value added:

Value added is the excess of a firm’s revenues over the amount it pays to other firms for intermediate goods. Value added is used to calculate GDP and, in much of Europe, as a major base for taxes.

value in exchange:

Value in exchange is the subjective value that the owners of an item expect they would be able to obtain if they sold the item being considered and purchased a different item or items. Contrast with value in use.

value in use:

Value in use is a measure of the subjective enjoyment a person experiences when consuming a good. Contrast with value in exchange.

value of money:

The value of money is the purchasing power of money, which is determined by the interaction of the supply of and demand for money. See Value of Life

value of the marginal product:

The value of the marginal product (VMP) is the value to society of the output produced by an additional unit of a variable input. VMP is computed by multiplying the price of output (Px) by the marginal physical product of a unit of input (MPPN): that is, VMP = (Px) x (MPPN.

value-added approach to estimating GDP:

The value-added approach to estimating gross domestic product (GDP) equals the sum of the values added to economic goods at each level of production.

value-added tax:

A value-added tax (VAT) is a tax applied to the excess of a firm’s revenues over the amounts it pays to other firms for intermediate goods and resources. VATs resemble retail sales taxes, and are widely used throughout Europe.

variable costs:

Variable costs are costs that vary with the level of production. Variable costs are also known as direct costs or prime costs, and are the only costs that rational decision makers consider.

variable:

A variable is anything that can assume different values.

variance:

The variance (s²) for a variable x is a weighted average of the squared differences of the individual values (xi) of the variable from the mean of the entire data set for that variable.

vault cash:

Vault cash is the currency banks keep on hand for daily transactions of its customers. Vault cash is usually kept a vault (the bank’s safe), ATM machines, or in the drawers of bank tellers. The monetary base is the sum of vault cash in all banks plus all reserves that banks have on deposit at the central bank (the Federal Reserve System for the United States).

Veblen good:

A Veblen good is viewed by its owners as a status symbol, and such a good is valued by an individual because its high price places it beyond the reasonable budgets of other individuals. Named after Thorstein Veblen, who described status competition and conspicuous consumption in his 1899 best-seller, The Theory of the Leisure Class.

Veblen, Thorstein

Thorstein Bunde Veblen [1857-1929], the first notable American institutionalist, was an extraordinarily eccentric philosopher-sociologist-economist who bounced from one academic position to another during his career, and authored two best-selling books. The Theory of the Leisure Class [1899] vilified the idle rich and introduced the tem conspicuous consumption into the American idiom. He followed this with The Theory of Business Enterprise, which condemned “businessmen” as parasitic paper-shufflers who conspire to wrest income from the productive workers whom he grouped together as “engineers.”

velocity:

Velocity (V) is the average rate at which money turns over in a period for total transactions (PT) or for expenditures on final goods and services (often measured as the ratio of GDP relative to the money stock: V=GDP ∕ M). Higher velocity means that a given quantity of money is associated with a greater dollar volume of income or transactions.

venture capital:

Venture capital is funding made available to fledgling firms (start-ups) by venture capitalists, who are willing to bear high levels of risk because of the prospects of very high rates of return.

vertical combination:

A vertically integrated firm is a firm having different plants producing products at different production levels within an industry.

vertical equity:

The principle of vertical equity in taxation asserts that people better able to pay higher taxes should do so. Differences in wealth or income are usually assumed to be reasonable measures of the ability to pay taxes.

vertical integration:

Vertical integration is a process of merging firms that operate at different production levels within an industry, or the creation of operations that are either customers of the intermediate products of the parent firm, or suppliers of intermediate products to the parent firm.

vertical merger:

A vertical merger is a merger between a vendor firm and a customer firm. This gives one company power over multiple stages of manufacturing.

vertical spread:

A vertical spread is a market strategy based on options whereby the investor buys one option and sells another of the same type with the same expiration month.  The difference in strike price determines the amount gained or lost. Competition among arbitrageurs tends to eliminate these spreads. See also option and striking price.

vicious circle:

A vicious circle [or vicious cycle] is a sequential set of events with feedback loops where each repetition of the cycle only reinforces the first feedback. In this type of cycle, the results are always harmful (in contrast to the virtuous cycle, wherein the results are beneficial). The cycle continues in the same direction until an external factor intervenes and stops the cycle. One example is hyperinflation. When hyperinflation begins, there is a spiral of inflation that causes inflation to accelerate until an external force puts an end to the cycle. Vicious cycles are also blamed for persistent poverty and for stagnant economic growth and persistent underdevelopment.

Vickrey auction:

See second price bid auctions, which are sometimes called Vickrey auctions after William Vickrey, the Nobel Prize winning economist who first suggested them as mechanisms by which strategic bidding could be reduced or even eliminated.

virtuous circle:

A virtuous circle [or virtuous cycle] is a sequential set of events in which each repetition of the cycle reinforces the first event. In this type of cycle, the results are favorable (in contrast to the vicious cycle, wherein the results are harmful). The cycle continues in the same direction until an external factor intervenes and stops the cycle. For example, if the external factor of technological innovation sparked economic growth, further growth would take place once people familiarized with the technology since the costs would be reduced and production would be more efficient.  The prices of the products would then decrease, and output would increase allowing even more growth because new people would be able to become familiarized with the technology.

visibles:

The visibles in the current account of balance of payments accounting are the legal imports and exports in the balance of trade, for which data tend to be relatively good. Contrast with invisibles, which are current account trades in services.

volatility:

Economic volatility refers to the variablility of prices, employment, exchange rates, or some other economic variable during a specified period.

voluntary exchange:

Voluntary exchange is a foundation for market transactions. Voluntary exchange pivots on the willingness of two agents or more agents to exchange goods or resources for either money or other goods or resources.

voluntary export restrictions:

Voluntary export restrictions emerge when one government threatens foreign governments or industries with import barriers unless they restrict exports.  These restrictions are only voluntary in the sense that you voluntarily give up your money when a robber has a gun pointed at your head.

voluntary poverty:

Voluntary poverty exists when an individual or family has sufficient resources [e.g., employment opportunities] to escape a state of destitution, but chooses not to. See also absolute poverty, relative poverty, and involuntary poverty.

voluntary restructuring:

Voluntary restructuring is the opposite of a merger or acquisition, and occurs when a firm rids itself of bad acquisitions.

voluntary saving:

Voluntary saving is the voluntary decisions of individuals to defer consumption until some future date. See also involuntary saving.

voluntary sector:

The voluntary sector of the economy refers to economic activities of religious organizations, charities, and any other nonprofit organizations that are not government agencies.

voluntary unemployment:

The frictional unemployment that exists when everyone who wants to work at the prevailing wage rate has a job or can find one rapidly. Voluntary unemployment is sometimes called search unemployment.

von Hayek, Friedrich:

Friedrich Hayek (1899-1992), who shared the 1974 Nobel Prize in economics, dropped the “von” in his name because he thought it pretentious. See Friedrich Hayek.

von Mises, Ludwig

The Austrian economist Ludwig von Mises (1881-1973) was a staunch defender of classical liberalism and voluntary transactions, both within a nation, and between individuals located in different nations. Von Mises wrote about inflation, monetary economics, and the advantages of exchanges based on prices in a market system over the allocation of resources and redistributions of income and wealth by government.

von Thunen model:

The von Thünen model of location and rent concludes that land values decrease the greater the distance from a location that minimizes the combined transaction costs of buyers and sellers, and that activities the costs of which depend similarly on locational convenience tend to locate equal distances away from the most convenient locales. The von Thünen model was the proudest accomplishment of the early Austrian economist Johann H. von Thünen [1780-1850], on whose gravestone is inscribed the equation summarizing this model.

voodoo economics:

When both were candidates for the Republican presidential nomination in 1980, George H.W. Bush (41) castigated the supply-side economics advocated by Ronald Reagan as “voodoo economics”, and was especially critical of cutting taxes as a strategy for increasing federal revenues, per the theory of the Laffer curve. Critics have used similar terms to characterize the fiscal policies adopted for 2001-2007 during the administration of President George W. Bush (43).

voter apathy:

Voter apathy is a term pundits use to characterize the behavior of people who decide that the expected marginal personal costs of voting probably outweighed their expected marginal personal benefits.

voting cycles:

Voting cycles occur when political control tends to swing between two parties in a democratic country with a two-party system, and is a consequence of the volatility implicit in the median voter model. A small move in the preferences of “middle-of-the-road” voters shifts political control from one party to the other.

voting lumpiness:

Voting usually involves “lumpy” trade-offs because you cannot vote for a set of positions other than those taken by one of the candidates.

voting paradox:

The voting paradox is the analytical result that democratic choices will be inconsistent unless the preferences of sets of individuals share uniform transitivity. Open the file for voting paradox (also known as Arrow’s theorem) for a tabular example and more discussion.

voting system:

Voting system has an effect on the result of the vote.