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Economics vocabulary · GDP and Growth

Overheating

Meaning in economics, with examples

nounCommon term

In economics, overheating means: 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.

In Turkish: aşırı ısınma

How it is used

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.

Example sentences

  1. Strong credit growth and rising wages are clear signs of overheating.

  2. The central bank raised rates to prevent overheating in the economy.

Common collocations

  • signs of overheating
  • risk of overheating
  • an overheating economy
  • prevent overheating
  • aggregate demandThe total spending on goods and services in an economy at a given price level: consumption, investment, government spending and net exports added together.
  • tighteningA policy of making money and credit more expensive or harder to get, mainly by raising interest rates, in order to slow demand and bring inflation down.
  • boomA period of very fast growth in the economy or in one sector, with rising demand, prices, profits and jobs.
  • soft landingA slowdown in economic growth that is just enough to bring inflation down without causing a recession or a big rise in unemployment.
  • demand-pull inflationInflation 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.

More terms: GDP and Growth

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This page explains English vocabulary for learners. It is not financial advice.