English Vocabulary: How to talk about the economy

Hi. Welcome back to www.engvid.com. I'm Adam. Today's lesson, we're going to look at business

English. We're going to talk about the economy. Now, we're not going to get into too much

detail. We're not going to get into economic theories, etc. What we're going to look at

is some vocabulary that will help you read financial articles and newspapers, or online,

or watch financial broadcasts on TV; CNN, Money Matters, etc., things like that. So,

we're going to look at all these words.

We're going to start with "GDP" because everything somehow relates to "GDP - gross domestic product".

What is this? This is the total value, the total monetary value of goods and services

produced within a country. So everything that the country produces from toilet paper to

airplanes, and services from massage to heart surgery, all the money that's made from these

goods and services together adds up to the GDP. So, when we're talking about GDP, we're

going to refer back to this expression when we're talking about some of these other words.

So, first, let's look at "fiscal". "Fiscal" basically means anything to do with money,

anything to do with financial matters, especially when we're talking about taxes. Okay? So,

when... The most common thing you'll hear is "fiscal year". So when we're talking about

a company's fiscal year, we're talking about it's the beginning of its tax year to the

end of its tax year. In some countries, everybody matches this to January to December; in other

countries, you're allowed... Your fiscal year starts when you start your business, and then

one year later is the end of your fiscal year. It's easier to match it to the calendar year,

but...

A "quarter". Now, you're going to always hear about prices, and stocks, and values going

up or down over the last quarter or over the last two quarters. What is a "quarter"? It's

basically three months. So if you're talking about the first quarter of the year, you're

talking about January, February, March. That's your first quarter. Your next three months,

second quarter. Four quarters makes one year.

"Currency". I think everybody knows this word, but just in case, this is the money that is

used in a country or a region. This is the monetary value that is used for exchanges,

trades, investments, etc. In Canada, we use the Canadian dollar. In the U.S., they use

the American dollar. Euro in Europe, etc.

A "budget". A "budget" or "to budget", it can be a noun or a verb, means to make a plan

on how to spend a certain amount of money. So, for example, a government has this much

money that they need to spend, or they have a plan that they want to spend this much money.

Now, they want to spend a million dollars. I'm being very simple, here; I'm not going

to get into big numbers. They need to spend a million dollars to provide all the services

that they need and to buy all the materials that they need to import, etc. If they are

running on a deficit, that means that they need to spend more money than they have. They

have to spend on things to bring in or to run the country, but they don't have. So if

I need to spend a million dollars but I only make the revenues of the country are only

$900,000, then they will run on $100,000 deficit. Okay?

"Surplus" is the opposite. "Surplus" is when the government or any company, you don't have

to apply this to a government, when you have more money than you need for the budget. So

if I need to spend a million dollars over the next year, but I have a million and a

half, then I have half a million dollar surplus, which is always a good thing.

"Inflation/deflation". "Inflation" is when prices of goods and services go up, but wages

stay the same. So, basically, the purchase power of the individual goes down. You have

the same amount of money, but you can buy fewer things or you can hire fewer people

to do to have services for you. "Deflation" is the opposite. That's when prices go down,

and the value of your dollar or your currency goes up. Both situations are not good. A little

bit of each is okay. Too much of each is bad for the economy. People think deflation is

good because prices go down, but then companies don't produce as much things because they're

not making as much money, so unemployment goes up. So, you have to be careful with both

of them. Inflation, prices go too high, people can't afford things. Deflation, companies

don't want to produce.

"Stagnation". Now, when we look at GDP, we talk about growth or decline. Growth means

that GDP is growing; decline means that GDP is shrinking. Okay? "Stagnation" means that

there's hardly any movement, up or down. It means everything stays more or less the same.

1%, etc. that's still stagnation, if it carries for a long time. A government wants to make

sure that the economy is in growth, that the economy grows. If it's stagnant, it means

it's not moving, that's also bad for the economy.

Next... Actually, you know what? I'm going to jump here a little bit; I'll come back

to these guys. "Recession". "Recession" is different from "stagnation". "Recession" means

that the economy is in decline. Now, usually, if the economy is in decline for two quarters,

consecutive quarters, means one quarter after another quarter, then people... The government

or people, economists consider the economy to be in recession. If the recession continues

for a long time, maybe a couple of years, some... In some places, it's only one year

or even less, then you have a depression, which is a very big decline in the... In the

economy, the GDP.

Next, we're going to talk about "credit". "Credit" is the ability to borrow money. Okay?

So, for example, you need to buy a car, you can buy a car and pay for it later. Why? Because

the bank will give you the money to buy the car, and then slowly you pay them back. If

they give you $10,000 to buy the car, you have a $10,000 debt. Notice I don't pronounce

the "b": "debt". Okay? "Debt" means owing. You owe money to someone, usually the bank.

A "credit rating" means how much or how little the banks will give you. Now, of course, there's

also credits between credit ratings and credits between countries, between companies, between

banks and individuals, so this basically tells you how much money you can borrow. If you

have a very bad credit rating, it means nobody will give you any money; you have bad credit.

Next: "bubble". You might hear this word often used, especially when we're talking about

houses. We have a housing bubble. What does this mean? It means that the prices of the

houses, in this particular case, are growing, growing, growing, growing. There's no real

reason that they should be growing. It's not like there's suddenly a huge demand or the

product is so much better, but prices are growing and they're growing quickly for no

particular reason, and then suddenly they pop or they burst. So a bubble grows, and

then it bursts. So, people are always worried when a bubble gets too big or lasts for too

long that the burst is coming, and then people start panicking, and the economy is affected

very much.

Lastly, when we're talking like generally about good economy or bad economy, we say:

"boom" or "bust". "Boom", very good, growing. "Bust", bad, shrinking. Okay?

"Boom", up; "bust", down.

So, these are very general words that you need to know. Again, you're not going to go

get your MBA with these words. Okay? But, you can read articles, you can watch programs

about financial matters and get a little bit of better understanding. And the more of these

words you learn, the easier it will be to study business, economics, commerce, etc.

If you have any questions, please go to www.engvid.com,

and in the comments section, you can ask about these words.

There's also a quiz that you can try out to test your knowledge.

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and see you again soon. Bye-bye.