Key Economic Terms

Yield Curve !

Represents the relationship between the

cost of borrowing or interest rate that a bond

pays and when it matures.

CPI and Inflation Denotes a rise in prices per unit of money. The inflation rate is usually reported as the annual percentage growth of the cost of goods. For

example, one dollar buys less each year. Inflation can also be thought of as the decrease in the purchasing power of a particular currency. In the United

States, the inflation rate is most commonly measured by the rise in the

Consumer Price Index or CPI as reported by the Bureau of Labor

Statistics. An example of the CPI might be 110 in the current period, that would

mean it takes $110 to purchase a basket of goods that $100 used to

purchase.

Aggregate Supply - The total supply of goods and services that an economy produces at a given price level during a specific

time period. The aggregate supply curve describes the relationship of prices and output that firms are willing to provide.

Aggregate Demand - The total amount of goods and services demanded in the economy at an overall price level during a specific time period. The aggregate demand curve

shows the relationship between price levels and the quantity of output that firms are willing to provide.

Liquidity

How much an asset or security can be bought or sold for without

affecting it's price. Liquidity often means a high level of trading. Assets

or securities that can be easily bought or sold are known as liquid assets.

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Budget Deficits

The opposite of a surplus. Excess spending over a

particular period of time. They can be used as income for a government, corporation, or

individual. For the federal government of the United

States are financed by Treasury Bonds being issued. For

individuals that accumulate huge debts must declare

bankruptcy if the debt cannot be serviced.

GDP and GNP- GDP measures the output of all labor and capital within a country. GNP measures the output supplied by residents of the United States regardless of where they live and work. Put simply, the GDP measures production in the United

States, while GNP emphasizes U.S. income resulting from production.

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