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Economic terms used in these lessons

This economics glossary defines 41 terms used to discuss markets, growth, inflation, policy and data. Start with the term you need, then use the full lesson to see how it works in a calculation or a real economic question.

Choices and markets

Scarcity
Resources have competing uses. Choices therefore involve tradeoffs.
Opportunity cost
The value of the best alternative forgone by a choice.
Incentive
A reward, cost or rule that can change behavior.
Marginal
The effect of one additional unit or a small change.
Elasticity
A percentage response of one variable to a percentage change in another, under stated conditions.

Output and living standards

GDP
Production within an economy during a period. It is a flow, not national wealth.
GNI
GDP plus net primary income received from abroad.
Nominal
Measured at current prices or in money terms without the relevant inflation adjustment.
Real
Adjusted for price changes using a specified method.
Per capita
Divided by population. An average, not a distributional measure.
Productivity
Output relative to an input, such as output per hour worked.
Value added
Output value less intermediate inputs used in production.
PPP
Purchasing power parity: a conversion used to compare prices and output across countries. It is not a tradable exchange rate.

Prices and rates

Inflation
The rate at which a broad price measure rises.
Disinflation
A reduction in the inflation rate. Prices can still be rising.
Deflation
A decline in a broad price level.
CPI
A consumer price index based on a defined population and consumption basket.
PPI
A producer price index. Coverage and stage of pricing differ from CPI.
Basis point
One hundredth of a percentage point. One hundred basis points equal one percentage point.
Percentage point
The arithmetic difference between two percentages, distinct from relative percentage change.

Jobs and the cycle

Labor force
Employed plus unemployed people under the applicable statistical definition.
Participation rate
Labor force as a share of the relevant population.
Unemployment rate
Unemployed people as a share of the labor force.
Recession
A substantial contraction in economic activity. Official definitions and dating procedures vary.
Output gap
Estimated actual output relative to potential output. Potential output is unobserved and uncertain.

Policy and external accounts

Monetary policy
Central bank actions affecting monetary and financial conditions.
Fiscal policy
Government decisions about spending, revenue and transfers.
Deficit
The amount by which expenditure exceeds revenue over a period under the specified accounting basis.
Public debt
A stock of government obligations at a date. Scope and valuation matter.
Primary balance
A fiscal balance excluding interest payments.
Current account
The balance of goods, services, primary income and secondary income with the rest of the world.
Depreciation of a currency
A fall in its value against another currency. Always specify the quotation.

Reading evidence

Seasonal adjustment
A statistical treatment of recurring seasonal and calendar patterns.
YoY / MoM / QoQ
Change against a year earlier, the previous month or the previous quarter.
Annualized growth
A growth rate over a short period compounded as if its pace continued for a year.
Base effect
An effect on a growth rate caused by an unusual level in the comparison period.
Revision
An update to a previously published estimate.
Consensus
A summary of forecasts from a particular survey, not an official outcome.
Correlation
Movement together. It does not by itself establish causation.
Scenario
A conditional description of outcomes under explicit assumptions.
PMI
A purchasing managers’ survey index. For common diffusion PMIs, 50 indicates no change versus the preceding month. It is not a GDP growth rate.

Use definitions in context

These are introductory working definitions. Official coverage, accounting boundaries and methods can differ. Consult the relevant release notes before combining datasets. Keep this glossary beside the data release checklist and return to the full lessons for examples.

Sources and further reading

Examples use hypothetical figures unless stated otherwise. Updated 8 October 2026.