1. Appreciation

    A rise in the value of an asset and the opposite of depreciation. When the value of a currency rises relative to another, it appreciates.

  2. Assets

    Entities which have value for their owner. A more restricted financial meaning is anything which possesses earning power for its owner.


  1. Banking Reserves

    A narrow definition is the deposits held by commercial banks with the central bank (also known as exchange settlement funds). A broad definition is the conjunction of currency held by a commercial bank (currency reserves) and their central bank deposits. Bank-held currency is basically interchangeable with exchange settlement funds.

  2. Base Money

    Also known as the monetary base, high-powered money, reserve money, outside money, central bank money - and in the UK, narrow money. This is the conjunction of total currency (coins and notes) on issue plus commercial banks' deposits with the central bank.

  3. Bond

    An interest-bearing security issued by governments, companies and some other organisations, which may be traded on the open market.

  4. Bubble

    A phenomenon where the price of an asset rises far higher than can be explained by the income likely to be derived from holding that asset.

  5. Budget Balance

    Is the difference between the quantity of money spent into the real economy by a government in one year and the revenue it receives from taxation and any other (non-lending) sources over that time-span. If the Balance is positive we have a Deficit, and if it is negative we have a Surplus.


  1. Capital Adequacy

    Is the ratio of the net worth of a business to its risk-weighted assets. The inverse of capital adequacy is a measure of leveraging.

  2. Capitalism

    An economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.

  3. Commercial Bank

    Also known as a retail bank. A financial institution whose essential activities are to take financial deposits from the public and to provide loans to the public - on which interest is charged.

  4. Currency

    Consists of coins and notes, which are a form of fiat money created by the state.


  1. Deflation

    Refers to a persistent fall in the general price level of goods and services.

  2. Deleveraging

    Refers to a reduction in liabilities in order to improve net worth and thereby reduce the overall level of leveraging.

  3. Demand

    Refers to the quantity of a good or service that people are both willing and able to buy.


  1. Endogenous Money

    Refers to the view that the quantity of money in the real economy is determined endogenously - i.e. as a result of the interactions of other economic variables - rather than exogenously by an external authority such as a central bank. Thus the demand for base money is a consequence, rather than a cause, of commercial banks making loans.


  1. Factors of Production

    Are the ingredients of economic activity: land, labour, capital and enterprise.

  2. Financial Instability Hypothesis

    Economist Hyman Minksy argued that financial crises are endemic in capitalism because periods of economic prosperity encouraged borrowers and lender to be progressively reckless. This excess optimism creates financial bubbles which eventually burst. Therefore, capitalism is prone to move from periods of financial stability to instability.

  3. Fiscal Policy

    The means by which a national government can adjust its financial operations (mainly spending, taxing and borrowing) in order to monitor and influence a nation's economy.


  1. Glass-Steagall Act

    The Glass-Steagall Act, also known as the Banking Act of 1933 (48 Stat. 162), was passed by the U.S. Congress in 1933 and prohibited commercial banks from engaging in the investment business. It was enacted as an emergency response to the failure of nearly 5,000 banks during the Great Depression.

  2. Global Financial Crisis

    A severe economic event during 2008-9, considered by many economists to have been the worst financial crisis since the Great Depression of the 1930s. It threatened the collapse of large financial institutions, which was prevented by the bailout of those institutions by national governments.



  1. Inflation

    Denotes a persistent rise in prices across the board. It may be subdivided into many specific forms of inflation, such as that pertaining to consumer prices, wholesale goods, wages, assets, etc.

  2. Investment

    Refers to acquiring an asset in the expectation of a future benefit. If the asset is available at a price worth investing, it is normally expected either to generate income, or to appreciate in value, so that it can be sold at a higher price (or both).




  1. Leveraging

    Refers to the magnitude of the financial assets held by a business in relation to its net worth.

  2. Liability

    A duty or responsibility to others that entails settlement by a future transaction which yields an economic benefit.

  3. Liquidity

    Refers to how easily an asset can be spent, if so desired. Base money is wholly liquid. The liquidity of other assets is usually less; how much less may be measured by the ease with which they can be exchanged for base money (that is, liquidated).


  1. Monetary Policy

    Monetary policy is the ultimate constraint on money creation and monetary stability, accomplished through open market operations by the central bank (buying/selling of Treasury securities from/to the private sector) with the objective of keeping consumer price inflation within an agreed target bound.


  1. Neoclassical Economics

    Is currently the mainstream economic school of thought throughout the world. It claims to relate supply and demand to an individual's rationality and his or her ability to maximize utility or profit.

  2. Neoliberalism

    Denotes a modified form of liberalism, embracing a free market economic model in which control of economic factors is transferred from the public sector to the private sector.

  3. Net Worth

    Is the difference between the assets held by a business and its liabilities.



  1. Paradigm

    Is a framework containing basic assumptions, ways of thinking and methodology which are commonly accepted by members of a discipline.

  2. Progressive

    Pertains to the idea of progress, which asserts that advancement in science, technology, economic development, and social organization are vital to improve the human condition.




  1. Saving

    Refers to income not spent, or deferred consumption.

  2. Say's Law

    States that supply creates its own demand. So argued a French economist, Jean-Baptiste Say (1767-1832), and many classical and neo-classical economists since. British economist John Maynard Keynes argued against Say, making the case for the use of fiscal policy to boost demand if there is not enough of it to produce full employment.

  3. Sectoral Balances

    Refers to the financial balances of the private sector, government sector and foreign sector. A sectoral analysis framework for macro-economic analysis of national economies was developed by British economist Wynne Godley. By definition, the three balances must net to zero.

  4. Social Justice

    Refers to justice in terms of the distribution of wealth, opportunities, and privileges within a society.

  5. State Theory of Money

    A theory devised by German economist Georg Knapp, which argues that money's value derives from its issuance by an institutional form of government rather than spontaneously through relations of exchange.

  6. Supply

    Refers to the quantity of a good or service that is available at any particular price.

  7. Supply-side Policies

    Refer to proposals to increase economic growth by making markets work more efficiently.

  8. Sustainability

    Is the endurance of systems and processes, which largely means the property of systems to remain diverse and productive indefinitely.








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