Economic Terms

Economics can be an intimidating subject but, by understanding the fundamental definitions of economic terms, you can start to get a sense of why economic changes happen, what drives and economy, and how they affect your daily life.

Simple explanations of everyday economics terms

An illustration of three groupings of people. The first is a woman and two men, the second is a couple, and then a family of three, the third is a home and five faceless people. Text reads: "Groups for which census reports average family incomes: income per person, or income for each person at age 15 or older. Income for two or more people in one household related by birth, marriage, or adoption. Household income of all people living in a housing unit, whether related or not"
What Is the Average Income in the United States?
Frequently Asked Questions
  • What is supply and demand?

    Supply and demand are the forces that drive the U.S. economy. Supply includes labor, represented by employment, and natural resources, such as oil, land, and water. Oil prices drive over 50% of the cost of gas. Demand, or personal consumption, drives almost 70% of the economy. A lot of this occurs during the holiday shopping season, which starts on Black Friday.

  • How does trickle-down economics work?

    Trickle-down economics assumes investors, savers, and company owners are the real drivers of growth. It promises they’ll use any extra cash from tax cuts to expand businesses. Investors will buy more companies or stocks. Banks will increase lending. Owners will invest in their operations and hire workers. All of this expansion will trickle down to workers.

  • What is economic growth?

    Economic growth is the increase in the value of an economy's goods and services, which creates more profit for businesses. As a result, stock prices rise. That gives companies capital to invest and hire more employees.

  • What is middle class income?

    Although the U.S. government doesn't have an official definition of middle-class income, the Pew Research Center considers a household income to be "middle-class" if it's between 67% and 200% of the median household income.

  • What is an economic depression?

    An economic depression is a severe downturn that lasts several years. Fortunately, the world has only experienced one economic depression. That was the Great Depression which lasted for 10 years. The decline in the gross domestic product growth rate was bigger than anything experienced since then.

Key Terms

Explore Economic Terms

Job seekers sit in a row of chairs, waiting for an interview.
What Is the Phillips Curve?
Illustration showing a demand curve
What Is Demand?
A woman points something out.
What Is Racketeering?