The Most Common Economic Terms

  The Most Common Economic Terms

 

We often hear in the news or come across different economic terms on social media. They are widely used and have great importance in the impact of economic conditions around us, whether in a particular country or at the global level. In this article, we will shed light on the most common economic terms, with an explanation and definition of what is meant by them and what are their uses . To help us understand what is meant by these terms.

  Economy

A linguistic term that means moderation between extravagance and stinginess (Mukhtar Al-Sihah states: “The moderation between extravagance and stinginess is said, ‘So-and-so is frugal in spending’). Despite the many definitions of the term (economy), the most general and comprehensive definition is that of (Lionel Robbins) in an article he published in 1932 AD, where he says: “Economics is a science that is concerned with studying human behavior as a relationship between ends and scarce resources with multiple uses.”

The economy is a natural activity that aims to manage resources, starting from their production, through their distribution, and ending with their balanced consumption. The economy is known in the Arabic language as moderation in spending between extravagance and stinginess .

 

   General budget

The general budget or balance sheet , the annual financial statement of the state , the annual plan of the state for the next fiscal year , a report containing the state’s revenues (sources of income), the estimated revenues expected to be collected and its expenditures (what will be spent), and the estimated expenditures authorized to be spent within their limits in order to achieve the objectives of this plan.

Budget deficit

It is the negative balance of the state's general budget. At the end of the fiscal year, This happens as a result of the state's expenditures exceeding its revenues, as expenditures exceed revenues. In this case, the government is forced to finance this deficit through borrowing .

Budget surplus

It is the positive balance of the state's general budget. At the end of the fiscal year, a surplus occurs when the rate of revenue is higher than the rate of expenditure, i.e. the state's revenues exceed its expenditures.

GDP

It is the value of all final goods and services produced within a country during a specific period of time and includes the production of foreign companies and foreign investors . It reflects the economic status of the country by estimating the size of the economy and the growth rate of that country.

 

   Austerity

Austerity is an economic program imposed by the state to reduce consumption and increase production and savings, in order to cover the budget deficit or recover from an economic crisis. .

 

     Inflation

It is high In the general level of prices of goods and services Excessive, or low purchasing power of the local currency . Inflation occurs for many reasons, the most important of which is the lack of cash cover for printed paper money, which causes that paper to lose its value .

Causes of inflation

Increased demand for goods and services may lead to higher prices, which exacerbates inflation .

Higher production costs, such as higher raw material prices or labor costs, can lead to an increase in the cost of producing goods and services, which is usually reflected in prices .

The effect of central bank policies, such as increasing interest rates or increasing the amount of money in circulation, can lead to increased inflation by increasing spending and stimulating the economy .

Monetary depreciation is caused by an increase in the amount of money in the economy without an increase in the total economic value of the goods and services available, which can lead to price inflation.

 

Economic recession

It is a decline in economic growth, because the volume of production exceeds consumption, which leads to accumulation and congestion. Goods and products, and thus lower prices, which in turn makes it difficult for producers to sell inventory, so the production rate decreases and this causes a drop in demand for labor and the elimination of some jobs, which leads to an increase in the unemployment rate.

A recession may occur in a specific economic activity without the rest of the activities that are operating normally. But the problem is when the recession affects an important and pivotal economic activity, for example: (Banks or manufacturing), which is reflected in the rest of the sectors, causing them to enter a continuous economic recession.

Economic depression

It is a state of severe decline in economic activity , a contraction in economic activities over a long period . It is defined as a slowdown in economic activity during a normal economic cycle. It is an unusual form of recession and is more severe than a recession . All economic, social and political aspects are affected if it occurs.

Long-term recession results in unemployment, a decline in bank assets due to financial crises, a reduction in production due to weak purchasing power, producers and investors reducing their production and investments, large bankruptcies and defaults on sovereign debts, a significant decline in trade (especially international trade), and a relative fluctuation in the value of the currency .

 

Depression occurs as a result of the accumulation of many economic problems that are linked in one way or another to the emergence of indicators of depression , such as: 

stock market crash 

Decrease in production due to decreased demand that occurs when prices increase,

-         Rising prices of raw materials and energy prices

 

 Trade balance

It is the volume of trade in goods outside the country's borders, which is known as import and export . It is part of the balance of payments.

 Trade balance deficit

It occurs when the volume of products imported from outside the country ( the country's exports ) increases compared to the volume of products exported and sold outside the country (imports) .

 Trade surplus

The opposite of a trade deficit, which is the increase in the volume of a country's exports compared to its imports .

Foreign exchange reserve

It is the sum of what the country owns of foreign currencies, such as the US dollar, the euro, and the British pound, within the country’s central and official banks .

Cash Cover

It is a percentage of gold on the basis of which the value of paper money circulating in the markets is determined, and the monetary cover has been converted to the US dollar instead of gold.

Black market

The black market is an informal market that arises for two reasons: either the scarcity of goods, or the setting of their prices by the state in a way that does not suit the seller or the buyer. It is also known as the shadow market.

Local debt

Domestic debt is the sum of money that a country borrows domestically from its citizens through bonds and treasury bills .

External debt

It is the sum of the state's loans from foreign banks and institutions such as the International Monetary Fund or through foreign investments in treasury bills and bonds .

Public debt

It is the sum of the state's internal and external debts, and is also called sovereign debt

  Treasury bills

It is a type of short-term investment offered by the state due to its need to borrow to cover the budget deficit or to establish and finance national projects, in return for an interest rate determined for the investor . Its maturity (the investor obtaining the principal of the loan) does not exceed one year 

Government bonds

Government bonds are a type of long-term investment offered by the state due to its need to borrow to finance national projects or cover the budget deficit, in return for an interest rate determined for the investor . It differs from treasury bills in that the maturity period is more than one year and up to ten years