Work & prices
Inflation
Inflation describes how quickly the general price level rises over a stated period.
Look up: CPI, price level, cost of living
Understand inflationOpening the page.
Loading the explanation and its sources…
News, numbers, and the ideas beneath them.
Loading the explanation and its sources…
34 ideas that unlock economic and financial news. Start with a familiar question, or look up the term in front of you.
34 of 34 concepts
Inflation describes how quickly the general price level rises over a stated period.
Look up: CPI, price level, cost of living
Understand inflationAn interest rate expresses the cost of borrowing money, usually as a yearly percentage.
Look up: borrowing costs, APR, policy rates
Understand interest ratesThe unemployment rate is the share of the labor force classified as unemployed.
Look up: jobless rate, labor market
Understand unemploymentGDP measures the value of final goods and services produced within a country during a period.
Look up: gross domestic product, annualized growth
Understand gross domestic productNominal values use current prices. Real measures adjust for price changes so periods can be compared.
Look up: inflation adjusted, constant prices
Understand real versus nominalPercentage points measure the direct gap between percentages; percent change measures the relative change.
Look up: pp, percentage point, percent change
Understand percentage pointsSeasonal adjustment estimates and removes recurring calendar patterns to make changes over time easier to interpret.
Look up: seasonally adjusted, SA, NSA
Understand seasonal adjustmentA trade deficit occurs when the value of imports exceeds exports during the period measured.
Look up: imports, exports, trade balance
Understand trade deficitA revision updates an earlier estimate when additional information or improved measurement becomes available.
Look up: revised estimate, preliminary, data vintage
Understand data revisionsGovernment debt is outstanding borrowing. A budget deficit is the gap between spending and revenue over a period.
Look up: budget deficit, public debt, fiscal deficit
Understand government debtThe overnight borrowing rate for reserve balances between eligible financial institutions.
Look up: Fed funds, FFR, policy rate
Understand the federal funds rateCentral-bank purchases of longer-term securities intended to ease financial conditions.
Look up: QE, asset purchases, balance sheet
Understand quantitative easingA reduction in a central bank’s securities holdings, often by letting assets mature without fully replacing them.
Look up: QT, runoff, balance sheet
Understand quantitative tighteningA comparison of bond yields across different maturities at one point in time.
Look up: Treasury curve, term spread
Understand yield curveA yield curve is inverted when a longer-term yield is below a shorter-term yield being compared.
Look up: inversion, 2s10s, 10y-3m
Understand inverted yield curveOne basis point equals 0.01 percentage point; 100 basis points equal one percentage point.
Look up: bps, bp, quarter point
Understand basis pointsA bond is a tradable promise to repay borrowed money under stated terms.
Look up: fixed income, coupon, maturity, principal
Understand bondsYield expresses a bond’s return relative to its price; different yield measures include different cash flows.
Look up: yield, current yield, yield to maturity
Understand bond yieldsA measure of how sensitive a bond’s price is to changes in yields.
Look up: modified duration, interest-rate risk
Understand durationThe yield gap between a riskier debt instrument and a chosen benchmark.
Look up: risk premium, investment grade, high yield
Understand credit spreadsHow readily an asset can be bought or sold without a large price concession.
Look up: liquid market, illiquid
Understand liquidityA share represents an ownership interest in a company.
Look up: shares, equities, stock market
Understand stocks and equitySpreading investments across different exposures to reduce concentration risk.
Look up: portfolio, asset allocation
Understand diversificationCentral-bank actions intended to influence financial conditions, economic activity and price stability.
Look up: tightening, easing, central bank
Understand monetary policyGovernment decisions about spending and taxation that affect the economy and public finances.
Look up: stimulus, austerity, taxes, government spending
Understand fiscal policyA significant, broad decline in economic activity lasting more than a few months.
Look up: contraction, downturn, business cycle
Understand recessionReal output produced per hour of work.
Look up: output per hour, efficiency
Understand labor productivityThe labor force as a share of the relevant civilian noninstitutional population.
Look up: participation rate, labor force
Understand labor-force participationAn inflation measure excluding specified components; core CPI excludes food and energy.
Look up: headline CPI, core CPI, underlying inflation
Understand core inflationA sustained decline in the general price level.
Look up: falling price level
Understand deflationA decline in the inflation rate, which can remain positive.
Look up: slowing inflation
Understand disinflationThe price of one currency expressed in another.
Look up: currency appreciation, depreciation, dollar
Understand exchange ratesThe value of the best alternative given up when making a choice.
Look up: trade-off, next best alternative
Understand opportunity costTaxes applied to imported goods under the importing country’s rules.
Look up: import duty, customs duty
Understand tariffs