Archives: Terms

Definition of Balanced Budget A balanced budget is a budget in which total revenue is equal to total expenditure. That means the government does not spend more money than it takes in. This is usually achieved by cutting spending, raising taxes, or both. Example To illustrate this, let’s look at […]

Definition of Capital Flight Capital Flight is defined as the movement of money out of a country due to political or economic instability. That means it is the process of investors and businesses transferring their money to safer investments in other countries. This often happens when investors fear that their […]

Definition of Capital Capital is defined as any asset that can be used to generate income or increase the value of a business. That means it includes both physical assets such as buildings, equipment, and inventory, as well as financial assets such as cash, stocks, and bonds. Example To illustrate […]

Definition of Business Cycle The Business Cycle is defined as the natural fluctuations of economic activity that occur over time. That means it describes the rise and fall of economic growth, which is measured by indicators such as gross domestic product (GDP), employment, and inflation. Example To illustrate this, let’s […]

Definition of Budget Surplus A budget surplus is defined as a situation in which a government’s income exceeds its expenditures. That means the government has more money coming in than it has going out. This can be achieved either through increased taxation or reduced spending. Example To illustrate this, let’s […]

Definition of Budget Deficit A budget deficit is defined as the difference between a government’s total spending and total revenue (i.e., excess spending). That means it is the amount of money a government has to borrow in order to cover its expenses. Example To illustrate this, let’s look at the […]

Definition of Bond A bond is a debt security issued by a government or corporation. That means it is a loan that the issuer takes out from investors, and in return, the issuer promises to pay back the loan with interest at a predetermined date. Bonds are typically issued in […]

Definition of the Benefits Principle The benefits principle is an economic concept that states that people should pay taxes in proportion to the benefits they receive from public services. That means people should pay taxes according to the individual value they receive from public services, such as roads, schools, and […]

Definition of Average Total Cost Average Total Cost (ATC) is defined as the total cost of production divided by the number of units produced. That means it is the average cost of producing one unit of a good or service. It includes both fixed and variable costs, such as labor, […]

Definition of Average Tax Rate Average Tax Rate is defined as the total amount of taxes paid divided by the total taxable income. That means it is the average rate at which taxes are applied to a person’s income. It is usually expressed as a percentage. Example To illustrate this, […]