This glossary covers the 20 most commonly used terms in economics for any students interested in this field of study.
capital
noun
physical or financial resources used to produce value in an economy
Example: a lot of capital will be needed to build those facilities
en: capital
comparative advantage
noun phrase
the ability of an individual or group to carry out a particular economic activity (such as making a specific product) more efficiently than another activity
Example: Canada has a comparative advantage in lumber because it can produce lumber at a lower opportunity cost than steel
en: avantage comparatif
Debt
noun
something, typically money, that is owed or due
Example: Uncle Sam borrowed $500 from the bank. He now has a debt of $500 toward the bank
en: dette
economy
noun
An economy is the system of production, distribution, and consumption of goods and services within a society
Example: Canada's economy relies on a mix of natural resource exports, manufacturing, and services like finance and technology
en: économie
fiat currency
noun phrase
fiat currency is money that has value because the government declares it legal tender, not because it is backed by a physical commodity like gold
Example: The Canadian dollar is fiat currency—it has value because the Bank of Canada and the government say it does, not because it can be exchanged for gold
en: monnaie fiduciaire
fiscal policy
noun phrase
Fiscal policy refers to the use of government spending and taxation to influence a country's economy, particularly to manage economic growth, employment, and inflation.
Example: The government used fiscal policy during the pandemic by increasing spending on health care and sending stimulus cheques to citizens to prevent the economy from collapsing.
en: politique fiscale
Gross Domestic Product
noun phrase
the total monetary or market value of all final goods and services produced within a country's borders in a specific time period
Example: Canada's GDP in 2024 was approximately $2.3 trillion, representing the total value of all goods and services produced in the country that year
en: Produit Intérieur Brut
inflation
noun
Inflation is the rate at which the general price level of goods and services in an economy increases over time, reducing purchasing power
Example: If inflation is 3% annually, an item that costs $100 today will cost approximately $103 next year
en: inflation
interest rate
noun phrase
The interest rate is the percentage charged by a lender to a borrower for the use of money, typically expressed as an annual percentage of the principal amount.
Example: When the central bank raises the interest rate to 5%, borrowing becomes more expensive and people tend to spend less and save more.
en: taux d'intérêt
monetary policy
noun phrase
Monetary policy refers to the actions taken by a central bank to control the money supply and interest rates in order to achieve macroeconomic goals such as price stability and full employment.
Example: The Bank of Canada uses monetary policy to fight inflation by raising interest rates, making borrowing more expensive and slowing down spending.
en: politique monétaire
opportunity cost
noun phrase
The value of the next best alternative forgone when making a decision
Example: if you spend $400 on shoes, the opportunity cost might be not going to a concert.
en: coût d'opportunité
production possibilities curve
phrase noun
A production possibilities curve (PPC) is a graph showing the maximum combinations of two goods an economy can produce with its available resources and technology
Example: a country's PPC might show that it can produce either 100 cars and 0 computers, or 50 cars and 50 computers, illustrating the trade-off between the two goods
en: courbe des possibilités de production
purchasing power
noun phrase
Purchasing power is the amount of goods and services that can be bought with a unit of currency
Example: If inflation is 5% per year, your purchasing power decreases by 5%, meaning you can buy 5% fewer goods with the same amount of money
en: pouvoir d'achat
quantitative ease
noun phrase
Quantitative easing (QE) is a monetary policy where a central bank purchases large amounts of financial assets to increase money supply and stimulate economic growth
Example: During the 2008 financial crisis, the Federal Reserve used quantitative easing by buying billions in government bonds and mortgage-backed securities to inject money into the economy
en: assouplissement quantitatif
recession
noun
A recession is a period of significant economic decline lasting at least two consecutive quarters, characterized by falling GDP, rising unemployment, and reduced consumer spending.
Example: During the 2008–2009 recession, millions of people lost their jobs as banks failed and consumer spending dropped sharply.
en: récession
supply and demand
noun phrase
the relationship between the quantity of a produc available and the desire for that product, which determines price
Example: When a drought reduces the supply of oranges while demand stay constant, orange prices increase
en: offre et demande
tariff
noun
A tariff is a tax imposed on imported or exported goods, typically used to protect domestic industries or generate government revenue
Example: The United States imposed a 25% tariff on steel imports, making foreign steel more expensive and protecting American steel producers
en: tarif
taxe
noun
taxes are mandatory payments collected by the government from individuals and businesses to fund public services and infrastructure
Example: a sales tax of 15% means that on a $100 purchase, you pay an additional $15 to the government
en: taxe
trade deficit
noun phrase
A trade deficit occurs when a country imports more goods and services than it exports, resulting in a negative balance of trade.
Example: The United States has a large trade deficit with China because it buys far more Chinese goods, such as electronics and clothing, than it sells to China.
en: déficit commercial
unemployment
noun
Unemployment is the condition of being without a paid job while actively seeking work, typically expressed as a percentage of the total labour force.
Example: During the COVID-19 pandemic, unemployment in Canada rose sharply as businesses were forced to close and millions of workers lost their jobs.
:max_bytes(150000):strip_icc()/GettyImages-636251500-53ea44b08ca04fb7bc4f0c633cd3ea5d.jpg)
:max_bytes(150000):strip_icc()/dotdash_Final_Production_Possibility_Frontier_PPF_Apr_2020-02-e9454501b961401d85bb9ded84878dee.jpg)
