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Basic Economic Terms list with explanation. Alphabets - A

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What is Abandoned Option?
Means a share option not exercised because the price is against the buyer (or taker) on declaration day i.e., the situation has become unprofitable.

What is Absenteeism?
Instead of strike, the often industrial unrest form is called. When workers are unsatisfied with their conditions they take days off without pay.

What is Absolute Poor?
People with income below what is needed to maintain a minimum standard of nutrition.

What is Absolute Monopoly?
Means the control of the entire output of a commodity or service, for which there exists no substitute, by a single producer or supplier. This kind of situation rarely arises in real life. 
It is also known as Pure Monopoly or Perfect Monopoly.

What is Absorption Approach?
A method of analysing a country’s Balance of Payments by comparing its total output with its ‘absorption’, i.e. its domestic expenditure on goods and services. There will only be an improvement in a country’s balance of payments if its total output is greater than its absorption of its own output.

What is Absorptive Capacity?
The extent to which a country can increase investment without depressing returns to that investment.

What is Abundance?
The opposite of scarcity. Abundant goods and services cost nothing to produce and are made freely available. Main examples are, increasingly population let to scarcity of natural resources.

What is Accelerated depreciation?
An initial depreciation greater than the actual annual wear and tear of a fixed capital asset. For an asset with an expected life of let say ten years, under the straight line method (SLM) of depreciation the value of the asset would be deemed to depreciate by 10% per annum. But under Accelerated Depreciation, the value of the asset will be depreciated by 20% in the first year. Governments encourage this to private sector for investment.

What is Acceleration clause?
A clause in many mortgage agreements making the PRINCIPAL and interest immediately payable on the occurrence of an event such as failure to make payments on time or to keep a covenant.

What is Accommodation Bill?
A bill which is drawn, accepted or endorsed for the sole purpose of discounting it, no goods being given or received for it, thus offering short-term cash accommodation.

What is Account?
Refers to a running record of transactions which are taking place between two transactors, who may be in two departments of one business and a basic element in all systems of recording business transactions. In retail trading it refers to the credit facility which is automatically extended to a customer with whom an account is operated. A financial statement expressed in words and sums of money.

What is Accounting costs?
All the costs of producing a good or service recorded in the accounts of a firm.

What is Accrued expense?
An expense incurred in a particular time period but not yet paid.

What is Accrued income?
Income earned in a particular time period but not yet received in cash.

What is Accumulation?
The increase in assets which creates Capital. Individual persons and businesses do this for their own gain.

What is Accountability?
Accountability is a subordinates obligation to render an account or report of his activities to his superior.

What is Acid-test ratio?
The ratio of liquid assets such as cash, accounts receivable and short-term marketable securities to current liabilities. Also known as quick assets ratio.

What is Actual budget?
The national taxation and expenditure accounts of a government. They can be in balance, in surplus or in deficit; often contrasted with a Full Employment Budget.

What is Adjustment cost?
The cost to an economic agent, e.g. a firm or a household, of a change in the value of a variable crucial to its decisions. If, for example, a firm were to change its capital stock by embarking on an investment programme, it would incur the adjustment costs of research, planning, installation of equipment and training of workers.

What is Administered Prices?
A price set not by the force of demand and supply but by some authority like the government or a regulatory authority.

What is Administered Inflation?
Inflation brought about by firms increasing the profit mark-up on their products; a form of Cost push Inflation

What is Advance?
A bank loan or an overdraft which has a term of less than three years, usually less than one year. When a bank creates money, it does so by allowing advances to its customers, i.e. permitting them to draw
on the extra bank deposits created for them.

What is Ad Valorem Tax?
A duty, which is imposed on commodities in proportion to their value i.e., a duty, which is expressed as a percentage and not a flat amount.

What is Advertising?
A communication process used to influence buyers. For firms, it is a selling cost incurred with the hope of increasing sales.

What is After-hours dealings?
Dealings in stocks and shares after the Stock Exchange closes for the day. Such bargains are 
recorded as the next day’s business.

What is Agglomeration economy?
An external Economy of scale brought about by the massing of a population in one place. As the population of a town or city increases, a more complex infrastructure is possible and a greater Division of labour achieved than in a smaller settlement.

What is Agglomeration dis economy?
An external dis-economy of scale caused by the growth of a town or city. For example, the population growth of a city often results in increased pollution and congestion.

What is Amortization?
Extinguishing an liability/debt by allocation of cost gradually in time periods. Major examples are the depreciation of an asset and the repayment of a loan by regular instalments to cover the amount advanced and the interest.

What is Annuity?
An amount of money paid annually or at other regular intervals. Major examples include life assurance premiums

What is A.O.B.?
Abbreviation of Any Other Business?, as an item on the agenda of a meeting.

What is Apprenticeship?
A period of training in a firm which enables a trainee to learn a craft under the supervision of a skilled worker.

What is Appreciation?
An increase in the value:
1. of stocks and shares when their prices rise on the stock exchange;
2. of a currency when its value increases in terms of other currencies;
3. of stocks held by manufacturers and merchants during a period of rising prices.

What is Arbitrage?
It is a speculative activity. It seeks to make profit out of differences in prices of a security in two markets. If the price of a certain share is higher in one market than in another, the speculator will purchase them in the cheaper market and sell in the dearer market.

What is Articles of Association?
The Articles of Association prescribe a set of rules to govern the internal working of the company. They cover such things as the issue and transfer of the company's shares, the procedure to be followed in calling general meetings, shareholders voting rights, and many other matters. 
Articles of Association require to be registered with the Registrar of Companies.

What is Asset?
When the balance sheet of a business is drawn up, everything which it owns at the time which has a money value is listed as an asset. They may be classified as:

1. Current Assets - consisting of cash, stock and book debts.
2. Fixed Assets - consisting of buildings, plant and machinery.
3. Intangible Assets - being the value of goodwill, patents.

What is Asset Sweating?
Raising bank finance on the security of the property owned by a company. Sweating can also be effected by Securitisation of the property.

What is Asset / Employee Ratio?
Refers to a ratio which is used as an indication of the capital intensity of a company.

What is Auction?
A type of selling in which a system of bidding determines the price and the successful buyer.

What is Augmented GNP?
Gross National Product(GNP) plus the value of public goods and services of all kinds, whether marketed or not.

What is Autogestion?
This philosophy of management holds that enterprises should be less hierarchical, with all employees participating directly in decision making, especially about work organization, promotion and other employment
rules, technology and methods of production.

What is Autarky?

What is Authorised Capital?
When a new company is to be registered, its application for registration is accompanied by a statement indicating the amount of Capital with which it proposes to be registered. This is known as its nominal, registered, or authorised capital.

What is Authority?
Authority may be defined as the force to command others, to act or not to act in a manner deemed by the possess of the authority to achieve organisational objectives. It creates a relationship between the superior and the subordinate.

What is Averch – Johnson effect?
The disallocation of resources which resulting from regulatory agencies relating price levels to a ‘fair’ Rate of Return.

What is Average Cost?
Average cost is the cost per unit of output, where the cost of all inputs (factors of production) are included.

What is Average Revenue?
Refers to revenue per unit output.

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