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Tariff___A tax that’s usually on imports, but occasionally (very rarely) on exports. This is one form of trade barrier that’s intended to restrict imports into a country. Unlike non-tariff barriers and quotas which increase prices and thus revenue received by domestic producers, a tariff generates revenue for the government.
Troubled Asset Relief Program (TARP)___A program of the United States government to purchase assets and equity from financial institutions to strengthen its financial sector, signed into law by U.S. President George W. Bush on October 3, 2008.
Tax___Any sort of forced or coerced payment to government. The primary reason government collects taxes is to get the revenue needed to finance public goods and pay administrative expenses. However, the more astute leaders of the first estate have recognized over the years that taxes have other effects, including–(1) redirecting resources from one good to another and (2) altering the total amount of production in the economy. As such, taxes have been used to correct market failures, equalize the income distribution, achieve efficiency, stabilize business cycles, and promote economic growth.
Tax Avoidance___A legal reduction in taxes. The complexity of our system of taxes, especially income taxes, makes it extremely worthwhile to identify the mix of spending, working, and assorted activities that reduce taxes. This has also created a major industry of accountants, lawyers, educators, public speakers, and others who spend their efforts uncovering legal tax loopholes.
Tax Evasion___An illegal reduction in taxes. Tax evasion occurs when someone fails to pay their legal taxes.
Tax Shelter___Tax shelters are any method of reducing taxable income resulting in a reduction of tax payments. They include, but are not limited to, losses on investment property, depreciation of various assets, and tax-deferred investments.
Tea Party___A movement in the United States to promote conservative, libertarian, and populist beliefs including cutting spending, reducing the deficit, and lowering taxes.
Ticker Symbol___A symbol for a stock or mutual fund that it can be identified with. Every stock/mutual fund has a symbol, up to 5 letters long. For example Microsoft has the symbol MSFT.
Trade Deficit___Formally termed a balance of trade deficit, a condition in which a nation’s imports are greater than exports.
Trade Surplus___Formally termed a balance of trade surplus, a condition in which a nation’s exports are greater than imports
Traditional Economy___An economy based on agriculture, with others in society working in simple crafts, such as the manufacturing of cloth or pottery, with decisions made on the basis of custom.
Traditional IRA (Individual Retirement Account)___A traditional IRA is a personal savings plan that gives you tax advantages for saving for retirement. Contributions to a traditional IRA may be tax deductible – either in whole or in part. Also, the earnings on the amounts in your IRA are not taxed until they are distributed.
Treasury Bill___One kind of government security issued by the U. S. Treasury to obtain the funds used to finance the federal budget deficit. A Treasury bill (or T-bill) has a maturity length of one year or less, with 90 days a common maturities. T-bills, together with short-term commercial paper issued by businesses, are traded in money markets. The interest rate on T-bills is one of the key indicators of short-run economic activity.
Treasury Bond___One kind of government security issued by the U. S. Treasury to obtain the funds used to finance the federal budget deficit. A Treasury bond (or T-bond) has a maturity length of over 10 years, with 15 and 30 years common maturities. T-bonds, together with other long-term bonds issued by state and local governments and businesses, are traded in capital markets. The interest rate on T-bonds is a key long-run interest rate.
Treasury Note___One kind of government security issued by the U. S. Treasury to obtain the funds used to finance the federal budget deficit. A Treasury note (or T-note) has a maturity length of between one and 10 years.
Underwriter___A broker or bank which arranges the sale of an issue of securities (stocks) on behalf of a client and, if it does not sell all stock to other institutions or investors, purchases the unsold securities.
Unemployment Rate___The proportion of the civilian labor force 16 years or older that is actively seeking employment, but is unemployed and not engaged in the production of goods and services. The unemployment rate is estimated and reported monthly by the U.S. Department of Labor’s Bureau of Labor Statistics. It is used not only as the prime measure of labor unemployment in the economy, but also as a key indicator of business-cycle instability.
Union___An organization of workers or employees who act jointly to negotiate with their employers over wages, fringe benefits, working conditions, and other facets of employment. The main function of unions is to provide a balance for the market control exerted over labor by big business.
United States Supreme Court___The highest federal court, or for that matter any court, in the United States established by the U. S. Constitution. It has final appellate jurisdiction and as well as jurisdiction over all other courts in the nation.
United States Treasury Department___A cabinet level part of the U.S. Federal government responsible for assorted financial matters. While it was once heavily involved in what could be termed monetary policy, before the creation of the Federal Reserve System, it’s primary money role in modern times is relegated to authorizing the minting of metal coins. Among its many varied and important functions are issuing U.S. Treasury securities to finance the federal deficit and maintaining the integrity of paper currency by tracking counterfeiters.
Usury Law___Laws which establish legal ceilings on the interest rates charged for various types of loans.
Utility___The satisfaction of wants and needs obtained from the use or consumption of goods and services. The terms utility and satisfaction are, for the most part, used interchangeably in economics. Two other somewhat technical economic terms frequently used to capture this notion are welfare and well-being. Whichever term is used, the underlying concept is the same: To what extent are unlimited wants and needs fulfilled using the goods and services produced from society’s limited resources.
Valuation___In finance, valuation is the process of estimating the potential market value of a financial asset or liability.
Value___Quite simply, this is the amount of consumer satisfaction directly or indirectly obtained from a good. service, or resource. The more a good satisfies a person’s want or need, then the more valuable it is to that person.
Value Investing___An investment style that favors buying stocks with lower price-to-earnings ratios and relatively high dividend yields, such as those issued by cyclical companies and businesses in mature industries (as opposed to growth investing).
Variable Cost___Cost that fluctuates with changes in the quantity of output produced.
Voluntary Exchange___The process of willingly trading one item for another. The emphasis here is on “willingly.” Voluntary exchanges are the heart and soul of market transactions, and should be contrasted with the “involuntary” exchanges mandated by government taxes, laws, and regulations. While involuntary government-forced exchanges play an important role in a mixed economy, economists really, really like voluntary market exchanges because they promote economic efficiency.
Wants___This is often thought of as a psychological desire which makes life just a little more enjoyable, but which is not physiologically necessary to life. You need oxygen, but you want a Playstation 3.
Warranty___A written guarantee, issued to the purchaser of an article by its manufacturer, promising to repair or replace it if necessary within a specified period of time.
Warren Buffett___Warren Edward Buffett is an American business magnate, investor, and philanthropist. He is widely regarded as one of the most successful investors in the world.
Wealth___The net ownership of material possessions and productive resources. In other words, the difference between physical and financial assets that you own and the liabilities that you owe. Wealth includes all of the tangible consumer stuff that you possess, like cars, houses, clothes, jewelry, etc.; any financial assets, like stocks, bonds, bank accounts, that you lay claim to; and your ownership of resources, including labor, capital, and natural resources. Of course, you must deduct any debts you owe.
Welfare___An assortment of programs that provide assistance to the poor. The cornerstone of our welfare system is Aid to Families with Dependent Children (AFDC), which was created by the Social Security Act (1935). It provides cash benefits to assist needy families with children under the age of 18. Funding comes partly from the federal government and partly from states. Because states also administer their own programs, benefits and qualification criteria differ from state to state. A second part of the welfare system, one that’s run entirely by the federal government, is Supplemental Security Income (SSI). This program provides cash benefits to elderly, blind, and disabled in addition to any benefits received through the Social Security system
Will___A will or testament is a legal declaration by which a person, the testator, names one or more persons to manage his/her estate and provides for the transfer of his/her property at death.
World Bank___(International Bank for Reconstruction and Development) An agency of the United Nations that was established in 1945 to promote the economic development of the poorer nations in the world. They pursue this goal by providing low-interest loans to less development countries and offering technical assistance on the best ways to use these loans. Funds for the loans are obtained by the World Bank by selling bonds on the world’s financial markets. It’s long-run economic development orientation is usually coordinated with the shorter-run efforts of its sister U. N. agency, the International Monetary Fund.
World Trade Organization___An international organization that oversees multilateral trade among nations. The World Trade Organization, or WTO, was established in 1995 by the Uruguay round of trade negotiations to replace the General Agreement on Tariffs and Trade (GATT) that had been in place for the preceding five decades. The WTO administers multilateral trade agreements, provides a forum for trade negotiations, handles trade disputes, monitors national trade policies, and provides technical assistance and training for developing countries. The WTO has about 150 member countries.
X___The standard abbreviation for exports produced by the foreign sector and purchased by the domestic economy, especially when used in the study of macroeconomics.
Yield___The rate of return on a financial asset. In some simple cases, the yield on a financial asset, like commercial paper, corporate bond, or government security, is the asset’s interest rate. However, as a more general rule, the yield includes both the interest earned from an asset plus any changes in the asset’s price. Suppose, for example, that a $100,000 bond has a 10 percent interest rate, such that the holder receives $10,000 interest per year. If the price of the bond increases over the course of the year from $100,000 to $105,000, then the bond’s yield is greater than 10 percent. It includes the $10,000 interest plus the $5,000 bump in the price, giving a yield of 15 percent. Because bonds and similar financial assets often have fixed interest payments, their prices and subsequently yields move up and down as economic conditions change.
Zero Coupon Bond___Also termed a zero bond, a bond that does not pay interest, in which the return is generated by the difference between the purchase price and the face value paid at maturity. Because they do not pay interest, zero coupon bonds are sold at a discount. For example, a $10,000 zero coupon bond that matures in one year, would generate a 10% return if it sold at a discount of $9,000.