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Top 5 Economic Terms You’ve Heard Of But Don’t Know The Meaning

Economic

We’ve all been there at some point: Watching the news and hear an economic term that we just glaze over and move swiftly by.

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Luckily, we’re here to help you out! Here are 5 economic terms that are thrown around on the news and in conversations, that you might not know the meaning of:

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1. Escrow
If you’ve been looking into buying a property, you’ll have come across this term. The basic meaning is when a financial transaction happens, in order to keep your money safe – and the seller out of hot water, your money is held in a neutral third-party’s bank account. That way the buyer proves they can pay and if either party decides – or has to – back out, they can easily do so.

The reason this is used so widely in the properties industry is because you can put down a deposit on the house to prove you can pay for it, while also not having to commit to buying it without having various checks performed on it, such as foundation checks, mould inspections and the like.

2. GDP
When it comes to explaining GDP, many people say “it’s how well a country is performing financially”, however, it is a bit more specific than that. GDP is only defined as the total market value of all goods and services produced by a country in a period of time, normally quarterly. This includes everything produced by individuals, businesses and government, so also takes into account the difference between imports and exports.

However, GDP cannot be used singularly as a point of living standards compared to other countries. Moneyfarm has a great blog post about how GDP affects investments.

3. Deductible
You’ve likely heard this term when it comes to insurance and taxes.

Related to insurance, your deductible is the amount you will have to pay the insurance company before your insurance starts to take hold, before this is paid off, you’ll have to pay more of your costs.

Related to taxes, deductibles are costs (usually of doing business), that can be set off against tax paid to the government. Those that are self-employed will have a lot of experience with this one!

4. Stock options
During a job interview, you may have been offered these, in which case, well done! Stock options are used as a way to reward employees, in that they are able to buy stock at a set price at a certain point in the future. If you are offered an option on 1,000 stocks at £5, then a year later, the stocks are £10 a share, you can then buy these at the previously offered £5, effectively doubling your money!

5. Inflation
This effects economy in lots of ways, both good and bad, but at its most basic, inflation is the sustained increase of prices over time. It is caused by the devaluation of money, as the amount of money in a market increases.

We hope this helped you out, and if it did, be sure to comment below!

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