Archives: Terms

Definition of Open Economy An open economy is an economy that interacts with other economies through international trade and capital flows. That means it is not isolated from the rest of the world and is affected by global economic developments. Open economies are usually characterized by a high degree of […]

Definition of Poverty Line The poverty line determines the estimated minimum level of income required to secure the necessities of life. It is usually calculated by taking the median or average income of a country and then adjusting it for the cost of living in that country. That means it […]

Definition of Repurchase Agreement A repurchase agreement (Repo) is a financial transaction in which one party agrees to sell a security to another party and then repurchase it at a later date, usually for a slightly higher price. That means it is essentially a short-term loan that is secured by […]

Definition of Nominal GDP Nominal GDP is the total value of all goods and services produced in an economy in a given year, measured at current market prices. That means it is the sum of all the money spent on goods and services in a given year without taking into […]

Definition of Nominal Exchange Rate The nominal exchange rate is the rate at which one currency can be exchanged for another. That means it is the price of one currency in terms of another currency. Thus, it is usually expressed as the number of units of one currency that can […]

Definition of Net Exports Net exports, also known as the balance of trade, is the difference between a country’s exports and imports. That means it describes the value of all goods and services a country exports minus the value of all goods and services it imports. If the value of […]

Definition of Net Capital Outflow Net capital outflow (NCO) is defined as the net amount of capital that leaves a country over a certain period of time. That means it is the difference between the total amount of capital that is invested in a country and the total amount of […]

Definition of Natural-Rate Hypothesis The natural-rate hypothesis (NRH) is an economic theory that states that the unemployment rate in an economy will eventually return to its natural rate, regardless of the level of economic activity. That means it describes the rate of unemployment that exists when the labor market is […]