Euro Economics Glossary


aggregate demand: The amount of total goods and services demanded at a given price level.

aggregate supply: The amount of total goods and services supplied at a given price level.

appreciation: An increase in the exchange rate.

asymmetric shock: When an economic supply or demand shock is different from one region to another, or when the shocks do not move in tandem.

automatic stabilizers: Automatic changes to taxes and government spending due to fluctuations in the economy.


budgetary balance: The amount a government spends minus the amount it collects over a given period of time.


capital: The machines used by businesses to produce their goods.

currency: The paper or coins used for money, specific to the particular country or region.


debt: The debt of a government is the summation of all its deficits and surpluses from previous years.

deficit bias: When the structure of the budget of a government is such that its promised disbursements exceed the structure of its receipts.

depreciation: A decrease in the exchange rate.


economic fluctuations: Temporary movements of economic variables away from their natural position.

exchange rate: The cost of one currency in terms of another, or the rate needed to exchange the two currencies.


fiscal policy: The use by a government of its taxing and spending power to influence economic activity.


gross domestic product: Gross Domestic Product (GDP) is the amount of all goods and services produced in a given country within a given period of time.


inflation: An increase in the price level over a specified period of time.

interest rate: the rate at which a loan will be repaid or a saver will receive for making funds available.

international trade: The exchange of goods and services between two countries.

investment: Spending on capital and buildings by businesses and new homes by consumers.


labor: The workers used by businesses to produce their goods.

labor unions: Organized groups of laborers that work together to fight for higher wages and better working conditions.


monetary policy: The use by a central bank of either the money supply and/or interest rates to influence economic activity.

monetary union: A group of countries, states, or regions that adopt a common currency.

moral hazard: The tendency of a person or entity that is imperfectly monitored to engage in undesirable behavior.


net exports: The difference between exports and imports for a country as a result of international trade.

nominal exchange rate: The cost of one currency in terms of another, or the rate needed to exchange the two currencies


Okun's law: The negative relationship between GDP and unemployment.


price level: The overall measure of prices in a given country or region at a particular point in time.

productivity: The amount produced for each hour of work.


stagflation: A period in which inflation is abnormally high and output is less than the natural rate of output.

subsidies: Money given by the government to businesses.


transaction cost: any cost associated with the exchange of a good from one hand to another. Examples include transportation costs, fees, and time.


unemployment: A measurement reflecting the number of people actively looking for, but unable to find work.


wage: The amount paid to workers for a certain time period's worth of work.

weighted average: The summation of variables, each of which are each multiplied by their relative weight.

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