can be easily withdrawn by writing checks or using an ATM or debit card.
Chief Executive Officer (CEO): A chief executive officer (CEO) or chief executive is the highest-ranking corporate officer (executive) or administrator in charge of total management of an organization. An individual appointed as CEO of a corporation, company, organization, or agency reports to the board of directors.
Claim: A demand by an individual or corporation to recover, under a policy of insurance, for a loss that may be covered under that policy.
Closed End Fund: A fund that does not issue new shares or accept new money after the initial public offering. Closed-end securities can be purchased in the open market, just like a stock
Co-payment: A percentage contribution by the policyholder for each dollar of loss covered by the policy. For instance, if a health insurance plan includes a 20% co-payment, then for $70 in covered medical charges, the insurer would pay 80% of the cost (or $56) and the policyholder pays the remaining 20% ($14). Co-payment is sometimes mistakenly referred to as “coinsurance” which is a separate insurance term.
Collateral: Something pledged as security for repayment of a loan, to be forfeited in the event of a default.
Collection Agency: A collection agency is a business that pursues payments on debts owed by individuals or businesses. Most collection agencies operate as agents of creditors and collect debts for a fee or percentage of the total amount owed.
Collective Bargaining: The negotiation process between a union and the company that employs the union's members — usually going by the moniker of management. The purpose of collective bargaining is to find mutual agreement on wages, fringe benefits, work hours, promotion criteria, grievance procedures, and everything else that has to do with employment. The end result of this process is a collective bargaining agreement, which is a formal contract between management and the union. […]
Collusion: A usually secret agreement among competing firms (mostly oligopolistic firms) in an industry to control the market, raise the market price, and otherwise act like a monopoly. The reason for the secrecy is that such behavior is illegal in the United States under antitrust laws. Collusion is a characteristic trait of oligopolistic industries. […]
Command Economy: An economy in which the government uses its coercive powers (such as command and control) to answer the three questions of allocation. This is the real world version of the idealized theoretical pure command economy. While in this real world version some allocation decisions are undertaken by markets, the vast majority are made through central planning. […]
Commercial Insurance: Insurance designed to cover commercial needs (that is, “organizational,” including corporations, partnerships, municipalities, charitable organizations), as opposed to personal lines, which cover personal needs. Examples include commercial general liability (CGL), workers compensation, and commercial property insurance.
Commodity: Raw materials or unprocessed products such as coffee beans, copper ore or cotton traded on exchanges.
Common Market: An agreement among two or more nations to eliminate trade restrictions with each other, to adopt a common trade policy with other nations, and to allow free movement of resources among their countries. There is, however, no effort to adopt common monetary or fiscal policies. This is considered the third of four levels of integration among nations. […]
Common Stock: The ownership shares in a corporation that have legal claim to the corporation's assets. Stock is usually dividend into two types, common stock and preferred stock. Preferred stock has first claim to the corporations net assets, and common stock comes in second. […]
Competitive Market: A market with a large number of buyers and a large number of sellers, such that no single buyer or seller is able to influence the price or any other aspect of the market — no one has any market control. A competitive market achieves efficiency in the use of our scarce resources if there are no market failures present.
Compound Interest: Interest that's added to a principal at regular intervals such that each subsequent interest calculation is based on the original principal and the added interest. For example, suppose you have a $100 savings account that pays 5 percent interest. Without compound interest, such that your 5 percent interest is paid only at the end of a year, you will have exactly $105 in one year. […]
Consumer Price Index: An index of prices of goods and services typically purchased by urban consumers. The Consumer Price Index, commonly known by its abbreviation, CPI, is compiled and published monthly by the Bureau of Labor Statistics (BLS), using price data obtained from an elaborate survey of 25,000 retail outlets and quantity data generated by the Consumer Expenditures Survey. […]
Consumers: A broad term for people when they are engaged in the use of goods and services to satisfy wants and needs. Consumers are part of the household sector
Contract: A formal agreement, typically written, between two or more parties that agrees on a specified outcome.
Contraction: A phase of the business cycle characterized by a general period of declining economic activity. A contraction is one of two basic business cycle phases. The other is expansion. The transition from contraction to expansion is termed a trough and the transition from expansion to contraction is termed a peak. […]
Corporate Bond: A bond issued by a corporation to raise the funds used for capital investment. A corporate bond usually has a maturity date of 5 years or more, with 30 years common. Most corporate bonds are negotiable and traded through financial markets after issued.
Corporate Stock: The ownership shares in a corporation that have legal claim to the corporation's assets. Stock is usually dividend into two types, common stock and preferred stock. Preferred stock has first claim to the corporations net assets, and common stock comes in second. […]
Corporation: One of the three basic forms of business organization (the other two are proprietorship and partnership). A corporation is a business established through ownership shares (termed corporate stock). A corporation is considered a distinct legal person, that can be sued, forced to pay taxes, etc., just like a human person. […]
Credit: The promise of future payment in exchange for money, goods, services, or anything else of value. Car loans, mortgages, credit cards, corporate bonds, commercial paper, and government securities are all forms of credit. In fact, credit is an extremely wide-spread and critical part of our economy. […]
Credit Agency: A credit rating agency (CRA) is a company that assigns credit ratings for issuers of certain types of debt obligations as well as the debt instruments themselves

D

Day Trading: The buying and selling of various financial instruments, such as futures, options, currencies, and stocks, with the goal of making a profit from the difference between the buying price and the selling price, and in this case, over the duration of one day.
Debit Card: An increasing popular means of accessing the funds in a bank checking account. While debit cards look almost like credit cards, they are fundamentally different in how they are processed on a bank's end of the transaction. A credit card works through a liability (a loan with the bank). […]
Debtor Nation: A nation that owes more to foreign governments, businesses, and consumers than foreigners owe to domestic governments, businesses, and consumers. The United States, having been a creditor nation for many decades, has now achieved the status of debtor nation. This sort of thing happens when exports are less than imports, creating a deficit in the current account of the balance of payments and thus a surplus in the capital account.
Deductible: The amount of loss retained by a policyholder before an insurer begins to pay. For instance, if the deductible on your automobile is $500 and a tree falls on top of it, causing $1,200 in damage, you would pay the first $500 and your insurer would pay the amount over $500 (in this case, $700).
Default Risk: The probability that a borrowing agent will not pay in full the agreed interest and/or principal. A default risk can be assigned to any bond or loan agreement. Of course, there are some instruments considered default-risk-free, that is, instruments for which the probability that a borrowing agent will not pay is zero. […]
Deficit (government): The amount by which government revenues (money taken in by taxes, fees, etc.) is less than expenditures (wages, military costs, highway construction, etc.)
Deflation: An extended decline in the average level of prices. This is the exact opposite of inflation–in which prices are rising over an extended period, and it should be contrasted with disinflation–which is a decline in the inflation rate. Like inflation, deflation occurs when the average price level decreases over time. […]
Demand: The willingness and ability to buy a range of quantities of a good at a range of prices, during a given time period. Demand is one half of the market exchange process; the other is supply. This demand side of the market draws inspiration from the unlimited wants and needs dimension of the scarcity problem. […]
Demographic Variables: Characteristics of the aggregate population that marketers use to segment the market, including age, ethnicity, income, education, gender, and race. Other characteristics include occupation, family size, religion, and social class. These characteristics are the link to buyers' wants and needs and affect purchasing behavior. […]
Deposits: Bank accounts maintained by banks on behalf of customers. In a fractional-reserve banking system, one of the primary functions of a bank is to keep customer deposits safe. Banks offer a wide range of deposits, including checkable (or transactions) deposits, savings deposits, certificates of deposit, and money market accounts. […]
Depression: An extended period–a decade or so–of restructuring and institutional change in an economy that's often marked by declining or stagnant growth. During this period, unemployment tends to be higher and inflation lower than a regular, run-of-the-mill recession. Moreover, a depression usually lasts in the range of ten years, often encompassing two or three separate shorter-run business cycles. […]
Deregulation: The reduction of government regulation of business, consumers, and market activity. The most noted period of deregulation occurred during the 1970's and 1980's in response to criticisms that economic regulation inhibited rather than promoted competition. Key industries deregulated during this period were transportation, communications, and banking industries. Social regulations were also relaxed.
Derivative: A security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. […]
Direct Deposit: Electronic funds that are deposited directly into your bank account rather than through a paper check. Common uses of a direct deposit include income tax refunds and pay checks.
Direct Stock Purchase (DSP): A number of companies, such as Walt Disney, offer direct stock purchase plans. These plans allow investors to buy shares of stock directly from the company. Most have a minimum initial deposit but are happy to waive it if you agree to automatic monthly withdrawals from your checking or savings account. […]
Discount Rate: The interest rate that the Federal Reserve System charges for loans to banks. To ensure that our nation's banks retain their liquidity and remain in business, the Federal Reserve System stands ready to lend bank reserves on a moment's notice to any bank. The discount rate is the interest rate the Federal Reserve System charges for these loans. […]
Discretionary Income: After-tax income over which a person (or the entire household sector) has more or less complete discretionary control, which can be then used for either consumption or saving. Discretionary income is most commonly measured at the macroeconomic level by disposable income.
Disposable Income: The total income that can be used by the household sector for either consumption or saving during a given period of time, usually one year. This is the income left over after income taxes and social security taxes are removed and government transfer payments, like welfare, social security benefits, or unemployment compensation are added.
Diversification (to diversify): To invest in a variety of assets to reduce risk. Risk, however, cannot be entirely eliminated when investing.
Dividend: The portion of a corporation's after-tax accounting profit that's paid to shareholders or owners. Corporate managers usually try to pay the shareholders some minimum dividend that's comparable to returns from other financial markets–such as the interest on government securities or corporate bonds–to keep the owners from selling off the company's stock. That portion of after-tax accounting profit that's not paid out as dividends is typically invested in capital.
Dividend Reinvestment Plan (DRIP): Instead of sending dividend checks to shareholders enrolled in a company's DRIP, the company reinvests those dividends by purchasing additional shares (or fractional shares) in the shareholder's name. A shareholder usually needs only one share to enroll in a company's DRIP plan, and most of the time the company will reinvest a shareholder's dividends without a fee or commission.
Division of Labor: A basic economic notion that labor resources are used more efficiently if work tasks are divided among different workers. This allows workers to specialize in production as each becomes highly skilled at specific tasks. Efficiency achieved through specialization and the division of labor was popularized by Adam Smith in his classic work, The Wealth of Nations. […]
Dollar Cost Averaging: To invest, as in shares of stock, fixed amounts of money at regular intervals so as to buy more at lower prices and less at higher prices. Dollar-cost averaging means that if you put the same amount in each year, you'll buy more investments, such as mutual fund shares, when prices are down and fewer when prices are up. The end result will be that you'll pay a lower average price than the actual average price of the investment during that period.
Dow Jones Averages: These are the most widely used and recognized indexes of stock market prices in our economy. There are actually three separate indexes, for (1) 30 industrial stocks, (2) 20 transportation stocks, and (3) 15 utility stocks. There's also a composite index for all 65 stocks.
Durable Good: A good bought by consumers that tends to last for more than a year. Common examples are cars, furniture, and appliances. Durable goods play an important role in the business cycle. […]

E

Earnings Per Share (EPS): The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability. It is calculated by dividing a company's net income by the number of the company's outstanding shares.
Earnings Report: A statement of the revenues, expenditures, and profit for a business, household, or government entity over a given period of time. An income statement also goes by the names profit and loss statement, income statement, and operating statement. This is one of two key financial statements for an entity. […]
Economic Indicators: Numerous economic statistics that provide valuable information about the expansions and contractions of business cycles. These economic statistics are grouped into three sets–lagging, coincident, and leading. Leading economic indicators tend to move up or down a few months BEFORE business-cycle expansions and contractions. […]
Economic Sanctions: Economic sanctions are domestic penalties applied by one country (or group of countries) on another for a variety of reasons. Economic sanctions include, but are not limited to, tariffs, trade barriers, import duties, and import or export quotas
Economics: A social science that studies the allocation of limited resources to the production of goods and services used to satisfy consumer's unlimited wants and needs. Five notable phrases contained in this definition that need further study are: (1) social science, (2) allocation, (3) limited resources, (4) production, and (5) unlimited wants and needs
Economy: The system of production, distribution, and consumption of goods and services that a society uses to address the problem of scarcity. The essential task of an economy is to transform resources into useful goods and services (the act of production), then distribute or allocate these products to useful ends (the act of consumption). Virtually all economies accomplish this task through a combination of decisions made through voluntary market exchanges and involuntary government rules and regulations.
Education Savings Account (ESA): A Coverdell Education Savings Account (also known as an Education Savings Account, a Coverdell ESA, a Coverdell Account, or just an ESA and formerly known as an Education Individual Retirement Account), is a tax-advantaged, tax-deferred investment account in the United States designed to encourage savings to cover future education expenses (elementary, secondary or college), such as tuition, books, uniform, etc.
Efficiency: Obtaining the most possible satisfaction from a given amount of resources. Efficiency for our economy is achieved when we can not increase our satisfaction of wants and needs by producing more of one good and less of another. This is one of the five economic goals, specifically one of the two micro goals (the other being equity).
Elasticity: The relative response of one variable to changes in another variable. The phrase “relative response” is best interpreted as the percentage change. For example, the price elasticity of demand, one of the more important applications of this concept in economics, is the percentage change in quantity demanded measured against the percentage change in price. […]
Embargo: In general, any sort of restriction on foreign trade, in practice, the restriction of exports destined for sale in another country. Unlike tariffs, import quotas, and other non-tariff barriers that protect domestic producers from competition, embargoes are intended to punish the export destination country. One of the more famous embargoes in recent decades was the oil embargo that several middle-eastern countries imposed on the United States in the 1970's. […]
Entrepreneurship: One of the four basic categories of resources, or factors of production (the other three are labor, capital, and land). Entrepreneurship is a special sort of human effort that takes on the risk of bringing labor, capital, and land together and organizing production.
Equity: This has two, not totally unrelated, uses in our wonderful world of economics. The first is as one of the two micro goals (the other being efficiency) of a mixed economy. This use relates to the “fairness” of our income or wealth distributions. The second use of the term equity means ownership, especially the ownership of a business or corporation
Exchange: The process of trading one item for another. Exchange is fundamental to the study of economics, markets, and market-oriented economies. Most exchanges in a modern, complex market-oriented economy involve a commodity on one side and a monetary payment (that is, price) on the other. […]
Exchange Rate: The price of one nation's currency in terms of another nation's currency. This is often called the foreign exchange rate in that it is the price determined in the foreign exchange market when people buy and sell foreign exchange. The exchange rate is specified as the amount of one currency that can be traded per unit of another
Excise Tax: A tax on a specific good. This should be compared with a general sales tax, which is a tax on all (or nearly all) goods sold. The most common excise taxes are on alcohol, tobacco, and gasoline. […]
Exclusion: An insurance provision designating a type of event or loss that is not covered by the insurance policy.
Expected Loss: Sometimes referred to as the “mean” or “average” loss. This value often is used to estimate future losses. It is typically calculated as: estimated loss frequency multiplied by estimated loss severity. […]
Export: The sale of goods to a foreign country. The United States, for example, sells a lot of the stuff produced within our boundaries to other countries, including wheat, beef, cars, furniture, and, well, almost every variety of product you care to name. In general, domestic producers (and their workers) are elated with the prospect of selling their goods to foreign countries–leading to more buyers, a higher price, and more profit. […]
Exposure: The value or asset that can be lost and is the subject of insurance coverage. Exposures include automobiles and houses we own; income we anticipate earning; financial assets that must be paid to others because of our own negligence.
External Cost: A cost that's not included in the market price of a good because it's not included in the supply price. Pollution is an example of an external cost if producers aren't the ones who suffer from pollution damages. External cost is one type of market failure that causes inefficiency.

F

Factors of Production: The four basic factors used to produce goods and services in the economy–labor, capital, land, and entrepreneurship. These are also called resources or scarce resources. The term “factors of production” is quite descriptive of the function these “resources” perform. […]
Featherbedding: A labor union practice of artificially increasing the number of workers employed even though the specific job or task can be completed with fewer workers. This can be done mandating that specific jobs be performed only by workers with specific skill levels or be mandating that a certain number of workers are needed to perform a job or task. By increasing the demand for workers, featherbedding also keeps wages higher.
Federal Deposit Insurance Corporation (FDIC): A program established by Congress in 1933, during the worst of the Great Depression, to insure the deposits of failed banks. Abbreviated FDIC, it operates operates much like any private insurance company. It collects insurance premiums from its customers–the banks–in return for the assurance that it will stand behind, or be ready to pay off, any deposits that the banks can't.
Federal Insurance Contributions Act (FICA): Commonly abbreviated FICA, this act passed in 1939 established payroll deductions from wage-earning employees and the employers for the Social Security system. This is the noted Social Security tax that wage earners pay and which is then used to provide Social Security benefits to the elderly, disable, and qualified dependents.
Federal Open Market Committee (FOMC): A part of the Federal Reserve System that's specifically responsible for directing open market operations, and is more generally charged with guiding the nation's monetary policy. The FOMC includes the 7 members of the Fed's Board of Governors and 5 of the 12 presidents of Federal Reserve District Banks. The chairman of the Federal Reserve System is also the chairman of the FOMC. […]
Federal Reserve Bank: One of 37 Banks (12 District and 25 Branch) that comprise the Federal Reserve System. These Banks are largely responsible for supervising, regulating, and interacting with commercial banks and carrying out the policies established by the Federal Reserve Board of Governors. The large number of banks, spread across the country is what helps make the Federal Reserve System a very decentralized central bank.
Federal Reserve System: The central bank of the United States. It includes a Board of Governors, 12 District Banks, 25 Branch Banks, and assorted committees. The most important of these committees is the Federal Open Market Committee, which directs monetary policy. […]
Fiduciary: Relating to confidence or trust of one person in another, especially has it applies to financial matters. For example, you might give a lawyer, broker, or agent might be given fiduciary authority to access your bank account, pay your taxes, or maintain your investments. Alternatively, corporate executive might have the fiduciary authority to enter into contracts, write checks, or otherwise operate as a financial agent for the corporation.
Fiscal: Relating to government taxation, spending, or financial matters. The term is most often using in combination with other words, such as fiscal budget, fiscal year, or fiscal policy. In each case, the addition of the term “fiscal” means a connection with government financial matters. […]
Fixed Cost: In general, cost that does not change with changes in the quantity of output produced. More specifically, fixed cost is combined with the adjectives “total” and “average” to indicate the overall level of fixed cost or the per unit fixed cost. Fixed cost is incurred whether of not any output is produced. […]
Fixed Rate Mortgage: A mortgage loan first developed by the Federal Housing Administration (FHA) where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may adjust or “float”.
Foreclosure: A legal move to acquire possession of mortgaged property when the borrower is unable to pay off the loan or make payments according to the conditions of the loan. In other words, if you can't make your house payments, the bank (or lender) can boot you out and take your house. The house can then be sold to pay off all or part of the loan. […]
Fortune 500: A list of the 500 largest (in terms of sales) publicly held corporations in the good old U. S. of A., as compiled and published by Fortune magazine. While other business-oriented magazines publish similar lists, this one has come to symbolize the largest, most powerful bastions of the second estate. For a business to achieve ranking on the Fortune 500 is a mark of success. […]
Free Enterprise: A term that's often used, erroneously, in reference to capitalism. In principle, free enterprise is an economy in which businesses and consumers are “free” to engage their resources in any desired production, consumption, or exchange without government restriction, regulation, or control.
Futures: An agreement to complete the sale of a commodity at a pre-determined price on some future date. Much of the real stuff that consumers buy is what is usually termed a spot transactions. You buy the stuff, pay the price, and take it home with you. […]

G

G-20: In 1999, the Finance Ministers of the Group of Seven (G-7) leading industrialized nations announced the creation of the Group of Twenty (G-20). This international forum of Finance Ministers and Central Bank Governors represents 19 countries, the European Union and the Bretton Woods Institutions (the International Monetary Fund -IMF– and the World Bank). The G-20 promotes discussion, and studies and reviews policy issues among industrialized countries and emerging markets with a view to promoting international financial stability. […]
G-7: The common abbreviation for the Group of Seven, which is seven of the most advanced and industrialized nations of the world–the United States, Britain, France, Italy, Canada, Germany, and Japan–that meet regularly to coordinate fiscal and monetary policies. Their actions are based on the proposition that our global economy and the individual countries are better off through cooperation than conflict.
G-8: The common abbreviation for the Group of Eight, which includes the seven of the most advanced and industrialized nations of the world known as the G-7–the United States, Britain, France, Italy, Canada, Germany, and Japan–plus Russia. That is, the G-8 is the G-7 plus Russia, which effectively replaced the G-7 in 1998. They meet regularly to coordinate fiscal and monetary policies. […]
Generic Goods: Non-branded products that usually sell at a sizable discount compared to national or private brands.
Globalization: The generalized expansion of international economic activity which includes increased international trade, growth of international investment (foreign investment) and international migration, and increased proliferation of technology among countries. Globalization is the increasing world-wide integration of markets for goods, services, labor, and capital. It is an ongoing process that started several centuries ago. […]
Gold: A yellow precious metal valued especially for use in technology applications, jewelry, and to guarantee the value of currencies.
Golden Parachute: A golden parachute is an agreement between a company and an employee (usually upper executive) specifying that the employee will receive certain significant benefits if employment is terminated. Sometimes, certain conditions, typically a change in company ownership, must be met, but often the cause of termination is unspecified. These benefits may include severance pay, cash bonuses, stock options, or other benefits.
Good: This generically means a physical, tangible product used to satisfy people's wants and needs. The term good should be contrasted with the term service, which captures the intangible satisfaction of wants and needs. As such, you will frequently see the plural combination of these two phrases together “goods and services” to indicate the wide assortment of economic goods produced using the economy's scarce resources.
Grace Period: A provision in most loan and insurance contracts which allows payment to be received for a certain period of time after the actual due date. During this period no late fees will be charged, and the late payment will not result in default or cancellation of the loan. A typical grace period is 15 days.
Graduated Tax: A type of progressive tax in which the tax rate is higher as the value of the taxed item increases. For example a graduated sales tax would be one with a 5 percent tax rate on the first $10 of sales, 10 percent tax rate on the any sales between $10 and $50, then a 15 percent rate for anything above $50. Our personal income tax system uses graduated taxes.
Great Depression: A period of time from 1929 to 1941 in which the economy experienced high rates of unemployment (averaging well over 10%), low production, and limited investment. This period of stagnation prompted radical changes in the way government viewed it's role in the economy and lead to our modern study of macroeconomics.
Gross Domestic Product (GDP): The total market value of all goods and services produced within the political boundaries of an economy during a given period of time, usually one year. This is the government's official measure of how much output our economy produces
Gross National Product (GNP): The abbreviation for gross national product, which is the total market value of all goods and services produced by the citizens of an economy during a given period of time, usually one year. Gross national product, often was once the federal government's official measure of how much output our economy produces. In the early 1990's, however, it was replaced by gross domestic product (GDP).
Group Insurance: Any insurance plan under which a number of individuals are covered under a single master policy with individuals receiving certificates of coverage, most typically found in employer-provided health insurance.
Growth Investing: Growth investing is a style of investment strategy. Those who follow this style, known as growth investors, invest in companies that exhibit signs of above-average growth, even if the share price appears expensive in terms of metrics such as price-to-earnings or price-to-book ratios. In typical usage, the term “growth investing” contrasts with the strategy known as value investing.

H

Hazards: Conditions that increase the probability (frequency) or size (severity) of a loss. Examples include poor maintenance in a factory, inadequate lighting in a crime-prone area, speeding or being under the influence while driving, eating poorly and/or smoking tobacco.
Health Insurance: A generic term applying to all types of insurance indemnifying or reimbursing for costs of hospital and medical care.
Health Maintenance Organization (HMO): An organization that provides for a wide range of comprehensive health care services in exchange for a fixed periodic payment.
Hedge Fund: A hedge fund is a private, aggressively managed investment fund that utilizes sophisticated strategies in both the international and domestic markets designed to offset losses during a market downturn and/or generate returns higher than traditional stock and bond investments.
Human Capital: The stock of competencies, knowledge and personality attributes embodied in the ability to perform labor so as to produce economic value.

I

Immigration: Migration that enters one country from another country. Immigration is usually seen as a problem for existing citizens of nation because–(1) the supply of labor increases, which tends to lower wages, (2) there's a greater demand for public services, which causes taxes to rise, and (3) the culture of immigrants is usually different, which creates all sorts of social conflicts. […]
Imports: Goods and services produced by the foreign sector and purchased by the domestic economy. In other words, imports are goods purchased from other countries. The United States, for example, buys a lot of the stuff produced within the boundaries of other countries, including bananas, coffee, cars, chocolate, computers, and, well, a lot of other products. […]
Impulse Buying: An impulse purchase or impulse buy is an unplanned decision to buy a product or service, made just before a purchase.
Incentive: A cost or benefit that motivates a decision or action by consumers, businesses, or other participants in the economy. Some incentives are explicitly created by government policies to achieve a desired end or they can just be part of the wacky world we call economics. The most noted incentive in the study of economics is that provided by prices. […]
Income: Revenue earned or received by households that can be used for consumption or saving. For the aggregate economy, earned income is termed national income, while received income is termed personal income. The key is that income for the aggregate economy is generated in the production of goods and services.
Income Tax: A tax on income, including wages, rent, interest, profit, and (usually) transfer payments. The income tax system in the United States includes both a personal income tax and corporate income tax. In general, the U. S. income tax is progressive, but through a number of deductions and other loopholes, it's less so in practice that on paper.
Indemnification: Compensation for harm or loss. Typically indemnification should be equal in value to what was lost, however an insured can be over-indemnified (compensated more than the loss) or under-indemnified (compensated less than the loss).
Index Fund: Typically a mutual fund or exchange-traded fund, an index fund aims to replicate the movements of an index of a specific financial market, or a set of rules of ownership that are held constant, regardless of market conditions. Because of the lack of active management this mutual fund generally provides the advantage of lower fees and lower taxes in taxable accounts.
Individual Retirement Account (IRA): The abbreviation for individual retirement account, a savings retirement account set up with a bank, mutual fund, brokerage firm that allows people to set aside a portion of their income each year. Like other private pension plans, income diverted to an IRA is tax deferred, that is, taxes on not paid on the income until it is withdrawn during retirement.
Industry: A group of firms producing goods or services that are close substitutes-in-consumption. The similarity of the products makes it possible to analyze the production in a market framework. An industry can be broadly defined, such as the manufacturing industry, or narrowly specified, such as the root beer industry. […]
Inflation: A persistent increase in the average price level in the economy. Inflation occurs when the average price level (that is, prices in general) increases over time. This does not mean that all prices increase the same, nor that all prices necessarily increase. […]
Infrastructure: Capital used for transportation, communication, and energy delivery. This is often termed social overhead capital because it provides the basic capital foundation needed by an economy before business capital can adequately do its job.
Inheritance Tax: A tax on that portion of the Assets of a deceased person that's received by another. This should be compare with an estate tax, which is a tax is paid on the value of all assets before they are distributed to heirs.
Initial Public Offering (IPO): An initial public offering or Initial Purchase Offer (IPO), referred to simply as an “offering” or “flotation”, is when a company (called the issuer) issues common stock or shares to the public for the first time. They are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately owned companies looking to become publicly traded.
Insider Trading: The buying and selling of corporate stock or other financial instruments based on knowledge that is not widely available to the general public. Insider trading is most often undertaken by corporate executives or directors using information that they have acquired by working “inside” the company. Insider trading is illegal because it gives an unfair advantage to those on the inside. […]
Insolvency: The condition of a business when liabilities (excluding ownership equity) are greater than Assets. In other words, a business can't pay it's debts. This is a first step on the road to bankruptcy, but it doesn't guarantee that legal bankruptcy proceedings will be initiated.
Insurance: A mechanism through which a group of insureds (policyholders) pool their losses. Insureds transfer risk to insurers via a contractual agreement (an insurance policy), and “pay” for losses through insurance premiums, thereby transferring a large potential loss (the insurance loss payment) in exchange for a small certain loss (the insurance premium).
Insurance Agent: A person or organization who/that solicits, negotiates, or instigates insurance contracts on behalf of an insurer and can be independent or an employee of the insurer. Insurance agents are the legal representatives of insurers, rather than policyholders, with the right to perform certain acts on behalf of the insurers they represent, such as to bind coverage. Agents can represent multiple insurers (an “independent” agent), or just one company (as an exclusive agent or direct writer). (Listed under "Insurance industry specific careers".)
Insurance Broker: An insurance intermediary who/that represents and assists the insurance buyer (the insured) rather than the insurer. Because they do not represent the insurer, brokers cannot bind the insurer to promised coverage; however, they do have the capability to identify insurance coverage opportunities from a wide array of insurers. […] (Listed under "Insurance industry specific careers".)
Insurance Loss: The basis of a claim for damages under the terms of a policy.
Interest: A fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is also most commonly the price paid for the use of borrowed money, or, money earned by deposited funds. When money is borrowed, interest is typically paid to the lender as a percentage of the principal, the amount owed. […]
Intermediary: The go-between that connects up buyer and sellers in a market. Stock brokers, real estate agents, and banks are common intermediaries.
Internal Revenue Service (IRS): An agency of the U. S. Department of Treasury with the responsibility of collecting taxes. It was established during the Civil War in 1862, but underwent a major overhaul in 1913 when the 16th amendment to the U. S. Constitution gave it the power to collect income taxes.
International Monetary Fund (IMF): An agency of the United Nations established in 1945 to monitor and stabilize foreign exchange markets. Close to 150 of the world's nations (which is just about all of them) belong to the IMF. The IMF was set up to keep countries from manipulating their exchange rates in such a way as to gain a competitive trading advantage over others. […]
Inventory: Stocks of finished products, intermediate goods, raw materials, and other inputs that businesses have on hand. One big reason to keep inventories is to maintain a continuous stream of production by avoiding any supply shortages. Another big reason is to avoid the loss of sales because finished products are unavailable when a customer is ready, willing, and able to buy.
Investment Banking: The process of wholesaling newly issued government securities, corporate stocks, bonds, and similar financial assets by purchasing large blocks and reselling them in smaller units to the public. In essence, investment banks “underwrite” stocks and bonds when they're first issued by guaranteeing to sell them at a pre-set price.
Invisible Hand: The notion that buyers and sellers, consumers and producers, households and businesses, pursuing their own self-interests, do what's best for the economy–automatically, without any government intervention, as if guided by an invisible hand. This invisible hand was essential to the economic analysis of markets in Adam Smith's The Wealth of Nations. It has continued to be cornerstone in conservative economic policies that call for limits on government intervention in the economy.

J

Junk Bond: A bond, usually a corporate bond, that has a higher than average risk of default, but which pays a higher than average interest rate to compensate. Junk bonds were a popular method of investment during the 1970's and 1980's, especially to finance corporate mergers. Junk bounds held by savings and loan associations that defaulted were a major source of problems during the 1980's.
Just In Time: A method of production in which inputs used in the production process are delivered to a firm or factory immediately before they are needed. Just in time limits the inventories of raw materials and intermediate goods kept on site. While this is credited with improving microeconomic production efficiency, it might also prevent macroeconomic business-cycle instability that is attributable to the unplanned build-up of business inventories.

K

Keogh Plan: A savings retirement plan for self-employed workers authorized by the Self-Employment Individuals Retirement Act (1982). A Keogh plan is similar to an IRA (individual retirement account), but is a bit more complicated to establish. Like other private pension plans, income diverted to Keogh plans are tax deferred, that is, taxes on not paid on the income until it is withdrawn during retirement.
Keynes, John Maynard: A British economist (born 1883, died 1946) who is most noted for his work The General Theory of Employment, Interest, and Money, published 1936. The The General Theory revolutionized economic theory of the day, forming the foundation of Keynesian economics and creating the modern study of macroeconomics. […]
Keynesian Economics: A school of thought developed by John Maynard Keynes built on the proposition that aggregate demand is the primary source of business cycle instability, especially recessions. The basic structure of Keynesian economics was initially presented in Keynes' book The General Theory of Employment, Interest, and Money, published in 1936. For the next forty years, the Keynesian school dominated the economics discipline and reached a pinnacle as a guide for federal government policy in the 1960's. […]

L

Labor: One of the four basic categories of resources, or factors of production (the other three are capital, land, and entrepreneurship). Labor is the services and efforts of humans that are used for production. While labor is commonly thought of as those who work in factories, it includes all human efforts (except entrepreneurship), such as those provided by clerical workers, technicians, professionals, managers, and even company presidents.
Lagging Economic Indicator: One of seven economic statistics that tend to move up or down a few months after the expansions and contractions of the business cycle. These statistics paint a pretty clear picture of what the economy was doing a few months back. Lagging economic indicators lag the turning points of the aggregate economy by 3-12 months. […]
Laissez Faire: A french term that translates into “leave us alone.” It has become the rallying cry for many business leaders of the second estate who oppose government intervention, regulation, or even taxation. It's based on the belief that markets alone can achieve an efficient allocation of our resources. […]
Land: One of four basic categories of resources, or factors of production (the other three are labor, capital, and entrepreneurship). This category includes the natural resources used to produce goods and services, including the land itself; the minerals and nutrients in the ground; the water, wildlife, and vegetation on the surface; and the air above.
Large Cap Stock: A term used by the investment community to refer to companies with a market capitalization value of more than $10 billion. Large cap is an abbreviation of the term “large market capitalization”. Market capitalization is calculated by multiplying the number of a company's shares outstanding by its stock price per share. […]
Law of Large Numbers: A statistical theorem especially important in insurance whereby estimates become more accurate as sample sizes grow. Through application of the theorem, insurers are able to combine the experience of many policyholders for improved accuracy of estimated losses. […]
Leverage: The use of credit or loans to enhance speculation in the financial markets. Suppose, for example, that you take the $1,000 in your bank account to your stock broker and purchase $1,000 worth of stocks, bonds, or whatever. A leveraged purchase would let you use your $1,000 to buy, let's say, $10,000 worth of stocks or bonds. […]
Liability: The responsibility to pay for harm incurred by someone else. For example, a speeding driver who negligently hits a parked car will be legally liable to pay for the resulting damage (and for the injury incurred by anyone in the car at the time).
Liability Insurance: Insurance that financially protects an individual or business from the risk that they may be sued and held legally liable for something such as malpractice, injury or negligence. The insurer compensates the injured party and not the insured for the loss. Often the coverage includes legal defense against such liability. […]
Life Insurance: Provides for payment of an amount as specified in the contract to a beneficiary upon an insured's death, or at a designated date.
Limit Order: An order placed with a brokerage to buy or sell a set number of shares at a specified price or better.
Limit of Coverage: The maximum amount payable under a given insurance contract. Many policies have multiple limits (a certain amount per person, another amount per accident, and sometimes an aggregate limit on all losses paid during the policy term).
Limited Liability: A condition in which owners are not personally held responsible for the debts of by a firm. Corporations are the main form of business in which owners have limited liability. The primary benefit of limited liability is that it makes it possible for a business to accumulate large amounts of productive resources that lets it take advantage of large scale production.
Limited Partnership: A partnership in which one or more of the partners/owners has/have limited liability. This differs from regular partnerships in which each partner has unlimited liability. The limited partnership legal structure was created to provide liability protection to “partners” seeking investment opportunities, who did not want to participate in the actual management of the firm. […]
Line of Credit: An arrangement between a financial institution, usually a bank, and a customer that establishes a maximum loan balance that the bank will permit the borrower to maintain. The borrower can draw down on the line of credit at any time, as long as he or she does not exceed the maximum set in the agreement.
Liquidity: The ease of converting an asset into money (either checking accounts or currency) in a timely fashion with little or no loss in value. Money is the standard for liquidity because it is, well, money and no conversion is needed. Other assets, both financial and physical have varying degrees of liquidity. […]
Lloyd's of London: An insurance marketplace (an exchange) in England, initiated more than 300 years ago in response to the need to protect against loss when merchants sent shipments across the oceans. For much of its history, Lloyd's has been a leader in insurance activity around the globe, providing innovative products and significant insurance capacity.
Load: A sales charge or commission charged to an investor when buying or redeeming shares in a mutual fund.
Loaded Fund: A mutual fund that charges a load.
Loan: In general, a transaction in which a legal claim is exchanged for money. The legal claim is typically a contract or promissory note stipulating when and how the money will be repaid. The lender gives up the money and receives the legal claim. […]
Lockout: A plant or factory that is closed temporarily, because it's owners are trying to gain a negotiating advantage over the employees' union. A lockout is commonly used by a company's management if they suspect the union is planning to strike. A lockout by management before the union strikes is much like a pre-emptive military attach that tries to hit the enemy hard, fast, and first.
London Interbank Offered Rate (LIBOR): The LIBOR is the world's most widely used benchmark for short-term interest rates. It's important because it is the rate at which the world's most preferred borrowers are able to borrow money. It is also the rate upon which rates for less preferred borrowers are based. […]
Loss Sharing: The idea that loss is borne (financially) by all policyholders through premium payments rather than by the random few who experience the underlying covered event (such as an automobile accident, fire at an apartment or house, death, disability, etc.).

M

Macro Economics: The branch of economics that studies the entire economy, especially such topics as aggregate production, unemployment, inflation, and business cycles. It can be thought of as the study of the economic forest, as compared to microeconomics, which is study of the economic trees.
Margin Call: A broker's demand on an investor using margin to deposit additional money or securities so that the margin account is brought up to the minimum maintenance margin. You would receive a margin call from a broker if one or more of the securities you had bought (with borrowed money) decreased in value past a certain point.
Market: The organized exchange of commodities (goods, services, or resources) between buyers and sellers within a specific geographic area and during a given period of time. Markets are the exchange between buyers who want a good–the demand-side of the market–and the sellers who have it–the supply–side of the market. In essence, a buyer gives up money and gets a good, while a seller gives up a good and gets money. […]
Market Failures: Conditions in which a market does not efficiently allocate resources to achieve the greatest possible consumer satisfaction. The four main market failures are–(1) public good, (2) market control, (3) externality, and (4) imperfect information. In each case, a market acting without any government imposed direction, does not direct an efficient amount of our resources into the production, distribution, or consumption of the good.
Market Maker: A market maker is a company, or an individual, that quotes both a buy and a sell price in a financial instrument or commodity held in inventory, hoping to make a profit on the bid-offer spread, or turn.
Market Order: An order that an investor makes through a broker or brokerage service to buy or sell an investment at the best available, or market, price.
Market Share: The fraction of an industry's total sales accounted for by a single business. In general, market share is a “first-guess” indicator of a firm's market control. If, for example, a company has a market share of 100 percent (that is, a monopoly), then you can rest assured it has a substantial amount of market control. […]
Medicare: A federal system of health insurance for people over 65 years of age and for certain younger people with disabilities.
Medium Cap Stock: Or mid-cap stock, a company with a market capitalization between $2 and $10 billion, which is calculated by multiplying the number of a company's shares outstanding by its stock price.
Merchant: A person or company involved in wholesale trade, especially one dealing with foreign countries or supplying merchandise to a particular trade.
Merger: The consolidation of two separately-owned businesses under single ownership. This can be accomplished through a mutual, “friendly” agreement by both parties, or through a “hostile takeover,” in which one business gets ownership without cooperation from the other. Mergers fall into one of three classes — (1) horizontal–two competing firms in the same industry that sell the same products, (2) vertical–two firms in different stages of the production of one good, such that the output of one business is the input of the other, and (3) conglomerate–two firms that are in totally, completely separated industries.
Micro Cap Stock: The term is used to describe publicly traded companies which have a market capitalization of roughly $300 million or less.
Micro Economics: The branch of economics that studies the parts of the economy, especially such topics as markets, prices, industries, demand, and supply. It can be thought of as the study of the economic trees, as compared to macroeconomics, which is study of the entire economic forest.
Mixed Economy: An economy, or economic system, that relies on both markets and governments to allocate resources. While, in theory, we could have a pure market economy or a pure command economy, in the real world all economies are mixed, relying on both markets and governments for allocation decisions. Markets allocate resources through voluntary choices made by living, breathing people. […]
Monetary Policy: The Federal Reserve System's use of the money supply to stabilize the business cycle. As the nation's central bank, the Federal Reserve System determines the total amount of money circulating around the economy. In principle, the Fed can use three different “tools”–open market operations, the discount rate, and reserve requirements–to manipulate the money supply. […]
Money: Anything that is generally accepted in exchange as payment for goods and services. The emphasis is on “any,” because any item or asset can serve as money so long as it is generally accepted in payment throughout an economy. While the key function of money is acting as a medium of exchange, money also functions as a store of value, standard unit of account, and standard of deferred payment
Money Market: A financial market that trades U.S. Treasury bills, commercial paper and other short-term financial instruments. This market is often used by businesses when they need short-term funds to bridge the gap between paying operating costs and collecting revenue from product sales. As such, the term “money” in money market indicates that businesses are using highly liquid instruments to raise the money need for operating expenses.
Monopoly: A market structure characterized by a single seller of a unique product with no close substitutes. This is one of four basic market structures. The other three are perfect competition, oligopoly, and monopolistic competition. […]
Morningstar: An independent investment research and ratings company based in Chicago, IL.
Mortgage Loan: A mortgage loan is a loan secured by real property through the use of a mortgage note.
Multinational Company: A business that operates in two or more countries. With increased foreign trade, many businesses in the United States, as well as other nations, have found it worthwhile to open offices, branch plants, distribution centers, etc., around the globe. Almost all of the “big boys,” like General Motors, Sony, IBM, British Petroleum, Mitsubishi, and Exxon, are multinational companies. […]
Municipal Bond: Also called local bonds or munis, these are medium or long-term financial instruments issued by municipalities to borrow the funds used to build schools, highways, parks and other public projects. An attractive feature of these financial instruments is that are exempt from federal income tax. Commercial banks, corporations, and others with large sums of funds to lend usually purchase these bonds.
Mutual Fund: A company that pools the funds of hundreds or thousands of individuals to purchase corporate stocks, bonds, or other financial assets. The objectives of pooling funds is to reduce transactions costs and provide professional management not otherwise available. The most common types of mutual funds are “open-ended,” so called because there are no limits on the number of shares issued. […]
Mutual Insurer: An insurance company owned by its policyholders.

O

Oligopoly: A market structure dominated by a small number of large firms, selling either identical or differentiated products, and significant barriers to entry into the industry. This is one of four basic market structures. The other three are perfect competition, monopoly, and monopolistic competition.
Opportunity Cost: Opportunity cost is the value of the next best choice that one gives up when making a decision.
Organization of Petroleum Exporting Countries (OPEC): An international organization of more than a dozen nations located primarily in the Middle East, Africa, and Central America that controls a sizeable portion of the world's petroleum reserves
Organized Labor: The general term used when referring to the collection of labor unions representing the interests of workers. Of course, to be “organized” labor, labor needs to “organized,” which is what labor unions are all about. Prior to the onset of the labor union movement in the mid-1800's, labor was not organized, meaning that each and every worker acted independently in the pursuit of wages, fringe benefits, or improved working conditions. […]
Over-the-Counter Market: A market that trades corporate stocks and other securities using a computerized network of dealers rather than an organized exchange. Over-the-counter market is most often used in reference to the National Association of Securities Dealers. Stocks traded over the counter tend to be smaller, less well-known, technology based firms. […]
Overdraft: An overdraft occurs when money is withdrawn from a bank account and the available balance goes below zero. When an overdraft occurs a bank fee is typically charged the account holder unless prior “in the event” arrangements have been made.

P

Par Value: The stated, or face, value of a legal claim or financial asset. For debt securities, such as corporate bonds or U. S. Treasury securities, this is amount to be repaid at the time of maturity. For an equity security (corporate stock) this is the initial value at the time it is issued.
Participating Insurance: Insurance that allows the policyholders to share in the insurer's profits through dividends after the close of the policy period.
Partnership: One of the three basic forms of business organization (the other two are corporation and proprietorship). A partnership is a business that's owned and operated more or less equally by two or more people. The owners and the business are legally considered one and the same. […]
Payday Loan: A payday loan (also called a paycheck advance) is a small, short-term loan that is intended to cover a borrower's expenses until his or her next payday. Many consider payday loans an example of predatory lending due to the typically high interest rates charged.
Payroll Tax: A tax levied on the wage earnings, or payroll, of workers. The most notable being the Social Security tax.
Peril: Cause of loss—for example, fire, windstorm, collision.
Personal Income: The total income received by the members of the domestic household sector, which may or may not be earned from productive activities during a given period of time, usually one year. The primary use of personal income is to measure the income actually paid out to the household sector. After adjusting for income taxes, personal income forms the basis for consumption expenditures on gross domestic product.
Personal Insurance: Insurance purchased by an individual (as opposed to an organization) to provide protection on personal needs.
Phishing: E-mails that claim to be from legitimate companies in order to induce individuals to reveal personal information, such as credit-card numbers, online bank account numbers, etc.
Picketing: This is the traditional method of demonstrating that a labor union is on strike against an employer, whereby union members carry picket signs and walk in a line in front of the employers plant, factory, or place of business. The pickets carried by the striking workers contain messages documenting their striking status and some of their grievances with the employer. […]
Poverty: A condition in which a person lacks many of the basic necessities of life and the income needed to buy them. If these seems like a fuzzy concept, it is. Poverty is often a subjective notion, because the notion of basic necessities is also subjective. […]
Preferred Stock: The ownership shares in a corporation that have legal claim to the corporation's assets. Stock is usually dividend into two types, common stock and preferred stock. Preferred stock has first claim to the corporations net assets, and common stock comes in second. However, if a corporation has no preferred stock, the common stock has exclusive claim.
Premium: The amount of money an insurer charges to provide the coverage described in the policy.
Price-to-Earnings Ratio (PE Ratio): Also termed the price-earnings ratio, this is the ratio of the current price for one share of corporate stock to the earnings (profit) per share of stock. This is used by many financial analysts and investors as an indicator of a company's performance and potential for future growth. A relatively high price-earnings ratio suggests that investors think the company has a great deal of future growth potential. […]
Prime Rate: The interest rate banks charge their best, most credit-worthy customers. This is one of the key interest rates in the economy, and it is watched closely by financial types, government policy makers, and businesses. It's also an interest rate that should be watched closely by consumers who have loans with adjustable rates, like credit cards, that are “pegged” to the prime rate. […]
Private Sector: A short-cut term that combines the households and businesses in the economy into a single group. This term should be contrasted directly with public sector, which is a comparable short-cut term for government.
Producer: A person, company, or country that makes, grows, or supplies goods or commodities for sale.
Productive Resource: Natural resources, human resources, capital resources and entrepreneurship used to make goods and services.
Productivity: The rate at which goods or services are produced, especially measure of output per unit of labor.
Progressive Tax: A tax in which people with more income pay a larger percentage in taxes. A progressive tax is given by this example — You earn $10,000 a year and your boss gets $20,000. You pay $1,000 in taxes (10 percent) and your boss pays $4,000 in taxes (20 percent). Our income tax system is designed to be progressive, but assorted loopholes and deductions keep it from being as progressive in practice as it is on paper.
Property Insurance: Insurance that indemnifies the owner or user of property for its loss, or the loss of its income-producing ability, when the loss or damage is caused by a covered peril, such as fire or explosion. In this sense, property insurance encompasses inland marine, boiler and machinery (BM), and crime insurance.
Property Tax: A tax on property. This is a popular tax at the local level for cities, counties, and school districts. In many places it has been a primary source of funding for public schools. […]
Proportional Tax: A tax in which people pay the same percentage of income in taxes regardless of their incomes. Here's an example of a proportional tax — You earn $10,000 a year and your boss gets $20,000. You pay $1,000 in taxes (10 percent) and your boss pays $2,000 in taxes (10 percent). While a proportional tax would seem to make a lot of sense, very few taxes are designed to be proportional and even fewer come out that way in practice.
Prospectus: A printed document that advertises or describes a business enterprise in order to attract or inform clients or investors.
Public Sector: A term for government, which for the United States includes all three levels- federal, state, and local. The term public sector is most useful as a contrast to the term private sector, which includes households and businesses.

Q

Qualitative Measure: A measurement of the quality of something.
Quantitative Measure: A measurement of the quantity of something.
Quota: A limit, or expectation, on the quantity of some sort of activity. Some of the more noted quotas are for production, employment, and imports.

R

Real Time Quote: The actual price of a given security at a specific moment in time.
Rebate: The return of a portion of a purchase price by a seller to a buyer. Rebates are considered an incentive and typically offered to reduce specific inventories, move older products, introduce new products, etc.
Recession: The common term used for the contraction phase of the business cycle. A general period of declining economic activity, usually three consecutive quarters.
Red-Lining: The refusal to offer a loan or provide insurance to someone because they live in an area deemed to be a poor financial risk.
Redistribution: An economic theory or policy that advocates reducing inequalities in the distribution of wealth
Reinsurance: The transfer of insurance risk (that is, the risk initially assumed by an insurer in selling coverage) to another insurer. Reinsurance allows the spread of risk across a broad set of institutions in an effort to make the industry more stable and secure.
Retirement Plan: A savings and/or investment plan that provides income during retirement when an individual is no longer earning an income.
Revenue: The total of all money received from the sale of a firm's product or service during a given period.
Reward: The potential for gain from a particular investment.
Risk: The possibility of gain or loss associated with an investment.
Risk (2): Many definitions of risk are possible. Some that might be encountered are: (1) Uncertainty arising from the possible occurrence of given events; (2) The insured or the property to which an insurance policy relates (we defined this as the “exposure”); (3) variability in outcomes; (4) chance of loss.
Risk Averse: A person who values a certain income more than an equal amount of income that involves risk or uncertainty.
Risk Management Process: The framework to set objectives, identify and assess situations that can affect objective attainment, evaluation of available strategies to manage the identified problems, selection among the available option, and their implementation.
Risk Manager: An individual responsible for implementing risk strategy within an organization. Traditionally, this role has focused on situations involving insurable situations. Increasingly, the role incorporates financial, strategic, and other non-insurable organizational characteristics. […] (Listed under "Insurance industry specific careers".)
Risk Pooling: The process in insurance of defining policyholder characteristics that yield similar loss potential and therefore similar pricing for a specified group (or “pool”) of policyholders. The intention is to try to define a pool large enough to use the law of large numbers for credible estimates while also defining the loss potential sufficiently precisely to limit the occurrence of adverse selection. […]
Risk Tolerance: The amount or level of risk an individual is willing to accept concerning an investment.
Roth IRA (Individual Retirement Account): A Roth IRA is a special type of retirement plan that is generally not taxed until proceeds are withdrawn for retirement purposes, usually at a lesser tax rate.
Rule of 72: A mathematical formula to determine the amount of time required for an investment to double given a specific interest rate. For example, an investment earning 6% interest would take approximately 12 years to double (72/6=12).

S

Safe Deposit Box: A fireproof, metal strongbox typically found in a bank or credit union used for storing customer valuables.
Salary: The total of wages earned over a period of usually one year.
Sales Tax: A tax on retail sales. This is major source of revenue for many state and local governments. Because poorer people tend to spend a larger share of their income on goods covered by sales taxes, it tends to be a regressive tax. To reduce this “regressiveness”, some state and local governments exclude items like food and medicine.
Savings Account: An account maintained by banks, savings and loan associations, credit unions, and mutual savings banks that pay interest but can not be used directly as money. These accounts, also termed transactions deposits, let customers set aside a portion of their liquid assets that COULD be used to make purchases. But to make those purchases, savings account balances must be transferred to checkable deposits or currency.
Savings Bond: A bond issued by the U.S. Government and sold to the general public. Savings bonds are offered in various denominations and sold at one-half face value.
Scarce Resource: A resource with an available quantity less than its desired use. Scarce resources are also called factors of production. Scarce goods are also termed economic goods. […]
Scarcity: A pervasive condition of human existence that exists because society has unlimited wants and needs, but limited resources used for their satisfaction. In other words, we can't have everything that we want. […]
Second Bank of the United States: The second attempt by the United States to created a central bank. The second bank was established in 1816 and when defunct in 1836, when it lost a political battle with President Andrew Jackson. The United States did not seek another central bank until the Federal Reserve System was established in 1913.
Securities and Exchange Commission (SEC): The abbreviation for Securities and Exchange Commission, which is a federal government agency that regulates the trading of corporate stock to protect investors against unscrupulous practices. Like a number of other federal regulatory agencies, the SEC was established in 1934. The reason for its formation was to prevent investors from manipulating the stock market and to prevent other practices that contributed to the 1929 stock market crash. […]
Services: Activities that provide direct satisfaction of wants and needs without the production of tangible products or goods. Examples include information, entertainment, and education. This term service should be contrasted with the term good, which involves the satisfaction of wants and needs with tangible items. […]
Share Value: The value of one share at any given time.
Short Sale: The sale of securities or commodity futures not owned by the seller who hopes to buy them back at a later date at a lower price.
Shortage: A condition in the market in which the quantity demanded is greater than the quantity supplied at the existing price. A shortage occasionally goes by the terms excess demand and sellers' market. A shortage causes an increase in the equilibrium price.
Small Business: The businesses in our economy that individually produce very little output, have little or no market control, but collectively produce about half of the total production of the U.S.
Small Business Administration (SBA): An independent federal agency that was started in 1953 to help small business. It provides a variety of assistance, including financial, technical, and managerial help. It helps other agencies in the federal government direct contracts and spending in the direction of proprietorships and small corporations. […]
Small Cap Stock: Stocks of small companies typically valued at less than $1 billion. Most of these stocks are growth or speculative stock.
Smith, Adam: A Scottish professor (1723-1790) who is considered the father of modern economics for his revolutionary book, entitled An Inquiry into the Nature and Causes of the Wealth of Nations published in 1776.
Social Security: A system for providing financial assistance to the poor, elderly, and disabled. The social security system in the United States was established by the Social Security Act (1935) in response to the devastating problems of the Great Depression. Our current Social Security system has several parts. […]
Social Security Tax: A tax on wage earnings that's used to fund the Social Security system. In principle, the Social Security tax is divided equally between employer and employee-your share is listed under the FICA heading of your paycheck. In practice, however, employees really end up paying both employee and employer contributes. […]
Socialism: In theory, an economy that is a transition between capitalism and communism. It is based on–(1) government, rather than individual, ownership of resources, (2) worker control of the government, such that workers, rather than capitalist, control capital and other productive resources, (3) income allocated on need rather than on resource ownership or contribution to production (using the needs standard rather than the contributive standard).
Sovereign Bond: A sovereign bond is a bond issued by a national government. The term usually refers to bonds issued in foreign currencies, while bonds issued by national governments in the country's own currency are referred to as government bonds.
Special Interest Group: A group that has more to gain or lose from some candidate, issue, or policy and thus tries extra hard to ensure that the political system is aware of their preferences. Some special interest groups can be fairly tame, merely voting in elections for their chosen candidate, while others are quite active. The more active ones form political action committees and undertake all forms of lobbying (legal and illegal).
Specialization: The condition in which resources are primarily devoted to specific tasks. This is one of the most important and most fundamental notions in the study of economics. Human beings have long recognized that human resources can be more effectively used in the production of goods and services that satisfy unlimited wants and needs if those resources specialize. […]
Stagflation: High inflation rates at the same time the economy has high unemployment rates. Throughout much of the economic history of the United States, we've seen a tradeoff between inflation and unemployment. During an expansion, inflation is usually higher and unemployment is lower. […]
Standard & Poor's: Standard & Poor's (S&P) is a United States-based financial services company that publishes financial research and analysis on stocks and bonds.
Standard & Poor's 500 (S&P 500): An index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is used as a benchmark for the overall “health” of the U.S. Stock market.
State Tax: Taxes imposed by individual states.
State Unemployment Tax (SUTA): State unemployment taxes paid by the employer which are not deducted from the employee's wages. These taxes are in addition to any federal unemployment taxes owed.
Stock: A stock (also known as an equity or a share) is a portion of the ownership of a corporation. A share in a corporation gives the owner of the stock a stake in the company and its profits. If a corporation has issued 100 stocks in total, then each stock represents a 1% ownership in the company.
Stock Market: A financial market that trades ownership shares in corporations–corporate stock. The three best known, national stock markets in the United States are the New York Stock Exchange, the American Stock Exchange, and the National Association of Securities Dealers. There are also a few regional markets–the Chicago, Philadelphia, and Pacific exchanges are the most notable that trade stock on a smaller scale. […]
Stock Split: A corporate action in which a company's existing shares are divided into multiple shares. For example, a 2-for-1 split would result in an investor owning two shares of XYZ Company for each single share he/she owned previously. A reverse stock split is just the opposite. […]
Stockbroker: An individual who provides investors assistance and guidance in the buying and selling of stock.
Sub-prime Mortgage: A type of mortgage that is normally made available to borrowers with lower credit ratings that offers typically higher interest rates.
Subsidy: A payment from government to individuals or businesses without any expectations of production. The best way of thinking about a subsidy is as a negative tax. Government extends subsidies for many different reasons. […]
Supply: The willingness and ability to sell a range of quantities of a good at a range of prices, during a given time period. Supply is one half of the market exchange process; the other is demand. This supply side of the market is directly connected to the limited resources dimension of the scarcity problem. […]
Surplus: A condition in the market in which the quantity supplied is greater than the quantity demanded at the existing price. A surplus occasionally goes by the terms excess supply and buyers' market. A surplus causes a decrease in the equilibrium price.

T

Tariff: A tax that's usually on imports, but occasionally (very rarely) on exports. This is one form of trade barrier that's intended to restrict imports into a country. Unlike non-tariff barriers and quotas which increase prices and thus revenue received by domestic producers, a tariff generates revenue for the government.
Tax: Any sort of forced or coerced payment to government. The primary reason government collects taxes is to get the revenue needed to finance public goods and pay administrative expenses. However, the more astute leaders of the first estate have recognized over the years that taxes have other effects, including–(1) redirecting resources from one good to another and (2) altering the total amount of production in the economy. […]
Tax Avoidance: A legal reduction in taxes. The complexity of our system of taxes, especially income taxes, makes it extremely worthwhile to identify the mix of spending, working, and assorted activities that reduce taxes. This has also created a major industry of accountants, lawyers, educators, public speakers, and others who spend their efforts uncovering legal tax loopholes.
Tax Evasion: An illegal reduction in taxes. Tax evasion occurs when someone fails to pay their legal taxes.
Tax Shelter: Tax shelters are any method of reducing taxable income resulting in a reduction of tax payments. They include, but are not limited to, losses on investment property, depreciation of various assets, and tax-deferred investments.
Tea Party: A movement in the United States to promote conservative, libertarian, and populist beliefs including cutting spending, reducing the deficit, and lowering taxes.
Ticker Symbol: A symbol for a stock or mutual fund that it can be identified with. Every stock/mutual fund has a symbol, up to 5 letters long. For example Microsoft has the symbol MSFT.
Trade Deficit: Formally termed a balance of trade deficit, a condition in which a nation's imports are greater than exports.
Trade Surplus: Formally termed a balance of trade surplus, a condition in which a nation's exports are greater than imports
Traditional Economy: An economy based on agriculture, with others in society working in simple crafts, such as the manufacturing of cloth or pottery, with decisions made on the basis of custom.
Traditional IRA (Individual Retirement Account): A traditional IRA is a personal savings plan that gives you tax advantages for saving for retirement. Contributions to a traditional IRA may be tax deductible – either in whole or in part. Also, the earnings on the amounts in your IRA are not taxed until they are distributed.
Treasury Bill: One kind of government security issued by the U. S. Treasury to obtain the funds used to finance the federal budget deficit. A Treasury bill (or T-bill) has a maturity length of one year or less, with 90 days a common maturities. T-bills, together with short-term commercial paper issued by businesses, are traded in money markets. […]
Treasury Bond: One kind of government security issued by the U. S. Treasury to obtain the funds used to finance the federal budget deficit. A Treasury bond (or T-bond) has a maturity length of over 10 years, with 15 and 30 years common maturities. T-bonds, together with other long-term bonds issued by state and local governments and businesses, are traded in capital markets. […]
Treasury Note: One kind of government security issued by the U. S. Treasury to obtain the funds used to finance the federal budget deficit. A Treasury note (or T-note) has a maturity length of between one and 10 years.
Troubled Asset Relief Program (TARP): A program of the United States government to purchase assets and equity from financial institutions to strengthen its financial sector, signed into law by U.S. President George W. Bush on October 3, 2008.

U

Underwriter: An individual in an insurance company, who makes the decision to accept a particular insurance policy application, determines the proper category for policy pricing and sets policy conditions. (Listed under "Insurance industry specific careers".)
Underwriter: A broker or bank which arranges the sale of an issue of securities (stocks) on behalf of a client and, if it does not sell all stock to other institutions or investors, purchases the unsold securities.
Unemployment Rate: The proportion of the civilian labor force 16 years or older that is actively seeking employment, but is unemployed and not engaged in the production of goods and services. The unemployment rate is estimated and reported monthly by the U.S. Department of Labor's Bureau of Labor Statistics. It is used not only as the prime measure of labor unemployment in the economy, but also as a key indicator of business-cycle instability.
Union: An organization of workers or employees who act jointly to negotiate with their employers over wages, fringe benefits, working conditions, and other facets of employment. The main function of unions is to provide a balance for the market control exerted over labor by big business.
United States Supreme Court: The highest federal court, or for that matter any court, in the United States established by the U. S. Constitution. It has final appellate jurisdiction and as well as jurisdiction over all other courts in the nation.
United States Treasury Department: A cabinet level part of the U.S. Federal government responsible for assorted financial matters. While it was once heavily involved in what could be termed monetary policy, before the creation of the Federal Reserve System, it's primary money role in modern times is relegated to authorizing the minting of metal coins. […]
Usury Law: Laws which establish legal ceilings on the interest rates charged for various types of loans.
Utility: The satisfaction of wants and needs obtained from the use or consumption of goods and services. The terms utility and satisfaction are, for the most part, used interchangeably in economics. Two other somewhat technical economic terms frequently used to capture this notion are welfare and well-being. […]

V

Valuation: In finance, valuation is the process of estimating the potential market value of a financial asset or liability.
Value: Quite simply, this is the amount of consumer satisfaction directly or indirectly obtained from a good. service, or resource. The more a good satisfies a person's want or need, then the more valuable it is to that person.
Value Investing: An investment style that favors buying stocks with lower price-to-earnings ratios and relatively high dividend yields, such as those issued by cyclical companies and businesses in mature industries (as opposed to growth investing).
Variable Cost: Cost that fluctuates with changes in the quantity of output produced.
Voluntary Exchange: The process of willingly trading one item for another. The emphasis here is on “willingly.” Voluntary exchanges are the heart and soul of market transactions, and should be contrasted with the “involuntary” exchanges mandated by government taxes, laws, and regulations. […]

W

Wants: This is often thought of as a psychological desire which makes life just a little more enjoyable, but which is not physiologically necessary to life. You need oxygen, but you want a Playstation 3.
Warranty: A written guarantee, issued to the purchaser of an article by its manufacturer, promising to repair or replace it if necessary within a specified period of time.
Warren Buffett: Warren Edward Buffett is an American business magnate, investor, and philanthropist. He is widely regarded as one of the most successful investors in the world.
Wealth: The net ownership of material possessions and productive resources. In other words, the difference between physical and financial assets that you own and the liabilities that you owe. Wealth includes all of the tangible consumer stuff that you possess, like cars, houses, clothes, jewelry, etc.; any financial assets, like stocks, bonds, bank accounts, that you lay claim to; and your ownership of resources, including labor, capital, and natural resources. […]
Welfare: An assortment of programs that provide assistance to the poor. The cornerstone of our welfare system is Aid to Families with Dependent Children (AFDC), which was created by the Social Security Act (1935). It provides cash benefits to assist needy families with children under the age of 18. […]
Will: A will or testament is a legal declaration by which a person, the testator, names one or more persons to manage his/her estate and provides for the transfer of his/her property at death.
World Bank: (International Bank for Reconstruction and Development) An agency of the United Nations that was established in 1945 to promote the economic development of the poorer nations in the world. They pursue this goal by providing low-interest loans to less development countries and offering technical assistance on the best ways to use these loans. […]
World Trade Organization: An international organization that oversees multilateral trade among nations. The World Trade Organization, or WTO, was established in 1995 by the Uruguay round of trade negotiations to replace the General Agreement on Tariffs and Trade (GATT) that had been in place for the preceding five decades. […]

X

X: The standard abbreviation for exports produced by the foreign sector and purchased by the domestic economy, especially when used in the study of macroeconomics.

Y

Yield: The rate of return on a financial asset. In some simple cases, the yield on a financial asset, like commercial paper, corporate bond, or government security, is the asset's interest rate. However, as a more general rule, the yield includes both the interest earned from an asset plus any changes in the asset's price. […]

Z

Zero Coupon Bond: Also termed a zero bond, a bond that does not pay interest, in which the return is generated by the difference between the purchase price and the face value paid at maturity. Because they do not pay interest, zero coupon bonds are sold at a discount. […]

Other

401K Plan: A savings retirement plan, set up by an employer, that allows workers to set aside a portion of their wages and salaries. The employer can match the contributions made by the employee. Like other private pension plans, income diverted to 401(k) plans are tax deferred, that is, taxes on not paid on the income until it is withdrawn during retirement.
403B Plan: A retirement savings plan for employees of colleges, hospitals, school districts, and nonprofit organizations.