This is the second article based on the words/phrases used in Economics.
Economics cannot be left on its own, can it?
So better study some of its terms to have a better understanding of it.
1. Amortization: Amortization (or amortisation) is the process of decreasing, or accounting for, an amount over a period. The word comes from Middle English amortisen to kill, alienate in mortmain, from Anglo-French amorteser, alteration of amortir, from Vulgar Latin admortire to kill, from Latin ad- + mort-, mors death. When used in the context of a home purchase, amortization is the process by which your loan principal decreases over the life of your loan. With each mortgage payment that you make, a portion of your payment is applied towards reducing your principal and another portion of your payment is applied towards paying the interest on the loan. An amortization table shows this ratio of principal and interest and demonstrates how your loan’s principal amount decreases over time.
Source: Wikipedia
2. Assets: Things that have earning power or some other value to their owner.
3. Balance of payments: The total of all the money coming into a country from abroad less all of the money going out of the country during the same period.
4. Business Cycle: The cycles of boom and bust. The long-run pattern of economic growth and recession.
5. Cartel: An agreement among two or more firms in the same industry to co-operate in fixing prices and/or carving up the market and restricting the amount of output they produce.
6. Ceteris paribus: A latin phrase meaning “Other things being equal”. Economists use this latin phrase to bail themselves out of tricky situations. For example, they might say that “higher interest rates will lead to lower inflation, ceteris paribus”, which means that they will stand by their prediction about inflation only if nothing else changes apart from the rise in the interest rate.
7. Economies of scale: Bigger is better. In many industries, as output increases, the average cost of each unit produced falls. One reason is that overheads and other fixed costs can be spread over more units of output. However, getting bigger can also increase average costs (diseconomies of scale) because it is more difficult to manage a big operation, for instance.
8. Depreciation: A fall in the value of an asset or a currency; the opposite of appreciation.
9. Derivatives: Financial assets that ‘derive’ their value from other assets. For example, an option to buy a SHARE is derived from the share.
10. Devaluation: A sudden fall in the value of a currency against other currencies. Strictly, devaluation refers only to sharp falls in a currency within a fixed exchange rate system. Also it usually refers to a deliberate act of government policy, although in recent years reluctant devaluers have blamed financial speculation. Most studies of devaluation suggest that its beneficial effects on competitiveness are only temporary; over time they are eroded by higher prices.
Read the first article in the series HERE.
