This article comprehensively overviews the most important economic terminologies crucial for CSS and PMS aspirants. Learning to write them will enable aspirants to navigate complex political concepts effectively.
Learning to write subject terminologies is always essential for competitive exam students, especially CSS and PMS. This practice gives aspirants a deeper understanding of complex concepts, ultimately helping them articulate their thoughts clearly. Learning to write these terms appropriately not only enhances comprehension but also equips aspirants to engage effectively with exam essays. For example, in fields like political economy, acquaintance with terms such as “globalization” and “trade barriers” helps aspirants confidently analyze and debate relevant issues. After learning these terminologies, aspirants can tackle exam questions more adeptly because they can apply these terms contextually, demonstrating their knowledge and critical thinking skills. Therefore, learning subject-specific terminology is not just about learning words or vocabulary; it’s all about improving exam scores.
I have compiled the following terminologies from various reputable sources: dictionaries, websites, books, and magazines. This compilation is intended to aid my students in enhancing their vocabulary and effectively articulating their thoughts in essays, whether for compulsory or optional subjects.
Important Economic Terminologies
| Scarcity |
| The limited availability of resources compared to unlimited human wants |
| Opportunity Cost |
| The value of the next best alternative forgone when a choice is made |
| Supply and Demand |
| The economic model explaining how prices and quantities are determined in a market |
| Equilibrium |
| The point at which the quantity demanded equals the quantity supplied |
| Elasticity |
| A measure of how responsive quantity demanded or supplied is to a change in price or income |
| Market |
| A place or mechanism where buyers and sellers interact |
| Perfect Competition |
| A market with many buyers and sellers, homogeneous products, and no barriers to entry or exit |
| Monopoly |
| A market with only one seller |
| Oligopoly |
| A market with a few large firms |
| Monopolistic Competition |
| A market with many firms selling differentiated products |
| Externalities |
| Unintended consequences of economic activity that affect third parties |
| Public Goods |
| Goods that are non-rivalrous and non-excludable |
| Market Failure |
| When a market fails to allocate resources efficiently |
| Game Theory |
| The study of strategic decision-making |
| Transaction Costs |
| The costs associated with conducting economic transactions |
| Inflation |
| A sustained increase in the general price level |
| Unemployment |
| The percentage of the labor force that is unemployed |
| Economic Growth |
| An increase in the production of goods and services over time |
| Business Cycle |
| The fluctuations in economic activity over time |
| Fiscal Policy |
| The use of government spending and taxation to influence the economy |
| Monetary Policy |
| The use of interest rates and the money supply to influence the economy |
| Balance of Payments |
| The record of a country’s transactions with the rest of the world |
| Economic Development |
| The improvement of the quality of life of a population |
| International Trade |
| The exchange of goods and services between countries |
| Protectionism |
| Government policies that restrict international trade |
| Free Trade |
| The absence of government barriers to international trade |
| Tariff |
| A tax on imports |
| Quota |
| A limit on the quantity of imports |
| Exchange Rate Regime |
| The system used to determine the exchange rate of a country’s currency |
| Capitalism |
| An economic system characterized by private ownership of resources and market allocation |
| Socialism |
| An economic system characterized by public ownership of resources and centralized planning |
| Communism |
| A political and economic ideology advocating for a classless society |
| Mixed Economy |
| An economy that combines elements of capitalism and socialism |
| Gross Domestic Product (GDP) |
| The total value of goods and services produced in an economy |
| Interest Rate |
| The cost of borrowing money |
| Keynesian Economics |
| A theory that emphasizes government intervention to stabilize the economy |
| Classical Economics |
| A theory that emphasizes the role of markets in allocating resources |
| Monetarism |
| A theory that emphasizes the role of money supply in determining economic activity |
| Supply-side Economics |
| A theory that emphasizes the role of tax cuts and deregulation in stimulating economic growth |
| Stock Market |
| A market where stocks are bought and sold |
| Bond Market |
| A market where bonds are bought and sold |
| Foreign Exchange Market |
| A market where currencies are bought and sold |
| Derivative Market |
| A market where financial derivatives are bought and sold |
| Commodity Market |
| A market where commodities are bought and sold |
| Central Bank |
| An institution that controls a country’s money supply |
| Federal Reserve |
| The central bank of the United States |
| Monetary Policy |
| The actions taken by a central bank to influence the money supply and interest rates |
| Inflation |
| A sustained increase in the general price level of goods and services in an economy over time |
| Economic Development |
| The improvement of the quality of life of a population through economic growth |
| Human Development Index (HDI) |
| A measure of human development that includes health, education, and income |
| Sustainable Development |
| Economic development that meets the needs of the present without compromising the ability of future generations to meet their own needs |
| Poverty |
| The state of being poor |
| Income Inequality |
| The unequal distribution of income within a population |
| Economic Growth |
| An increase in the production of goods and services in an economy over time |
| Structural Adjustment |
| Economic reforms aimed at reducing government intervention in the economy |
| Opportunity Cost |
| The value of the next best alternative forgone when a choice is made |
| Marginal Cost |
| The additional cost of producing one more unit of a good or service |
| Marginal Benefit |
| The additional benefit of consuming one more unit of a good or service |
| Law of Diminishing Marginal Utility |
| As a consumer consumes more of a good or service, the additional satisfaction they derive from each additional unit decreases. |
| Production Possibility Frontier (PPF) |
| A graph that shows the maximum combination of two goods or services that an economy can produce with its available resources and technology |
| Comparative Advantage |
| The ability of a country to produce a good or service at a lower opportunity cost than another country |
| Absolute Advantage |
| The ability of a country to produce a good or service more efficiently than another country |
| Specialization |
| The concentration of production on a particular good or service |
| Interdependence |
| The reliance of countries on each other for goods and services |
| Economic Integration |
| The process of bringing countries closer together economically |
| Consumer Price Index (CPI) |
| A measure of inflation |
| Producer Price Index (PPI) |
| A measure of inflation at the producer level |
| Inflation Rate |
| The rate at which the general price level of goods and services is rising |
| Economic Growth Rate |
| The rate at which an economy’s output is increasing |
| Balance of Trade |
| The difference between a country’s exports and imports |
| Current Account Balance |
| The balance of a country’s trade in goods, services, and income |
| Capital Account Balance |
| The balance of a country’s trade in capital |
| Behavioral Economics |
| A theory that incorporates psychological factors into economic analysis |
| New Keynesian Economics |
| A theory that incorporates elements of Keynesian and classical economics |
| Real Business Cycle Theory |
| A theory that emphasizes the role of an economy witnesses all these phases of business cycle due to technology shocks |
| New Classical Economics |
| A theory that emphasizes the role of rational expectations in determining economic outcomes |
| Endogenous Growth Theory |
| A theory that emphasizes the role of technological progress in driving economic growth |
| Growth Theory |
| A theory that examines the factors that determine the long-run growth rate of an economy |
| Marginal Revenue Product |
| The additional revenue generated by hiring one more unit of labor |
| Marginal Factor Cost |
| The additional cost of hiring one more unit of labor |
| Labor Market |
| The market for labor |
| Capital Market |
| The market for financial capital |
| Gini Coefficient |
| A measure of income inequality |
| Lorenz Curve |
| A graph that shows the distribution of income in a population |
| Heckscher-Ohlin Theorem |
| A theory that explains why countries trade based on their relative endowments of factors of production |
| Stolper-Samuelson Theorem |
| A theorem that predicts how changes in trade policy affect the distribution of income within a country |
| Terms of Trade |
| The ratio at which a country exchanges its exports for imports |
| Economic Rent |
| The income earned by a factor of production in excess of its opportunity cost |
| Inflation Rate |
| The rate at which the general price level of goods and services is rising |
| Unemployment Rate |
| The percentage of the labor force that is unemployed |
| Economic Growth Rate |
| The rate at which an economy’s output is increasing |
| Exchange Rate |
| The price of one currency in terms of another |
| Fiscal Deficit |
| The difference between a government’s spending and its revenue |
| National Debt |
| The total amount of money owed by a government |
| World Trade Organization (WTO) |
| An international organization that regulates world trade |
| Inter-American Development Bank (IDB) |
| A regional development bank that promotes economic development in Latin America and the Caribbean |
| Asian Infrastructure Investment Bank (AIIB) |
| A multilateral financial institution that invests in infrastructure projects in Asia |
| International Monetary Fund (IMF) |
| An international organization that provides financial assistance to countries in need |
| World Bank |
| An international financial institution that provides loans and grants to developing countries |
| European Union (EU) |
| A political and economic union of member states located in Europe |
| North American Free Trade Agreement (NAFTA) |
| A free trade agreement between Canada, Mexico, and the United States |
| Organization for Economic Cooperation and Development (OECD) |
| An international organization that promotes economic growth and development |
| Asian Development Bank (ADB) |
| A regional development bank that promotes economic development in Asia |
| African Development Bank (AfDB) |
| A regional development bank that promotes economic development in Africa |
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