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EconoTerms D
Deflation
Something you won't hear
that much about, this is the counterpart to the
better known inflation. Deflation is what
happens when prices drop; money tends to buy
more, but you get less of it. This only tends to
happen in long periods of economic stagnation, as
in a recession, or more likely a depression.
Demand
This is one of the big ones.
Demand is how much someone wants something, to
put it simply. It's also how mcuh we're able
to get something. If a business sells something
that's useful for a low price, it will be in high
demand, because we can afford to buy more of it.
If a business sells it for a very high price,
there will be low demand. The demand curve
shows the relationship between how much of
something is sold and how much it costs. It is a
downward curve, because less is bought at higher
prices.
Demand price
This is related to the demand
for something, it's the highest amount that
buyers are willing (and able) to pay for an item.
Buyers want something to be sold for less than
the demand price. Businesses want the price to be
as close to the demand price as they can get it,
because they make more money.
Demand Side Economics
Probably less well known than supply side
economics, this theory holds that the government
can increase production, and thus lower
inflation, by giving subsidies to the public.
This increases demand for goods, causing
businesses to produce more, and lowering prices.
Disinflation
Not to be confused
with deflation, this isn't actually a drop
in prices, just a drop in how fast prices
are rising. Inflation's still going on, but it's
not as bad.
Dow Jones Industrial Average
The Dow Jones
Industrial Average is based on the stock prices
of 30 large industrial corporations. What does
this tell us? It gives us a general idea of how
the economy is doing. It's an indicator,
that is, a number made from just a few stocks
(compared to the vast number that are out there),
but if it goes up, chances are the prices of all
sorts of things are going up, and, if it goes
down, the prices on most stocks will
correspondingly drop. Should you worry too much
if you hear on the news that it has dropped? No.
But if it keeps dropping and doesn't show signs
of improving, then you might want to start
worrying.
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