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All Economics Content
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Average Cost (Per Unit Cost)
Average Cost (Per Unit Cost)What is Average Cost? The Average Cost, or “per unit cost”, is an economic term that describes the approximate cost incurred to manufacture one production unit.
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Balance of Trade
Balance of TradeWhat is Balance of Trade? The Balance of Trade is the value of a country’s exports (“outflows”) minus the value of its imports (“inflows”). Often used interchangeably with the term “trade balance”, th...
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Bank Run
Bank RunWhat is a Bank Run? A Bank Run occurs when customers start to collectively withdraw their funds from banks under the belief that the bank is at risk of becoming insolvent.
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Barriers to Entry
Barriers to EntryWhat are Barriers to Entry? Barriers to Entry deter new entrants from entering a market and protect the profits of existing incumbents. The existence of barriers to entry within a particular industry...
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BCG Growth Share Matrix
BCG Growth Share MatrixWhat is BCG Growth Share Matrix? The BCG Growth Share Matrix is a framework designed for companies to better understand a market’s current and future competitive landscape, which helps determine...
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Black Swan Event
Black Swan EventWhat is a Black Swan Event? A Black Swan Event is a metaphor describing a rare, unexpected phenomenon with a low probability of occurrence, yet has a significant impact on society as a whole.
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Consumer Surplus
Consumer SurplusWhat is a Consumer Surplus? A Consumer Surplus is present when the actual prices paid by consumers for goods and services are less than the maximum prices at which they would be willing to pay.
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Deflation
DeflationWhat is Deflation? Deflation occurs when an economy’s aggregate measure of pricing, i.e. the consumer price index (CPI), experiences a sustained, long-term decline. A period of deflation consists of a...
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Diseconomies of Scale
Diseconomies of ScaleWhat is Diseconomies of Scale? Diseconomies of Scale occurs if the incremental per unit cost of production rises from an increase in production volume (or output).
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Economic Moat
Economic MoatWhat is an Economic Moat? An Economic Moat is the competitive advantage belonging to a particular company that protects its profit margins from competitors in the market and other external threats.
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Economies of Scale
Economies of ScaleWhat is Economies of Scale? Economies of Scale refers to when the production costs on a per-unit basis decline as the output increases, resulting in cost savings and higher profit margins.
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Fisher Equation
Fisher EquationWhat is the Fisher Equation? The Fisher Equation defines the relationship between nominal interest rates and real interest rates, with the difference attributable to inflation.
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Fixed Costs
Fixed CostsWhat are Fixed Costs? Fixed Costs are independent of output and its dollar amount remains constant irrespective of a company’s production volume.
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Free Market Economy
Free Market EconomyWhat is a Free Market Economy? In a Free Market Economy, the production of goods and services is determined by consumer demand rather than controlled by a central government. Since supply and demand i...
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GDP Deflator
GDP DeflatorWhat is GDP Deflator? The GDP Deflator tracks the changes in the prices of all the goods and services produced within a country’s economy in order to measure its true economic state. The GDP deflator,...
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Hyperinflation
HyperinflationWhat is Hyperinflation? Hyperinflation occurs in a country’s economy when the prices of goods and services rise in excess of 50% per month.
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Interest Rate Risk
Interest Rate RiskWhat is Interest Rate Risk? Interest Rate Risk represents the inherent potential for monetary losses incurred by a lender from fluctuations in the market interest rate.
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Laissez Faire
Laissez FaireWhat is Laissez Faire? Laissez Faire is an economic policy based on the premise that the government should not intervene in the marketplace. The laissez faire doctrine advocates for minimal meddling b...
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Marginal Cost
Marginal CostWhat is Marginal Cost? The Marginal Cost quantifies the incremental cost incurred from the production of each additional unit of a good or service.
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Marginal Profit
Marginal ProfitWhat is Marginal Profit? Marginal Profit represents the incremental change in a company’s profit from the sale of one additional unit.
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Marginal Revenue
Marginal RevenueWhat is Marginal Revenue? Marginal Revenue represents the incremental change – either positive or negative – in a company’s revenue from selling one more unit. The production and sale of an additional...
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Market Penetration
Market PenetrationWhat is Market Penetration? The Market Penetration Rate measures the percentage of total customers in a company’s target market acquired by the company as of a specific date.
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Market Share
Market ShareWhat is Market Share? The Market Share represents the percentage of total revenue that a company generates within a given industry. Simply put, the market share of a company quantifies its contributio...
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Monopolistic Competition
Monopolistic CompetitionWhat is Monopolistic Competition Monopolistic Competition is defined as an environment wherein the market participants sell differentiated products, yet serve the same end market. In economics, monopo...
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Natural Monopoly
Natural MonopolyWhat is a Natural Monopoly? A Natural Monopoly occurs when a single company can produce and offer to sell a product or service at a lower cost than its competitors can, resulting in practically no com...
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Network Effects
Network EffectsWhat are Network Effects? Network Effects refer to the incremental benefits gained from new users joining the platform, which results in the product becoming more valuable for all users.
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Nominal Interest Rate
Nominal Interest RateWhat is Nominal Interest Rate? The Nominal Interest Rate reflects the stated cost of borrowing before adjusting for the effects of unexpected inflation.
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Oligopoly
OligopolyWhat is Oligopoly? An Oligopoly describes an economic structure wherein only a select few market participants compete with each other. In an oligopoly, the competitive dynamics within the industry are...
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Open Market Operations (OMO)
Open Market Operations (OMO)What are Open Market Operations? Open Market Operations refer to a central bank selling or purchasing securities in the open market in an effort to influence the money supply.
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Original Equipment Manufacturer (OEM)
Original Equipment Manufacturer (OEM)What is OEM? An Original Equipment Manufacturer (OEM) produces equipment, parts, and components on behalf of another company. The purchaser of an OEM’s product is called a value-added reseller (VAR) b...
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Porter’s 5 Forces Model
Porter’s 5 Forces ModelWhat is Porter’s 5 Forces Model? Porter’s 5 Forces Model provides a structured framework for industry analysis and the competitive dynamics impacting an industry’s profitability.
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Quantitative Easing (QE)
Quantitative Easing (QE)What is Quantitative Easing (QE)? Quantitative Easing (QE) refers to a form of monetary policy where the central bank attempts to encourage economic growth by purchasing long-term securities to increa...
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Real Rate of Return
Real Rate of ReturnWhat is Real Rate of Return? The Real Rate of Return (%) measures the percentage return earned on an investment after adjusting for the inflation rate and taxation, unlike the nominal rate.
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Repurchase Agreement (Repo)
Repurchase Agreement (Repo)What is a Repo? A Repurchase Agreement, or “repo”, involves the sale of a Treasury security and subsequent repurchase shortly thereafter for a marginally higher price.
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Reserve Requirements
Reserve RequirementsWhat are Reserve Requirements? Reserve Requirements are defined as the percentage of a depository institution’s cash that the central bank mandates it has on hand, rather than being lent out or invest...
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Shiller PE (CAPE Ratio)
Shiller PE (CAPE Ratio)What is the Shiller PE Ratio? The Shiller PE, or “CAPE ratio” is a variation of the price to earnings ratio adjusted to remove the effects of cyclicality, i.e. the fluctuations in the earn...
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Stagflation
StagflationWhat is Stagflation? Stagflation describes periods of rising unemployment rates alongside slowing economic growth, i.e. negative gross domestic product (GDP). An economic state of stagflation is chara...
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Switching Costs
Switching CostsWhat are Switching Costs? Switching Costs describe the burden incurred by customers from switching providers, which can reduce churn and act as a barrier to new entrants.
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SWOT Analysis
SWOT AnalysisWhat is SWOT Analysis? The SWOT Analysis is a framework for evaluating a company’s competitive positioning, typically completed for purposes of internal strategic planning.
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Trade Deficit
Trade DeficitWhat is a Trade Deficit? A Trade Deficit describes a country with a negative trade balance, wherein the total value of the country’s net imports exceeds the total value of its exports to other countri...
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Trade Surplus
Trade SurplusWhat is a Trade Surplus? A Trade Surplus means a country’s trade balance is positive, i.e. the value of the country’s net exports is greater than the value of its imports from other countries.
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Treasury Bond (T-Bond)
Treasury Bond (T-Bond)What is a Treasury Bond? A Treasury Bond, or “T-Bond”, is a fixed income security issued and backed by the full faith and credit of the U.S. government.
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Utilization Rate
Utilization RateWhat is Utilization Rate? The Utilization Rate measures the efficiency at which a company can utilize its employees to maximize productivity and output.
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Variable Cost
Variable CostWhat are Variable Costs? Variable Costs are output-dependent and subject to fluctuations based on the production output, so there is a direct linkage between variable costs and production volume.
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Yield Curve
Yield CurveHow to Interpret an Inverted Yield Curve On December 3, 2018, parts of the yield curve inverted for the first time in a decade. Specifically, the difference (“yield spread”) between 3-year and 5-year...