Economic terms explained

Absolute poverty

Having a household income below a line set using a reference year and then adjusted as prices change.

AKA: absolute low income

Aggregate demand

The total demand for goods and services made in an economy.

Aggregate supply

The goods and services businesses across an economy can and are willing to provide.

Automatic stabilisers

Parts of the tax and benefit system that respond to a weaker or stronger economy without a new policy decision.

AKA: automatic fiscal stabilisers

Barriers to entry

Obstacles that make it hard for a new business to start competing in a market.

AKA: entry barriers

Base effects

The effect an unusually high or low starting figure can have on a percentage change reported later.

Claimant count

The number of people claiming specified benefits linked to looking for work.

Collective bargaining

Workers' representatives and an employer negotiating pay or working conditions for a group.

Core inflation

A measure of inflation that leaves out certain prices, usually food, energy, alcohol and tobacco in UK figures.

Debt interest

Interest the public sector pays on money it has borrowed.

AKA: public debt interest

Deflation

A fall in the overall level of prices, rather than a fall in just one price.

Deposit to income ratio

A home-buying deposit compared with the buyer's or buyers' yearly income.

Disinflation

A slowdown in how quickly prices are rising.

Economic inactivity rate

The share of people in a stated age group who are neither working nor classed as unemployed.

AKA: inactivity rate

Economic rent

An earning above the amount needed to keep a person or resource in its current use.

Fiscal rules

Targets or limits a government sets for borrowing, debt or other measures of the public finances.

AKA: budget rules

Gini coefficient

A single number showing how unevenly income or wealth is spread across a group.

AKA: Gini index

Government bond yield

The return a buyer expects from a government bond at its current price, usually shown as a yearly percentage.

AKA: gilt yield

Gross value added (GVA)

The value a business or industry adds by making goods or providing services, after subtracting what it bought from other businesses to do so.

AKA: GVA

Housing completions

Homes recorded as finished and ready for use during a given period.

Housing cost burden

The share of a household's income spent on paying for its home.

AKA: housing cost to income ratio

Income after housing costs

Household income after taking off specified housing costs, including rent or mortgage interest.

AKA: after housing costs income AHC income

Income before housing costs

Household income measured before rent and certain other housing costs are taken off.

AKA: before housing costs income BHC income

Income decile

One of ten equally sized groups formed by putting people or households in order of income.

AKA: income tenth

Intergenerational wealth transfer

Money or other wealth passed from an older generation to a younger one.

AKA: intergenerational transfer of wealth

Labour force participation rate

The share of people in a stated age group who are either working or classed as unemployed.

AKA: economic activity rate

Labour share of income

The share of income generated in an economy that goes to people for their work.

AKA: labour income share

Loan to value ratio

A mortgage loan shown as a percentage of the home's value.

AKA: loan-to-value LTV

Market concentration

How much of a market's sales or activity is accounted for by its largest businesses.

Material deprivation

Going without things or activities considered part of a decent standard of living because you cannot afford them.

Mean earnings

Total earnings for a group divided by the number of people or jobs counted.

AKA: mean pay

Means testing

Checking a person's income and sometimes savings to decide whether they qualify for help or how much they receive.

AKA: means test

Median household income

The middle household income when households are put in order from lowest income to highest.

Mortgage affordability

Whether a household can manage the payments on a home loan alongside its other costs.

Mortgage income multiple

The mortgage amount divided by the borrower's or borrowers' annual income.

AKA: loan to income ratio mortgage loan to income ratio

Nominal wages

Pay measured in pounds, without adjusting for changes in prices.

AKA: money wages

Output gap

The estimated difference between what an economy is producing and what it could sustain using its workers and equipment normally.

Price elasticity of demand

How strongly the amount people buy responds when its price changes.

AKA: demand price elasticity

Primary deficit

The gap when public spending, excluding debt interest, is greater than public income.

AKA: primary budget deficit

Public spending per person

Public spending divided by the number of people it covers.

AKA: per capita public spending

Quantitative easing

A central bank creating electronic money to buy bonds, aiming to lower longer-term borrowing costs and support spending.

AKA: QE

Real interest rate

An interest rate adjusted for the change in prices, showing what borrowing or saving costs in purchasing power.

AKA: inflation-adjusted interest rate

Regressive tax

A tax that takes a larger share of income from someone on a lower income than from someone on a higher one.

AKA: regressive taxation

Relative poverty

Having a household income below a set share of what the middle household receives in the same year.

AKA: relative low income

Rent seeking

Trying to gain or protect an extra reward by securing an advantage, rather than by providing more or better goods or services.

Retail Prices Index (RPI)

An older UK measure of consumer price changes that is still used for some payments and contracts.

AKA: RPI

Social rent

Rent for certain social homes set under special rules, rather than at the going local market rate.

AKA: social rented housing

Tax expenditure

Support provided through a targeted tax break instead of a direct payment from public funds.

Top 1% wealth share

The share of all measured wealth owned by the wealthiest one in every hundred people or households.

Underemployment

When someone has work but would like and is available for more paid hours.

Wage growth

How much pay has risen or fallen compared with an earlier time.

AKA: pay growth

Wealth concentration

How much of a group's total wealth is held by a small number of its people or households.

Wealth percentile

A point on a wealth ranking divided into hundredths, showing how someone's wealth compares with others'.

Windfall profits

Profits that rise unexpectedly because of an outside event rather than a planned improvement by the business.