It is a world controlled by Money. Some people even say: "If its not making money, its not making sense". There is a need to know about common economic terms and their meanings, So, we have come up with some economic terms and its meanings.

Common Economic Terms and Meanings

1. Loan
A loan is money, property, or other material goods given to another party in exchange for future repayment of the loan value or principal amount, along with interest or finance charges. A thing that is borrowed, especially a sum of money that is expected to be paid back with interest e.g. “borrowers can take out a loan for $1,000“.

2. Debt
Debt is an amount of money borrowed by one party from another. E.g I have a debt of $100 to pay Peter Drucker.

3. Bad Debt
A debt is regarded as Bad Debt if the borrowed money may not be recovered from the debtor due to reasons such as a company is going to liquidation. Every creditor must be prepared for this kind of situation as this may also lead to problems for the creditor if not properly taken care of.

4. Good Debt
Good debt is an investment that will grow in value or generate long-term income. For example, mortgage debt is usually a good debt as the house you are buying via mortgage may have increased in value after some years.

5. Asset
Asset is anything tangible or intangible that can be owned or controlled to produce value and that is held by a company to produce positive economic value. For example, it could be machinery that produce goods and services and therefore generate sales and profits.

6. Inflation
Inflation is a sustained increase in the general price level of goods and services in an economy over a period of time. There is almost always inflation ongoing in every economy, what should be of concern is the rate or percentage of such inflation.

7. Recession
Recession is a business cycle contraction when there is a general decline in economic activity. Recession generally occur when there is a widespread drop in spending. During recession, almost everybody cut spending, reduce workforce, sack workers, close branches, so as to continue in business. This may not be the best approach towards Recession. Every country or economy always get out of Recession.

8. Deflation
Deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). Deflation is like opposite of Inflation.

9. Budget Surplus
Budget surplus is a period when income or receipts exceeds expenditures. This only occurs in countries or economy with lots of high financial integrity. In many other countries, all the government officials know is to spend and even overspend beyond budgetary allocation.

10. Liability
Liabilities are defined as a company’s legal financial debts or obligations that arise during the course of business operations. Liability can also be regarded as things that takes money away from your pocket, while Asset puts money in your pocket. Liability and Asset are all part of Business.

11. Investment Banking
An investment bank is a financial services company or corporate division that engages in advisory-based financial transactions on behalf of individuals, corporations, and governments. They help to raise capital for company going public, and other details

12. GDP
Gross Domestic Product (GDP) is the monetary value of all finished goods and services made within a country during a specific period. It is a rough estimate used to make plans and decisions and data analysis.

13. Mortgage
Mortgage is a debt instrument, secured by the collateral of specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments. It is usually used to secure real estate property. For example, you can become house owner via mortgage loan from a bank, and you will pay according to agreement made between you and bank giving the mortgage. Prices of Houses Rent in California major towns

14. Arbitrage
Arbitrage is the simultaneous purchase and sale of an asset to profit from an imbalance in the price. It is a trade that profits by exploiting the price differences of identical or similar financial instruments on different markets or in different forms.

15. Opportunity Cost
Oppportunity cost refers to the value of what you have to give up in order to choose something else. In a nutshell, it’s a value of the road not taken.

16. Scale of Preference
A scale of preference can be defined as the list of wants or needs that a person writes or comes up with in order of importance. For example, you can draw a scale of preference of buying food, cloth, shoes, writing material, buying data plan, then you choose which is the most important from top to bottom.

17. Budget Deficit
Budget deficit occurs when expenses exceed revenue and indicate the financial health of a country.