English for economics students and readers of economic news
Economics Vocabulary: 200 Key English Terms
Economics has its own vocabulary, and the same few hundred words come up again and again in lectures, textbooks, central bank statements and the business pages. This glossary explains the core terms of markets, inflation, growth, jobs, monetary and fiscal policy, trade and development, with natural Turkish equivalents and realistic example sentences. It is written for economics students and for anyone who wants to follow economic news in English.
200 terms
10 topics
78 core terms
401 example sentences
Read, understand, keep going
No account needed. Read the meaning, see where the term is used, then study the examples. Click any word in the lesson for help. You can also select a word and press Alt + Enter.
Core Concepts
economy
noun
Meaning
The whole system by which a country or region produces, sells, buys and uses goods and services, including its businesses, workers, money and government.
Where you use it
One of the most frequent words in the news. Economies grow, slow down, shrink or recover; reports compare the world's largest economies and talk about the global, national or local economy. It is countable when you mean a particular country's economy.
Examples
The economy grew by 0.4% in the third quarter, slightly faster than analysts had expected.
Tourism makes up a large share of the local economy along the coast.
Usage note
Economics is the subject you study; the economy is the system itself. Economic means related to the economy (economic growth), while economical means cheap to run or not wasteful (an economical car).
Common phrases
the global economy · a strong economy · boost the economy · the economy grows · emerging economies
The branch of economics that studies how individual households and firms make choices, and how prices are set in particular markets.
Where you use it
A first-year university course and a standard textbook title. Topics include consumer choice, costs, market structures and elasticity. It takes a singular verb despite the final s: microeconomics is... The adjective is microeconomic.
Examples
In microeconomics we look at how a single firm decides how much to produce.
Our microeconomics exam covers consumer choice and market structures.
Common phrases
intermediate microeconomics · a microeconomics course · microeconomic theory · microeconomic analysis
The branch of economics that studies the economy as a whole, including total output, inflation, unemployment, interest rates and government policy.
Where you use it
Used in courses, research and policy debates. The adjective macroeconomic appears constantly in news and reports: macroeconomic data, macroeconomic stability, the macroeconomic outlook. Economists also just say macro.
Examples
Macroeconomics asks why some countries suffer from high inflation while others do not.
The report says macroeconomic stability is the first condition for attracting long-term investment.
Common phrases
macroeconomic stability · macroeconomic data · macroeconomic policy · macroeconomic outlook
The basic problem that resources such as time, money, land and labour are limited while people's wants are not, so choices always have to be made.
Where you use it
Usually the first idea in an introductory economics course; economics is often described as the study of choice under scarcity. Outside the classroom it also describes a lack of one specific thing: water scarcity, the scarcity of skilled workers.
Examples
Because of scarcity, every hour you spend studying is an hour you cannot spend working.
Water scarcity is pushing farmers in the region to change the crops they grow.
Usage note
The adjective is scarce (there is no word scarcy). Scarcity describes a general, lasting condition; for a temporary lack of a product, shortage is more common.
Common phrases
the problem of scarcity · water scarcity · relative scarcity · scarcity of resources
The value of the best alternative you give up when you make a choice, for example the salary you lose by studying full time instead of working.
Where you use it
A key idea in every introductory course and in business decisions. People say the opportunity cost of something is..., and point out that a choice can have a high or low opportunity cost even when no money changes hands.
Examples
The opportunity cost of a master's degree includes two years of lost income, not just the tuition fees.
When the government spends more on roads, the opportunity cost is the schools or hospitals it could have built instead.
Common phrases
the opportunity cost of · a high opportunity cost · low opportunity cost · calculate the opportunity cost
Something such as a reward, a price or a penalty that encourages people or firms to act in a particular way.
Where you use it
A core idea in economics: people respond to incentives. Governments offer tax incentives or investment incentives, and economists ask whether a policy creates the right incentives or perverse ones. Common verbs are create, give, offer, provide and respond to.
Examples
Tax incentives encouraged several car makers to build factories in the region.
If fuel is heavily subsidised, people have little incentive to use less of it.
Common phrases
tax incentives · investment incentives · create incentives · respond to incentives · an incentive to
A situation in which getting more of one thing means accepting less of another, so you have to balance two goals against each other.
Where you use it
Used constantly by economists and policymakers: the trade-off between inflation and unemployment, between growth and the environment, between equity and efficiency. People face, make or accept trade-offs. American English also writes tradeoff.
Examples
The central bank faces a trade-off between lowering inflation quickly and protecting jobs.
Every budget involves trade-offs: more money for health means less for something else.
Usage note
The noun is hyphenated (a trade-off), but the verb is two words: we trade off speed against cost.
Common phrases
face a trade-off · the trade-off between · make trade-offs · a difficult trade-off
The point at which adding more of one input, while the other inputs stay fixed, produces smaller and smaller increases in output.
Where you use it
Taught as the law of diminishing returns, or diminishing marginal returns. The classic example is adding more and more cooks to the same small kitchen. Outside economics, people say an activity has reached the point of diminishing returns when extra effort brings less benefit.
Examples
Adding a third worker to one machine leads to diminishing returns, because they start getting in each other's way.
After a certain amount of fertiliser, the farm hits diminishing returns and yields barely rise.
Common phrases
the law of diminishing returns · diminishing marginal returns · the point of diminishing returns · hit diminishing returns
A Latin phrase meaning with other things the same, used when economists study the effect of one change while assuming that everything else stays constant.
Where you use it
Common in textbooks, lectures and exams, usually written in italics. For example, the law of demand says that, ceteris paribus, a higher price reduces the quantity demanded. In plain English people say all else being equal or other things being equal.
Examples
Ceteris paribus, a rise in income increases the demand for normal goods.
The model holds ceteris paribus, but in real life prices and incomes change at the same time.
Common phrases
the ceteris paribus assumption · all else being equal · other things being equal
Machines, buildings, tools and other man-made resources used to produce goods and services; in finance the word also means money invested in a business.
Where you use it
One of the factors of production, next to labour and land. Economists separate physical capital (factories, equipment) from human capital (skills) and financial capital (money). Firms raise, invest and accumulate capital; countries with more capital per worker are usually more productive.
Examples
Without new capital, the factory cannot replace its old machines.
Countries that accumulate capital quickly tend to see faster wage growth.
Usage note
In this meaning capital is uncountable: say more capital, not more capitals. Capitals are cities or capital letters.
Common phrases
physical capital · raise capital · capital accumulation · capital-intensive
Everything an economy produces and sells: goods are physical things such as food and cars, and services are activities such as banking, teaching or haircuts.
Where you use it
A fixed phrase in textbooks, statistics and news: GDP measures the value of all final goods and services; exports of goods and services; prices of goods and services. Goods is always plural in this sense, and the order is almost never reversed.
Examples
GDP is the total value of goods and services produced in a country in a year.
Exports of goods and services rose by 8% in the first half of the year.
Usage note
In everyday English, use product or item for one thing. The singular a good appears mainly in economic theory, as in a public good or a normal good.
Common phrases
final goods and services · exports of goods and services · prices of goods and services · produce goods and services
All the people who live together in one home and share its income and spending; in economic models, households buy goods and services and supply labour.
Where you use it
A basic unit in statistics and models: household income, household debt, household spending and household surveys. In the circular flow model, households and firms are the two main actors. Newspapers often write about pressure on household budgets.
Examples
Household debt has grown faster than income over the past five years.
Higher energy bills are squeezing household budgets across the country.
The part of the economy made up of businesses and organisations that are owned by individuals or companies rather than by the state.
Where you use it
Almost always used with the: the private sector. Common in news and policy talk about jobs, investment and debt: private sector employment, private sector credit, private sector investment. The opposite is the public sector.
Examples
Most new jobs last year were created in the private sector.
The private sector's foreign debt is closely watched by investors.
An economic system in which prices, production and wages are mainly decided by supply and demand in free markets, not by government plans.
Where you use it
Used in textbooks and political economy to compare systems: a market economy, a planned economy and a mixed economy. In practice all modern economies are mixed, so people speak of more or less market-oriented economies. The transition to a market economy describes former socialist countries in the 1990s.
Examples
In a market economy, a shortage usually pushes prices up until supply catches up.
Several countries in Central Europe made the move to a market economy in the 1990s.
Common phrases
free market economy · transition to a market economy · functioning market economy · social market economy
The basic resources used to produce goods and services, usually listed as land, labour, capital and entrepreneurship.
Where you use it
A first-week topic in economics courses. Each factor earns an income: land earns rent, labour earns wages, capital earns interest and entrepreneurship earns profit. Textbooks also call them inputs or resources.
Examples
Land, labour and capital are the classic factors of production.
A shortage of one of the factors of production, such as skilled labour, can hold back growth.
Common phrases
the four factors of production · combine factors of production · factor income · factor markets
An economic system in which the state decides what is produced, how much, and at what price, instead of leaving these choices to markets.
Where you use it
Also called a command economy or centrally planned economy. Textbooks contrast it with a market economy and a mixed economy. The Soviet Union, with its five-year plans, is the classic historical example. Typical problems discussed are shortages, queues and weak incentives.
Examples
In a planned economy, a government agency sets the price of bread.
The shift from a planned economy to a market economy took many years.
Common phrases
centrally planned economy · command economy · five-year plan · transition from a planned economy
The satisfaction or benefit a person gets from consuming a good or service; economists assume people make choices to get as much of it as possible.
Where you use it
A theory word, used in microeconomics with marginal utility (the extra satisfaction from one more unit) and utility maximisation. In everyday English, a utility is also a company that supplies electricity, gas or water, and utility bills are those bills.
Examples
The marginal utility of a third slice of cake is lower than that of the first.
Consumers are assumed to spend their income in a way that maximises utility.
Adam Smith's image for the way markets can turn people's self-interest into results that benefit society, without anyone planning it.
Where you use it
Usually the invisible hand of the market. It comes from Adam Smith's The Wealth of Nations (1776), where the phrase appears only once. It is often quoted in debates on free markets, sometimes in a simplified way; market failures show where the invisible hand does not work well.
Examples
Smith argued that the invisible hand guides self-interest towards the common good.
Pollution is a case where the invisible hand fails without regulation.
Common phrases
the invisible hand of the market · Adam Smith's invisible hand · trust the invisible hand
The amount of a good or service that producers are willing and able to sell at each possible price during a given period.
Where you use it
In theory, economists separate supply (the whole link between price and quantity, shown as the supply curve) from quantity supplied (the amount at one price). In the news, supply simply means how much is available: oil supply, housing supply.
Examples
A rise in the price of steel shifts the supply curve for cars to the left.
Housing supply has not kept up with population growth in the big cities.
Usage note
Exam trap: a change in the good's own price causes a movement along the supply curve (a change in quantity supplied); a change in anything else, such as costs or technology, shifts the whole curve (a change in supply).
The amount of a good or service that buyers are willing and able to purchase at each possible price during a given period.
Where you use it
Used in theory (the demand curve, the law of demand) and everywhere in the news: strong or weak demand, demand for exports, consumer demand. Demand rises, falls, picks up or cools.
Examples
Demand for electric cars has grown quickly as battery prices have fallen.
Higher interest rates are meant to cool demand and bring inflation down.
Usage note
Use the preposition for: demand for housing, not demand of housing. In exams, keep demand (the whole curve) separate from quantity demanded (the amount bought at one price).
Any arrangement, physical or online, where buyers and sellers meet to exchange goods, services or assets, and where prices are formed.
Where you use it
A very broad word: the labour market, the housing market, the oil market, financial markets. In the news, the markets often means financial markets and investors: markets reacted calmly to the decision. Firms enter or leave a market; governments regulate or open up markets.
Examples
In a competitive market, no single seller can set the price.
Markets reacted calmly to the central bank's decision.
Common phrases
the housing market · financial markets · market price · market share · enter a market
A situation in which supply and demand are equal, so there is no pressure for the price or the quantity to change.
Where you use it
A central word in textbooks and lectures: the equilibrium price and quantity are where the supply and demand curves cross. Markets move towards, reach or return to equilibrium. It is also used for any stable state, such as long-run equilibrium.
Examples
At the equilibrium price of 20 lira, buyers want exactly as many units as sellers offer.
After the tax is introduced, the market settles at a new equilibrium with a higher price.
Usage note
The stress is on the third syllable: e-qui-LIB-ri-um. The plural is equilibria (equilibriums is also used).
Rivalry between firms that sell similar products and try to win the same customers, which tends to push prices down and quality up.
Where you use it
Economists describe markets by how much competition they have, from perfect competition to monopoly. In the news: fierce or intense competition, foreign competition, competition authorities. The adjective is competitive: a competitive market, competitive prices.
Examples
Competition from online retailers has forced many small shops to cut their prices.
Under perfect competition, firms are price takers: no single firm can influence the market price.
A market in which a single firm is the only seller of a product with no close substitutes, which gives it the power to set prices.
Where you use it
A standard market structure in microeconomics, studied alongside perfect competition, oligopoly and monopolistic competition. In real life, a firm has or holds a monopoly on something, and competition authorities try to regulate or break up monopolies.
Examples
A water company is often a natural monopoly, because building two separate pipe networks would make no sense.
Because it has a monopoly, the firm can charge higher prices than it could in a competitive market.
Usage note
A market with only a few large sellers, such as mobile phone operators in many countries, is an oligopoly.
Common phrases
have a monopoly on · natural monopoly · state monopoly · monopoly power · break up a monopoly
A measure of how strongly the quantity demanded or supplied responds to a change in price, income or another factor.
Where you use it
Most often price elasticity of demand: the percentage change in quantity divided by the percentage change in price. Demand is elastic when buyers react strongly (luxury goods) and inelastic when they hardly react (bread, fuel, medicine). There is also income elasticity and cross elasticity.
Examples
The price elasticity of demand for cigarettes is low, so a tax rise reduces smoking only a little.
Calculate the elasticity of demand if a 10% price rise cuts sales by 20%.
Common phrases
price elasticity of demand · income elasticity · low elasticity · elasticity of supply
A situation in which buyers want more of a product than sellers offer at the current price, often because the price is held below equilibrium.
Where you use it
In theory it is also called excess demand. In the news: a shortage of workers, housing, chips or medicine. Shortages ease or worsen and can lead to queues and rationing. Price ceilings set below the market price often cause shortages.
Examples
A shortage of skilled workers is slowing down construction projects.
When the government capped rents below the market rate, a housing shortage followed.
Common phrases
a shortage of · housing shortage · labour shortage · severe shortage · chronic shortage
An amount left over: in a market, more supply than demand at the current price; in public finance or trade, more income than spending.
Where you use it
Watch the context: a market surplus (excess supply) pushes prices down; a budget surplus means the government collects more than it spends; a trade surplus means exports are larger than imports. Welfare analysis also uses consumer surplus and producer surplus.
Examples
A surplus of wheat after the record harvest pushed prices down.
The country has run a trade surplus with its neighbour for ten years.
Consumer surplus is the gap between what buyers are willing to pay and what they actually pay.
Common phrases
budget surplus · trade surplus · consumer surplus · run a surplus · a surplus of
A cost or benefit of an activity that falls on people who are not part of the deal and is not reflected in the market price.
Where you use it
A key reason for market failure. Pollution is the classic negative externality, while education and vaccination create positive externalities. Governments try to correct or internalise externalities with taxes (such as a carbon tax), subsidies or regulation.
Examples
Traffic congestion is a negative externality: each extra driver slows down everyone else.
A carbon tax makes polluters pay for the externality they create.
A situation in which a free market, left alone, does not produce an efficient outcome for society, so too much or too little of something is produced.
Where you use it
The main causes taught in courses are externalities, public goods, monopoly power and missing or unequal information. Economists use the idea to justify taxes, regulation or public provision, while noting that government action can fail too (government failure).
Examples
Pollution is a textbook case of market failure, because factories do not pay for the damage they cause.
The report argues that the lack of affordable childcare is a market failure that justifies public support.
Common phrases
a case of market failure · correct market failure · sources of market failure · government failure
A good that people cannot easily be stopped from using and whose use by one person does not reduce what is left for others, such as street lighting.
Where you use it
Economists call these two features non-excludable and non-rival. Because people can enjoy public goods without paying (the free-rider problem), markets provide too little of them, so they are usually paid for through taxes. Examples: national defence, lighthouses, public health research.
Examples
National defence is a classic public good: protecting one citizen protects everyone.
Because of free riders, private firms rarely supply public goods such as flood defences.
Usage note
In everyday English, the public good can also mean what is good for society as a whole (act for the public good); the context tells you which meaning is intended.
Common phrases
provide public goods · a pure public good · global public goods · the free-rider problem
The extra cost of producing one more unit of a good or service; a key idea when a firm decides how much to produce.
Where you use it
Central to microeconomics, where firms are assumed to produce until marginal cost equals marginal revenue. In economics, marginal means additional, not small or unimportant as in everyday English. Digital products often have a marginal cost close to zero.
Examples
Once the software is written, the marginal cost of selling another copy is almost zero.
A profit-maximising firm keeps producing until marginal cost equals marginal revenue.
The money a business has left after paying all its costs; if costs are higher than revenue, the result is a loss.
Where you use it
In economics, firms are usually assumed to maximise profit. Companies make, earn or report a profit; profits rise, fall or are squeezed. Economists also use economic profit, which subtracts opportunity cost as well, so it is lower than the accounting profit in company reports.
Examples
The company made a profit for the first time in three years.
Rising energy costs have squeezed profits across the manufacturing sector.
Usage note
Profit is money left over; benefit is any advantage. Profit sounds exactly like prophet, so context matters when listening.
Common phrases
make a profit · profit margin · maximise profit · pre-tax profit · profits fell
A line on a graph showing how much of a product buyers want at each price; it usually slopes downwards because people buy more when the price falls.
Where you use it
Basic vocabulary in microeconomics lectures and exams. Note the difference between a movement along the demand curve (caused by a change in price) and a shift of the demand curve (caused by income, tastes or the price of other goods). Price goes on the vertical axis and quantity on the horizontal axis.
Examples
A rise in incomes shifts the demand curve for cars to the right.
Draw the demand curve first, then add the supply curve and mark the equilibrium.
Common phrases
shift the demand curve · downward-sloping demand curve · movement along the demand curve · supply and demand curves
A theoretical market with many small sellers of an identical product, free entry and exit, and full information, so that no single firm can set the price.
Where you use it
A benchmark model in microeconomics: firms are price takers and earn zero economic profit in the long run. Real markets rarely meet every condition, but some farm and commodity markets come close. Textbooks compare it with monopoly, oligopoly and monopolistic competition.
Examples
Under perfect competition, price equals marginal cost in the long run.
The wheat market is often used as an example of something close to perfect competition.
Common phrases
perfectly competitive market · under perfect competition · model of perfect competition · price taker
A market controlled by a small number of large firms, so each firm's decisions on prices and output affect the others.
Where you use it
Typical examples are airlines, mobile networks, cement and fuel distribution. Economists study oligopolies with game theory and watch for collusion, when firms secretly agree on prices. The adjective is oligopolistic. Competition authorities monitor these markets closely.
Examples
The mobile phone market is an oligopoly with three main operators.
In an oligopoly, a price cut by one firm is quickly matched by its rivals.
A product that can be used instead of another, such as tea and coffee; when the price of one rises, demand for the other usually goes up.
Where you use it
Learned together with complement, a good used together with another (cars and fuel). Substitutes have a positive cross-price elasticity of demand, and the more close substitutes a product has, the more elastic its demand.
Examples
When beef prices rose, many families bought chicken as a cheaper substitute.
Products with few substitutes, such as petrol, have inelastic demand.
Usage note
The verb pattern is tricky: substitute margarine for butter means use margarine instead of butter.
Common phrases
close substitute · cheaper substitute · substitutes and complements · substitute goods
The cost savings a firm gets as it grows: when it produces more, the average cost of each unit falls.
Where you use it
Always plural. Big firms benefit from, achieve or exploit economies of scale through bulk buying, specialised machines and spreading fixed costs over more output. When a firm grows so big that costs rise again, economists speak of diseconomies of scale.
Examples
Large supermarket chains enjoy economies of scale that small shops cannot match.
Carmakers need economies of scale to cover the huge cost of new factories.
Usage note
Here economies means savings, not national economies.
Common phrases
achieve economies of scale · benefit from economies of scale · diseconomies of scale · economies of scope
A basic raw material or farm product, such as oil, copper, wheat or coffee, that is traded in large amounts and is much the same whoever produces it.
Where you use it
Very common in news on inflation and trade: commodity prices, a commodity boom, commodity exporters. Most commodity prices are set on world markets in US dollars. Countries whose exports depend on raw materials are called commodity exporters.
Examples
Falling commodity prices have helped to bring inflation down.
Copper is one of the commodities most sensitive to global growth.
A legal maximum price that sellers are allowed to charge for a good or service, such as a limit on rents or on bread prices.
Where you use it
Also called a price cap. Textbooks show that a binding price ceiling, set below the equilibrium price, causes a shortage and can lead to queues or black markets. News reports talk about governments imposing or lifting a price cap.
Examples
The price ceiling on rents has made it harder to find a flat.
A price ceiling below the market price creates a shortage.
Common phrases
impose a price ceiling · binding price ceiling · price cap · lift the price ceiling
A legal minimum price for a good or service, set by the government to protect producers or workers; the minimum wage is the best-known example.
Where you use it
If set above the equilibrium price, a price floor creates a surplus, such as unsold crops that the state may have to buy. Government purchase prices for farm products such as wheat and hazelnuts work in a similar way.
Examples
The price floor for milk has led to a large surplus of milk powder.
Economists see the minimum wage as a price floor in the labour market.
Common phrases
set a price floor · binding price floor · minimum price · support price
A general and continuing rise in the prices of goods and services in an economy, which means each unit of money buys less over time.
Where you use it
Usually reported as an annual rate: inflation rose to 4%, inflation eased to 3.2%. Common verbs are rise, accelerate, peak, ease, slow and fall. Central banks fight, curb or bring down inflation, and the media discuss inflation figures and inflation expectations.
Examples
Annual inflation slowed to 3.1% in March, mainly because of lower energy prices.
High inflation hurts people on fixed incomes, such as pensioners, the most.
Usage note
A fall in the inflation rate (say from 5% to 3%) does not mean prices are falling; they are still rising, only more slowly. Falling prices are deflation.
Common phrases
high inflation · annual inflation · inflation rate · bring down inflation · inflation expectations
A measure of the average change over time in the prices that households pay for a fixed basket of goods and services, used to calculate inflation.
Where you use it
Usually shortened to CPI and published monthly by national statistics offices, such as TurkStat in Türkiye, the ONS in the UK and the Bureau of Labor Statistics in the US. Headlines say CPI rose 0.3% month on month or 2.9% year on year.
Examples
The consumer price index rose 2.4% from a year earlier, in line with forecasts.
Rent and food have a large weight in the consumer price index, so changes in them move the headline figure a lot.
Usage note
The sister measure is the producer price index (PPI), which tracks the prices producers receive for their goods.
Common phrases
the consumer price index rose · CPI data · CPI inflation · the CPI basket
A general and lasting fall in the prices of goods and services across an economy; the opposite of inflation.
Where you use it
Rarer than inflation but feared by central banks, because falling prices can make people delay spending and make debts harder to repay. Japan's long period of mild deflation from the late 1990s is the best-known modern example.
Examples
Japan struggled with deflation for years, with prices falling slightly and wages stagnating.
Deflation sounds good for shoppers, but it can trap an economy in weak growth.
Usage note
Disinflation is different: prices are still rising, only more slowly than before.
Common phrases
fall into deflation · deflation risk · a deflationary spiral · fight deflation
The amount of goods and services that a sum of money or an income can buy; it falls when prices rise faster than incomes.
Where you use it
Common in news about inflation and wages: inflation erodes or eats into purchasing power, and pay rises aim to protect or restore it. Economists also compare countries using purchasing power parity (PPP), which adjusts for different price levels.
Examples
High inflation has eroded the purchasing power of pensions.
Measured at purchasing power parity, the country's income per person is much higher than at market exchange rates.
Common phrases
erode purchasing power · loss of purchasing power · purchasing power parity · protect purchasing power
The amount of money people need to pay for basic needs such as housing, food, transport and energy in a particular place and time.
Where you use it
Very common in British and international news, especially the phrase cost-of-living crisis for periods when prices rise faster than wages. Also used to compare cities: the cost of living in Istanbul. It is hyphenated before a noun: a cost-of-living adjustment.
Examples
The rising cost of living is the main concern for most households in the survey.
Public sector workers will receive a cost-of-living adjustment twice a year.
Common phrases
the rising cost of living · cost-of-living crisis · cost-of-living adjustment · high cost of living
Measured after removing the effect of inflation, so that a figure shows the true change in what money can buy.
Where you use it
Used whenever money values are compared over time: wages rose 30% but fell in real terms; spending on education is flat in real terms. The opposite is in nominal terms, or in cash terms in British English.
Examples
Wages rose by 40%, but with inflation at 50% they actually fell in real terms.
In real terms, the health budget is lower today than it was ten years ago.
Common phrases
fall in real terms · rise in real terms · real wages · real interest rate
Measured in current money values without adjusting for inflation, such as a salary or a GDP figure expressed in today's prices.
Where you use it
Always paired with its opposite, real: nominal GDP and real GDP, nominal wages and real wages, the nominal interest rate and the real interest rate. Good economic reports state clearly which one they mean.
Examples
Nominal GDP grew by 60%, but most of that was inflation rather than real growth.
The nominal interest rate is 6% and inflation is 4%, so the real interest rate is roughly 2%.
Common phrases
nominal GDP · nominal wages · nominal interest rate · in nominal terms
A painful mix of high inflation, weak or no growth and rising unemployment, all happening at the same time.
Where you use it
A blend of stagnation and inflation. It is hard for policymakers, because raising rates to fight inflation can deepen the slowdown. The oil price shocks of the 1970s are the classic example; analysts warn of stagflation risks when energy prices jump.
Examples
The oil shocks of the 1970s pushed many Western economies into stagflation.
With prices rising and output shrinking, some economists say the country is already in stagflation.
Common phrases
stagflation risk · fall into stagflation · fears of stagflation · a period of stagflation
Extremely rapid inflation, often defined as prices rising by more than 50% a month, which quickly destroys the value of a currency.
Where you use it
Historic cases include Germany in 1923, Hungary after the Second World War and Zimbabwe in the late 2000s. In such periods people stop using the local currency and switch to foreign money or barter. Avoid using it loosely for ordinary high inflation.
Examples
During the hyperinflation of 1923, German banknotes lost value so fast that people spent their wages the same day.
Hyperinflation usually starts when a government prints money to pay for large deficits.
Common phrases
a period of hyperinflation · spiral into hyperinflation · suffer hyperinflation · hyperinflation in
A measure of inflation that leaves out the most volatile prices, usually food and energy, to show the underlying trend in prices.
Where you use it
Central banks watch core inflation closely because it shows whether price rises are spreading through the economy. The exact definition varies by country. The overall figure is called headline inflation.
Examples
Headline inflation fell because of cheaper fuel, but core inflation is still stubbornly high.
Core inflation, which excludes food and energy, rose to 3.3%.
A fall in the rate of inflation: prices are still rising, but more slowly than before.
Where you use it
Common in central bank statements and economic news: the disinflation process, a period of disinflation, the disinflation path. Central banks often describe their aim as bringing inflation down through sustained disinflation.
Examples
The disinflation process is expected to continue next year as demand cools.
Annual inflation fell from 9% to 5%, a clear sign of disinflation.
Usage note
Disinflation (slower price rises) is not deflation (falling prices). If inflation drops from 8% to 3%, that is disinflation.
Common phrases
disinflation process · disinflation path · sustained disinflation · a period of disinflation
The overall inflation rate based on all items in the consumer price index, including volatile prices such as food and energy.
Where you use it
This is the figure that makes the news headlines, hence the name. Analysts compare it with core inflation, which leaves out volatile items. Headline inflation can jump because of an oil price rise even when underlying inflation is stable.
Examples
Headline inflation rose to 4.8% because of higher fuel prices.
Headline inflation has fallen, but core inflation remains sticky.
Common phrases
headline inflation rate · headline and core inflation · headline inflation rose · headline CPI
A measure of the average change in the prices that domestic producers get for their goods at the factory gate, before taxes and shop margins are added.
Where you use it
Usually shortened to PPI. Analysts watch it as an early signal for consumer prices, because higher production costs are often passed on later. Reports say producer prices rose or eased. TurkStat publishes the domestic PPI every month together with the CPI.
Examples
The producer price index rose 2% last month, mainly because of energy costs.
A jump in the producer price index often shows up in consumer prices a few months later.
Common phrases
PPI inflation · producer prices · domestic PPI · factory-gate prices
A situation in which the general level of prices rises only slowly and predictably, so that inflation does not disturb economic decisions.
Where you use it
The main legal objective of many central banks, including the Central Bank of the Republic of Türkiye and the European Central Bank. In advanced economies it is usually defined as inflation of around 2%, not zero. Central banks aim to achieve, maintain or restore price stability.
Examples
The bank's primary objective is to achieve and maintain price stability.
Without price stability, firms find it hard to plan investment.
What households, firms and investors believe inflation will be in the future; these beliefs affect wage demands, prices and interest rates today.
Where you use it
A key idea in central bank communication. Expectations can be well anchored (stable near the target) or de-anchored. They are measured by surveys, such as the CBRT's Survey of Market Participants, and by the prices of inflation-linked bonds.
Examples
Inflation expectations remain well anchored despite the recent rise in oil prices.
If inflation expectations rise, workers will ask for bigger pay increases.
A fixed list of goods and services that a typical household buys, used by statistics offices to measure how prices change over time.
Where you use it
The consumer price index tracks the cost of this basket. Each item has a weight that reflects its share of household spending, and the basket is updated regularly, with new items added and old ones dropped. Also called the CPI basket or the basket of goods and services.
Examples
Food and housing make up the largest share of the basket of goods.
Statisticians update the basket of goods every year to reflect new spending habits.
Common phrases
CPI basket · basket of goods and services · weights in the basket · update the basket
Inflation caused by rising production costs, such as higher energy prices, wages or import costs, which firms pass on to their customers.
Where you use it
Contrasted with demand-pull inflation in textbooks and policy debates. Typical triggers are oil shocks and a weaker currency. It is difficult for central banks because it raises prices while slowing growth, the mix behind stagflation.
Examples
Higher electricity and gas prices have fuelled cost-push inflation.
Economists disagree on whether this is cost-push inflation or the result of strong demand.
Common phrases
cost-push pressures · cost-push factors · cost-push and demand-pull inflation
Inflation that happens when total demand in the economy grows faster than the supply of goods and services, often summed up as too much money chasing too few goods.
Where you use it
Typical causes are fast credit growth, large fiscal stimulus or an export boom. Because demand is the source, central banks fight it by raising interest rates to cool spending. Compare cost-push inflation.
Examples
Cheap credit and rising wages led to demand-pull inflation.
Rate hikes work best against demand-pull inflation.
Common phrases
demand-pull pressures · demand-side inflation · too much money chasing too few goods
The degree to which a change in costs, especially in the exchange rate, is passed on to consumer prices.
Where you use it
Usually exchange rate pass-through: when the currency weakens, import prices rise and part of this shows up in inflation. Pass-through can be high or low, fast or slow, and tends to be higher where inflation is already high. The phrasal verb is pass on: firms pass on costs.
Examples
Economists estimate that pass-through from the exchange rate to inflation is about 20%.
Exchange rate pass-through is faster when inflation is already high.
Common phrases
exchange rate pass-through · high pass-through · pass-through to inflation · pass on costs
Short for gross domestic product: the total value of all final goods and services produced within a country in a given period, usually a quarter or a year.
Where you use it
The headline measure of the size and growth of an economy. The news reports GDP growth (quarter on quarter or year on year), GDP per capita and debt as a share of GDP. Say it letter by letter; economists also use output for the same idea.
Examples
GDP grew by 1.2% in the second quarter compared with the previous quarter.
Services now account for more than half of the country's GDP.
Usage note
GNI (gross national income) counts the income earned by a country's residents wherever they earn it, while GDP counts production inside the country's borders.
Common phrases
GDP growth · real GDP · GDP per capita · share of GDP · GDP figures
An increase in the amount of goods and services an economy produces over time, usually measured as the percentage change in real GDP.
Where you use it
Often just growth in the news: growth slowed to 2%, growth picked up. Governments aim to boost or support growth; economists separate short-term growth from long-term growth, which depends on productivity, investment and population.
Examples
Economic growth slowed to 2.1% last year as exports weakened.
Without higher productivity, long-term economic growth is hard to sustain.
A significant fall in economic activity lasting months, with falling output, income and jobs; often defined as two quarters in a row of shrinking GDP.
Where you use it
Economies enter, fall into, slide into or emerge from a recession. The two-quarter rule gives a technical recession; in the US, a committee of the National Bureau of Economic Research officially dates recessions using wider data such as jobs and income.
Examples
The economy fell into recession after two quarters of negative growth.
Many firms froze hiring because they feared a recession.
Usage note
A very long and severe recession is called a depression, as in the Great Depression of the 1930s.
Common phrases
fall into recession · a deep recession · a mild recession · technical recession · emerge from recession
The repeated pattern of ups and downs in economic activity, moving from expansion to a peak, then to contraction and a low point, and back to recovery.
Where you use it
Used in macroeconomics courses and by analysts who discuss where we are in the cycle: early, late, at the peak or near the bottom. Cycles are irregular in length. Also called the economic cycle, or the trade cycle in older British texts.
Examples
Unemployment usually rises in the downswing of the business cycle and falls in the upswing.
Analysts think the economy is late in the business cycle, so growth may soon slow.
Common phrases
phases of the business cycle · late in the cycle · cyclical downturn · economic cycle
How much output is produced from a given amount of input, most often measured as output per worker or per hour worked.
Where you use it
Seen as the main source of long-term growth and higher living standards. Productivity rises, stagnates or lags behind; firms invest in technology and training to boost or improve it. Labour productivity is the most widely quoted measure.
Examples
Productivity growth has been weak in many rich countries since the 2008 financial crisis.
Better roads and ports can raise productivity by cutting the time it takes to move goods.
Common phrases
labour productivity · productivity growth · boost productivity · low productivity · productivity gap
A period when economic activity, sales or prices fall or grow much more slowly; a general word that may or may not mean a full recession.
Where you use it
A softer, less technical word than recession, popular in business news: an economic downturn, a downturn in the housing market. Firms prepare for, survive or weather a downturn. The opposite is an upturn.
Examples
Many small firms did not survive the downturn.
The downturn in the housing market has hit construction jobs hard.
Common phrases
an economic downturn · a sharp downturn · weather the downturn · a downturn in
The period after a recession or crisis when output, jobs and incomes start to grow again and move back towards their earlier level.
Where you use it
Recoveries can be strong, slow, fragile, uneven or jobless. The news describes them with letter shapes: a V-shaped recovery (fast), a U-shaped one (slower) or a K-shaped one (some groups recover, others do not). The verb is recover.
Examples
The recovery has been uneven: services have bounced back, but manufacturing is still weak.
The economy took four years to recover its pre-crisis level of output.
Common phrases
economic recovery · a strong recovery · a fragile recovery · V-shaped recovery · slow recovery
The money that households spend on goods and services, from food and rent to cars and holidays; it is the largest part of GDP in most economies.
Where you use it
Also called household consumption or private consumption, the C in the GDP formula. The news says consumer spending is strong, slowing or holding up. Economists watch retail sales and consumer confidence surveys as early signals.
Examples
Consumer spending held up well despite higher interest rates.
Consumer spending accounts for about 60% of GDP, so a drop in confidence can quickly hit growth.
Spending on things that will be used to produce more in the future, such as machines, buildings and software; in GDP data it does not include buying shares.
Where you use it
One of the four main parts of GDP, next to consumption, government spending and net exports. In national accounts it appears as gross fixed capital formation. In everyday and financial English, investment also means putting money into shares, bonds or property, so check which meaning is intended.
Examples
Business investment fell for the third quarter in a row as borrowing costs rose.
Public investment in railways and ports can raise the economy's long-term growth.
Common phrases
business investment · public investment · investment spending · boost investment
The spending of households on goods and services such as food, clothes, rent and transport; it is usually the largest part of a country's GDP.
Where you use it
In national accounts it is called private consumption or household final consumption expenditure. News reports say consumption rose, slowed or was the main driver of growth. In energy consumption, the word means the amount used, not spending.
Examples
Private consumption was the main driver of growth in the second quarter.
Consumption slowed as higher interest rates made borrowing more expensive.
The amount of goods and services produced by a firm, an industry or a whole economy in a given period.
Where you use it
Economists often use output as another word for GDP, as in total output or output growth. In company and industry news, output simply means production: factory output, oil output, car output. Output rises, falls, recovers or is cut.
Examples
Factory output fell by 2% in March after a strong start to the year.
Oil producers agreed to cut output to support prices.
Common phrases
total output · factory output · output growth · cut output · output per worker
The total spending on goods and services in an economy at a given price level: consumption, investment, government spending and net exports added together.
Where you use it
A core idea in macroeconomics, often written AD and drawn with aggregate supply (AS) in the AD-AS model. Fiscal and monetary policy try to boost or cool aggregate demand. As a formula: AD = C + I + G + (X − M).
Examples
Tax cuts are meant to boost aggregate demand during a recession.
When aggregate demand grows faster than supply, prices tend to rise.
Common phrases
boost aggregate demand · weak aggregate demand · aggregate demand and supply · AD curve
A fall in economic activity or output over a period, for example when GDP is lower than in the previous quarter.
Where you use it
A neutral, technical word used in data releases and reports: a contraction of 0.3%, the economy is in contraction. The verb is contract: GDP contracted. In PMI surveys, a reading below 50 signals contraction. The opposite is expansion.
Examples
The economy suffered a contraction of 1.2% in the first quarter.
A manufacturing PMI of 47 points to a contraction in factory activity.
Common phrases
economic contraction · a sharp contraction · contraction in output · slip into contraction
The output of factories, mines and energy producers, usually reported every month as an index that shows how activity in industry is changing.
Where you use it
One of the first monthly signals of where GDP is heading. TurkStat publishes the industrial production index each month, usually adjusted for calendar and seasonal effects. News reports say industrial production rose month-on-month or fell year-on-year.
Examples
Industrial production rose 1.5% in May, led by cars and machinery.
Weak industrial production data raised fears of a slowdown.
Common phrases
industrial production index · industrial production rose · industrial production data · manufacturing output
The phase of the business cycle when output, jobs and incomes are growing, lasting from the low point after a recession to the next peak.
Where you use it
Economists date expansions and compare how long they last: the longest expansion on record. In PMI news, expansion means growth in activity; a reading above 50 signals expansion. Expansionary policy is policy that boosts demand.
Examples
The US expansion that began in 2009 lasted more than ten years.
A PMI of 53 shows a solid expansion in manufacturing.
Common phrases
economic expansion · the current expansion · expansionary policy · period of expansion
A period of very fast growth in the economy or in one sector, with rising demand, prices, profits and jobs.
Where you use it
Used for the whole economy or for one sector: a housing boom, a credit boom, a commodity boom, a tech boom. Booms often end in a bust, hence the phrase boom and bust. It is also a verb: business is booming.
Examples
The housing boom ended when interest rates rose sharply.
Policymakers want to avoid another cycle of boom and bust.
A situation in which demand grows faster than the economy can produce, leading to rising inflation, labour shortages and often a large current account deficit.
Where you use it
Signs of overheating include fast credit growth, rising wages and output above its potential level. Central banks respond with tightening. The verb is overheat: the economy is overheating. A gentle cooling without recession is called a soft landing.
Examples
Strong credit growth and rising wages are clear signs of overheating.
The central bank raised rates to prevent overheating in the economy.
Common phrases
signs of overheating · risk of overheating · an overheating economy · prevent overheating
The situation of people who have no job but are available for work and actively looking for one; also the number or share of such people.
Where you use it
The headline figure is the unemployment rate, the share of the labour force without a job. It rises, falls, stays flat or hits a record low. Official definitions follow the International Labour Organization, so people who have stopped looking are not counted as unemployed.
Examples
The unemployment rate fell to 8.6%, its lowest level in five years.
Youth unemployment remains much higher than the national average.
Usage note
Unemployed is the adjective: unemployed people, the unemployed. Payments to people who lose their jobs are called unemployment benefit in the UK and unemployment insurance in the US.
Common phrases
the unemployment rate · youth unemployment · high unemployment · unemployment benefit · long-term unemployment
The market in which workers offer their time and skills and employers hire them, setting the level of employment and wages.
Where you use it
Common in central bank statements and the news: the labour market is tight (few available workers, rising wages) or loose and slack (many people looking for work). It is spelled labor market in American English.
Examples
The labour market remains tight, with more job openings than people looking for work.
Women's participation in the labour market has increased steadily over the past decade.
Common phrases
a tight labour market · labour market data · enter the labour market · labour market reform
The money a worker is paid for their work, especially when it is calculated by the hour, day or week.
Where you use it
In economics, wages is the general word for the price of labour: wage growth, real wages, wage rises. Wages rise, stagnate or lag behind inflation; unions negotiate them and employers set or raise them.
Examples
Real wages fell last year because prices rose faster than pay.
The union is asking for a 15% wage increase for factory workers.
Usage note
Wage is usually hourly or weekly pay; salary is a fixed yearly amount paid monthly, typically to office staff. Turkish often uses maaş for both.
Common phrases
wage growth · real wages · wage increase · average wage · wage gap
All the people who are either working or unemployed but actively looking for work; students, retirees and others not seeking jobs are left out.
Where you use it
A statistical term used in labour surveys: the unemployment rate is the share of the labour force without a job. People join, enter or leave the labour force. It is spelled labor force in American English; workforce is a common synonym in general English.
Examples
The labour force grew by 500,000 people last year as more women entered work.
Retired people and full-time students are not part of the labour force.
Common phrases
join the labour force · the labour force survey · share of the labour force · a skilled labour force
The lowest hourly, daily or monthly pay that employers are legally allowed to pay workers, set by the government or by law.
Where you use it
A frequent topic in the news and in economics exams: governments raise the minimum wage, and economists debate its effects on jobs and prices. Workers earn or are on the minimum wage; employers must pay at least the minimum wage.
Examples
The government raised the minimum wage by 30% from January.
Economists disagree about whether a higher minimum wage reduces employment.
Usage note
In the UK, the legal minimum for workers above a certain age is officially called the National Living Wage.
Common phrases
raise the minimum wage · on the minimum wage · national minimum wage · minimum wage increase
To end someone's employment because there is not enough work or money, rather than because of anything the worker did wrong.
Where you use it
Very common in business and economic news. Companies lay off staff or lay staff off; workers are laid off. The noun is layoff (mainly US) or redundancy (UK): a wave of layoffs. It is more neutral than fire, which suggests the worker was at fault.
Examples
The factory will lay off 300 workers as orders from Europe fall.
A wave of layoffs in the tech sector has pushed up unemployment in the city.
Usage note
The past form is laid off, not layed off.
Common phrases
lay off workers · be laid off · a wave of layoffs · mass layoffs · temporary layoffs
Long-lasting unemployment caused by a mismatch between workers' skills or locations and the jobs available, often after technology or industries change.
Where you use it
One of the three types taught in macroeconomics, together with frictional unemployment (time spent between jobs) and cyclical unemployment (caused by recessions). Interest rate cuts do little to reduce it; retraining and education are the usual policy responses.
Examples
When the coal mines closed, many miners faced structural unemployment because their skills were no longer needed.
Automation could increase structural unemployment among workers who do routine tasks.
The share of the working-age population that is in the labour force, meaning people who are either working or actively looking for work.
Where you use it
The full name is the labour force participation rate. Read it together with the unemployment rate: unemployment can fall simply because discouraged people stop looking and leave the labour force. In Türkiye, women's participation rate is a widely discussed figure.
Examples
The participation rate for women rose to 36%, still well below the OECD average.
Unemployment fell, but only because the participation rate dropped as people gave up looking for work.
Common phrases
labour force participation rate · female participation rate · a rise in the participation rate · low participation
A wage measured by what it can actually buy, after adjusting for inflation; if prices rise faster than pay, real wages fall.
Where you use it
Usually used in the plural: real wages rose, fell or stagnated. Economists compare real wage growth with productivity growth. The opposite is the nominal wage, the amount written on the payslip.
Examples
Real wages fell last year because pay rises did not keep up with inflation.
The union wants a deal that protects the real wage of its members.
Common phrases
real wage growth · real wages fell · real wage losses · protect real wages
An organisation of workers that negotiates with employers about pay, working hours and conditions on behalf of its members.
Where you use it
British English says trade union; American English says labor union or just union. Unions negotiate through collective bargaining, sign collective agreements and may call a strike. Economists study how union membership affects wages and employment.
Examples
The trade union is asking for a pay rise above the inflation rate.
Trade union membership has fallen in most rich countries since the 1980s.
Usage note
Turkish sendika comes from French syndicat, but English syndicate means a group of companies or criminals working together, not a trade union.
Common phrases
trade union membership · join a trade union · trade union leaders · collective bargaining
The process by which an economy or a business adds new jobs, often measured as the number of new positions in a month or a year.
Where you use it
Common in news and policy debates: job creation slowed, policies to boost job creation, net job creation (new jobs minus jobs lost). Governments often justify investment incentives by the number of jobs they will create.
Examples
Job creation slowed sharply in the second half of the year.
Small firms account for most job creation in the economy.
A situation in which almost everyone who wants a job can find one; some unemployment still exists because people change jobs or lack the right skills.
Where you use it
Full employment does not mean zero unemployment; economists link it to the natural rate of unemployment, or NAIRU. In the US, maximum employment is one of the Federal Reserve's two main goals, together with stable prices. An economy is at, near or above full employment.
Examples
With unemployment at 3.5%, many economists say the country is close to full employment.
Pushing the economy beyond full employment usually leads to higher inflation.
Common phrases
at full employment · close to full employment · maximum employment · full employment policy
Unemployment among young people, usually measured for those aged 15 to 24 who are looking for work but cannot find a job.
Where you use it
A standard figure in labour reports from TurkStat, Eurostat and the ILO: the youth unemployment rate. It is usually much higher than the overall rate. A related idea is NEET: young people not in education, employment or training.
Examples
Youth unemployment is more than twice the national average.
Apprenticeship schemes are one way to tackle youth unemployment.
A situation in which employers cannot find enough workers, or enough workers with the right skills, to fill their vacancies.
Where you use it
Common in news about ageing populations, migration and wage growth: sectors facing labour shortages, such as construction, health care and hospitality. Shortages often push wages up. A skills shortage is narrower: a lack of qualified workers. US spelling: labor shortage.
Examples
Farmers say a labour shortage has left fruit unpicked in the fields.
The labour shortage in hospitals has pushed up nurses' pay.
Common phrases
severe labour shortage · face a labour shortage · skills shortage · ease labour shortages
A paid position that is available and that an employer is actively trying to fill.
Where you use it
Economists watch the number of vacancies, and the ratio of vacancies to unemployed people, to judge how tight the labour market is. Firms advertise, fill or cut vacancies. TurkStat publishes job vacancy statistics; the US equivalent is the JOLTS report on job openings.
Examples
There are now more job vacancies than unemployed people in the country.
The hotel has struggled to fill its job vacancies before the summer season.
Common phrases
fill a vacancy · advertise a vacancy · job vacancy rate · unfilled vacancies · job openings
The part of the labour market where people work on short tasks or jobs, often found through apps, instead of having a permanent employer.
Where you use it
Typical gig work includes food delivery, ride-hailing and freelance online tasks. Debates focus on flexibility versus job security and whether gig workers are employees or self-employed. The word gig originally meant a single music performance.
Examples
Many young people in the city earn a living in the gig economy as delivery riders.
Gig economy workers usually have no paid holidays or sick pay.
Common phrases
gig economy workers · gig work · platform workers · the rise of the gig economy
A model showing a short-run trade-off between unemployment and inflation: when unemployment is low, wages and prices tend to rise faster.
Where you use it
Named after the economist A. W. Phillips, who studied UK data on unemployment and wage growth in 1958. The 1970s, with high inflation and high unemployment together, showed that the trade-off is not stable in the long run. Economists say the Phillips curve has flattened or steepened.
Examples
According to the Phillips curve, falling unemployment should push inflation up.
Some economists argue that the Phillips curve has become much flatter in recent decades.
Common phrases
a flat Phillips curve · short-run Phillips curve · long-run Phillips curve · the Phillips curve trade-off
The price of borrowing money, shown as a yearly percentage of the amount borrowed; for savers, it is the return they earn on deposits.
Where you use it
In economic news, interest rates usually means the central bank's policy rate: the bank raised, cut or held interest rates. Banks also set rates on loans, mortgages and deposits. Often shortened to rates: rates are high.
Examples
The central bank kept interest rates unchanged for the third meeting in a row.
Higher interest rates make mortgages more expensive and usually slow down house price rises.
Usage note
Interest on its own is uncountable: pay interest, earn interest. Do not say interests for bank interest; interests means someone's hobbies or advantages.
The national institution that issues a country's currency, sets the main interest rate and works to keep prices and the financial system stable.
Where you use it
Examples are the Central Bank of the Republic of Türkiye (CBRT), the US Federal Reserve (the Fed), the European Central Bank (ECB) and the Bank of England. In the news, the central bank raises or cuts rates, intervenes in currency markets and publishes statements and inflation reports.
Examples
The central bank said it would keep policy tight until inflation falls clearly.
In many countries the central bank is legally independent and sets interest rates without direct instructions from the government.
Common phrases
central bank independence · the central bank governor · central bank reserves · central bank decision
The actions a central bank takes to influence interest rates, the money supply and credit in order to control inflation and support the economy.
Where you use it
Monetary policy is tight (restrictive, high rates) or loose (accommodative, low rates). Central banks tighten or ease it, and committees such as a Monetary Policy Committee meet regularly to decide. Contrast it with fiscal policy, which is run by the government.
Examples
Monetary policy works with a lag, so a rate rise today may only affect inflation a year from now.
The bank signalled that monetary policy would stay tight for some time.
The main interest rate set by a central bank, which guides the rates that banks charge each other, businesses and households.
Where you use it
Also called the benchmark rate, key rate or base rate. Each central bank has its own: the Fed sets a target range for the federal funds rate, the Bank of England sets Bank Rate, and the CBRT's policy rate is the one-week repo rate.
Examples
The central bank left its policy rate at 4.25%, as most economists had expected.
Bank lending rates usually follow the policy rate within a few weeks.
Common phrases
raise the policy rate · keep the policy rate unchanged · benchmark rate · key policy rate
An increase in the central bank's main interest rate, usually made to cool demand and bring inflation down.
Where you use it
An informal news word, especially common in American English; British reports often say rate rise. Central banks deliver or pause rate hikes, and markets price in further hikes. Hike is also a verb: the bank hiked rates by half a point.
Examples
The rate hike of 50 basis points was larger than markets had expected.
After a series of rate hikes, mortgage costs have almost doubled.
Common phrases
a series of rate hikes · pause rate hikes · deliver a rate hike · aggressive rate hikes
A reduction in the central bank's main interest rate, usually made to make borrowing cheaper and to support growth and jobs.
Where you use it
Markets expect, hope for or bet on rate cuts; central banks deliver them or start an easing cycle. As a verb phrase: the bank cut rates by a quarter point. Rate cuts usually come when inflation is falling or growth is weak.
Examples
Investors are betting on a rate cut at the next meeting.
The surprise rate cut weakened the currency against the dollar.
Common phrases
deliver a rate cut · expect a rate cut · a surprise rate cut · a quarter-point rate cut
The rate of inflation that a central bank officially aims to achieve over the medium term, such as 2% a year.
Where you use it
Many central banks in advanced economies aim for about 2%. Inflation can be above, below or back at target; banks hit, miss or overshoot their targets. The policy framework built around such a target is called inflation targeting.
Examples
Inflation has been above the central bank's 2% inflation target for three years.
The bank expects inflation to return to its target by the end of next year.
Common phrases
meet the inflation target · miss the target · above target · inflation targeting · medium-term target
Ten questions from this glossary. Pick the right meaning for each term and see your score.
How to learn economics vocabulary
Read one short economic news story in English every day, such as a central bank decision or an inflation release, and note the verbs used with each figure: inflation rises, eases or accelerates; rates are raised, cut or held.
Learn terms in pairs and opposites: supply and demand, inflation and deflation, surplus and deficit, hawkish and dovish, appreciation and depreciation. Most economic texts are built on these contrasts.
Practise saying numbers the English way: 3.5% is three point five percent, a move from 3% to 4% is one percentage point, and a quarter of a point is twenty-five basis points.
Compare the same announcement in two languages: the Central Bank of the Republic of Türkiye and TurkStat publish their press releases in both Turkish and English, so you can match the key terms side by side.
When a definition feels abstract, draw it. A simple supply and demand diagram or a timeline of the business cycle makes many terms much easier to remember.
Frequently asked questions
What is the difference between economics, economy, economic and economical?
Economics is the academic subject; the economy is the system of production and trade itself. Economic means related to the economy, as in economic growth or economic policy. Economical means cheap to run or careful with money, as in an economical car. Turkish uses ekonomik for both of the last two, which is why learners often mix them up.
Which economic terms should I learn first to follow the news in English?
Start with the figures that make the headlines every month: inflation and the consumer price index, the interest rate or policy rate, GDP and growth, the unemployment rate, the exchange rate, the budget deficit and the current account deficit. Then learn the verbs that describe how they move, such as rise, ease, pick up, widen and narrow, and the difference between a percent and a percentage point.
Do Turkish economists use the English terms or the Turkish ones?
Both. Academic Turkish has well-established equivalents such as arz, talep, esneklik, fırsat maliyeti and beşeri sermaye, and exams and textbooks use them. In financial markets and the media, some English terms are used directly or translated literally: hawkish and dovish become şahin and güvercin, and QE, soft landing and basis point are everyday expressions. Knowing both versions lets you move easily between Turkish and English sources.
How do I read numbers like 3.5%, 25 basis points and 0.4 percentage points aloud?
Say 3.5% as three point five percent; English uses a decimal point where Turkish uses a comma. 25 basis points is a quarter of a percentage point, often called a quarter point. 0.4 percentage points is zero point four percentage points (British speakers may say nought point four). In large numbers English uses commas to separate thousands, so 1,500 means one thousand five hundred.
What is the difference between monetary policy and fiscal policy?
Monetary policy is run by the central bank and works mainly through interest rates and the money supply. Fiscal policy is run by the government and works through taxes and public spending, which are set out in the budget. Both affect demand, growth and inflation, which is why the news often discusses how well the two are coordinated.
