ECONOMIC TERMS

Deflation: Deflation is a reduction in the level of national income and output,
usually accompanied by a fall in the general price level.

Dumping occurs when goods are exported at a price less than their normal
value, generally meaning they are exported for less than they are sold in the
domestic market or third country markets, or at less than production cost.

Direct investment: Foreign capital inflow in the form of investment by foreign-
based companies into domestic based companies. Portfolio investment is foreign
capital inflow by foreign investors into shares and financial securities. It is the
ownership and management of production and/or marketing facilities in a foreign
country.

Direct tax: A tax that you pay directly, as opposed to indirect taxes, such as
tariffs and business taxes. The income tax is a direct tax, as are property taxes.

Double taxation: Corporate earnings taxed at both the corporate level and
again as a stockholder dividend.

Economic growth: Quantitative measure of the change in size/volume of
economic activity, usually calculated in terms of gross national product (GNP) or
gross domestic product(GDP).

Duopoly: A market structure in which two producers of a commodity compete
with each other.

Econometrics: The application of statistical and mathematical methods in the
field of economics to test and quantify economic theories and the solutions to
economic problems.

Economic growth: An increase in the nation's capacity to produce goods and
services.

Economic infrastructure: The underlying amount of physical and financial
capital embodied in roads, railways, waterways, airways, and other forms of
transportation and communication plus water supplies, financial institutions,
electricity, and public services such as health and education. The level of
infrastructural development in a country is a crucial factor determining the pace
and diversity of economic development.

Economic integration: The merging to various degrees of the economies and
economic policies of two or more countries in a given region.

Economic policy: A statement of objectives and the methods of achieving these
objectives (policy instruments) by government, political party, business concern,
etc. Some examples of government economic objectives are maintaining full
employment, achieving a high rate of economic growth, reducing income
inequalities and regional development inequalities, and maintaining price stability.
Policy instruments include fiscal policy, monetary and financial policy, and
legislative controls (e.g., price and wage control, rent control).

Elasticity of demand: The degree to which consumer demand for a product or
service responds to a change in price, wage or other independent variable. When
there is no perceptible response, demand is said to be inelastic.

Excess capacity: Volume or capacity over and above that which is needed to
meet peak planned or expected demand.

Excess demand: The situation in which the quantity demanded at a given price
exceeds the quantity supplied.

Exchange control: A governmental policy designed to restrict the outflow of
domestic currency and prevent a worsened balance of payments position by
controlling the amount of foreign exchange that can be obtained or held by
domestic citizens. Often results from overvalued exchange rates.

Exchange rate: The price of one currency stated in terms of another currency,
when exchanged.

Export incentives: Public subsidies, tax rebates, and other kinds of financial and
nonfinancial measures designed to promote a greater level of economic activity in
export industries.

Exports: The value of all goods and nonfactor services sold to the rest of the
world; they include merchandise, freight, insurance, travel, and other nonfactor
services. The value of factor services (such as investment receipts and workers'
remittances from abroad) is excluded from this measure.

Externalities: A cost or benefit not accounted for in the price of goods or
services. Often "externality" refers to the cost of pollution and other
environmental impacts.