Definitions of Economics by Jim Stanford for preparations of Master of Economics or other Business Studies. These definitions is also useful for anyone who do business.
Defined Contribution Pensions: A pension plan that makes no specified promise about the level of pension paid out after retirement. Instead, a pensioner’s income depends on the amount of money accumulated in a pre-funded retirement account, on investment returns, and on interest rates at the time of retirement.
Deflation: A decline in the overall average level of prices. Deflation is the opposite of inflation.
Demand-Constrained: An economy is demand-constrained when the level of output and employment is limited by the amount of overall demand (or spending) on its products. The capitalist economy is usually demand-constrained. Only rarely is the economy supply-constrained: that is, limited by the availability of workers and other productive resources.
Depreciation: This represents the loss of value from an existing stock of real capital (for an individual company or for the whole economy), reflecting the normal wear-and-tear of machinery, equipment, and infrastructure. A company or country must invest continuously just to offset depreciation, or else its capital stock will gradually run down.
Depression: A depression is a very deep, long, and painful recession, in which unemployment rises to very high levels, and economic output does not bounce back.
Derivatives: A derivative is a financial asset whose resale value depends on the value of other financial assets at different points in time. Its value is thus “derived” from the value of other financial assets, and is hence very difficult to predict. Examples of derivatives include futures, options, and swaps.
Development: Economic development is the process through which a country’s economy expands and improves in both quantitative and qualitative terms. Economic development requires the coming together of several different processes and conditions: the accumulation of real capital; the development of education, skills, and human capacities; improvements in governance, democracy, and stability; and changes in the sectoral make-up of the economy.
Discretionary Fiscal Policy: Some government taxing and spending programs can be adjusted by government in response to changing economic circumstances. These discretionary measures (increasing or decreasing particular taxes or spending) are usually used as a counter-cyclical policy.
Discrimination: As a result of racist and sexist attitudes, and deliberate efforts of employers to play off groups of workers against each other, different groups of people (defined and divided by gender, ethnicity, language, ability, or other factors) experience very different economic opportunities and incomes.
Distribution: The distribution of income reflects the process by which the real output of goods and services produced by the economy is allocated to different individuals and groups of people. Distribution can be measured across individuals (comparing high-income and low-income households), or across classes (comparing the incomes of workers, small businesses, and capitalists).
Dividends: Many companies pay a cash dividend (quarterly or annually) to the owners of its shares. This is an enticement to investors to purchase that company’s shares, and represents a way of distributing some of a company’s profits to its ultimate owners. Individual investors can capture profits in other ways, as well – such as through capital gains.
Economic Growth: Economic growth is the expansion of total output produced in the economy. It is usually measured by the expansion of real GDP.
Economies of Scale: Most economic production requires the producing firm or organization to make an initial investment (in real capital, in engineering and design, in marketing) before even the first unit of production occurs. As total production then grows, the cost per unit of that initial investment shrinks. For this reason, most industries demonstrate economies of scale, whereby the unit cost of production declines as the level of output grows. Because of economies of scale, larger companies have an advantage in most industries, and the economy usually operates more efficiently when it is busy and growing (than when it is shrinking or stagnant).
Effective Demand: The theory of effective demand was developed separately in the 1930s by John Maynard Keynes and Michal Kalecki. It explains why the capitalist economy is normally limited by the total amount of spending (that is, the economy is demand-constrained), and hence why unemployment almost always exists.
Employment: Employment is a specific form of work, in which the worker performs their labour for someone else in return for a money wage or salary.
Employment Rate: This measures the share of working age adults who are actually employed in a paying position. The employment rate can be a better indicator of the strength of labour markets than the unemployment rate (since the unemployment rate depends on whether or not a non-working individual is considered to be “in” the labour force).
Enclosures: A historic process in Britain and other European countries, in the very early years of capitalism, in which lands formerly held and used in common were fenced off and formally assigned to private owners. This painful and often violent process was essential to the creation of a landless, desperate new class of people who were compelled to work in the new industrial factories.
Environment: The natural environment is an essential aspect of the economy, whose influence is felt in several different ways. Everyone relies on the direct ecological benefits that come from nature: fresh air, clean water, space, climate. And every industry relies on natural resources which are used as necessary inputs to production (land, minerals, forestry and agriculture, energy, and other materials). Finally (and unfortunately), most economic activities involve the creation of some waste and pollution which is expelled back into the environment.
Environmental Taxes: Taxes which are imposed on particular activities, or particular products, which are considered to be especially damaging to the environment, with the goal of changing economic behaviour and reducing pollution. A carbon tax is an important example of an environmental tax.
Equilibrium: In neoclassical economics, equilibrium exists when supply equals demand for a particular commodity. General equilibrium is a special (purely hypothetical) condition in which every market (including markets for both final products and factors of production, the latter including labour) is in equilibrium.
