Welcome to the SwiftEconomics.com Glossary! Each word will come to life using witty jokes, satire, and colorful examples. The glossary is meant to amuse and educate; not to be traditional or academic. The SwiftEconomics.com team wants to hammer home a few vital ideas throughout the vocabulary lesson. For example, keep an eye on asymmetric information’s effect on health insurance. Please share the SwiftEconomics.com Glossary with colleagues, friends, and family!
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Terms beginning with N
A 1993 trade agreement between the United States, Canada and Mexico to reduce the barriers of trade among the participants. What probably should have been a treaty passed by the Senate after two thirds approval, it was turned into a chief executive “agreement” for fast-tracking purposes. Politically expedient or unconstitutional? You make the call.
I hate starting any phrase with “most economists agree” but most economists agree the benefits outweighed the costs on this one. Rumblings have grown increasingly intense since NAFTA was instituted about a North American Union being formed a la the European Union (EU). In this new alliance all three countries would share a common currency called the Amero along with easier access from one country to another on a newly-constructed “superhighway.” That’s infrastructure for you.
A desirable play in game theoretical situations where a player achieves the best possible outcome with full knowledge of all other player’s strategies. No player has motivation to deviate from a Nash Equilibrium strategy.
The ultimate metaphor for a Nash Equilibrium strategy is a warped wooden desk and a marble. The desktop is wavy and looks like a collection of miniature half pipes connected in random chaos. If you were to drop a marble onto the desk, it does not reach a Nash Equilibrium until it comes to a resting position. As long as the marble is moving a better strategy exists for the player.
John Nash knows what’s up. Find a Nash Equilibrium or two in your dating life and bear the fruits of success and trouble saved!
The total accumulation of annual budget deficits by a government. The national debt can have some economic benefits but is generally considered a drain on future generations.
In the case of the United States the majority of the national debt finances the American lifestyle. In polar opposition to the golden rule, U.S. debt isn’t used for investment into infrastructure and production. Countries of China, Japan, and Russia’s ilk buy up U.S. debt so American’s may continue their lifestyle. If America’s debt holders ever decided the credit risk of holding American debt was too great, the U.S. would be in a world of hurt. American budget deficits could not be financed any longer. A genuine concern of economists is the U.S. credit rating being downgraded, forcing interest rates on U.S. debt to rise. Even worse for Americans would be a decision by foreign debt holders to begin selling the Treasury Bills they already hold.
Another name for GDP. A tally of what an economy earns, produces, and spends in a given time period.
One firm controlling a marketplace is sometimes the best way to go. Consider the case of utilities. It takes extensive infrastructure to bring water and electricity to homes. If multiple firms competed, laying their own piping, fiber-optics, and electricity polls, cities would look like a mess in a hurry. The government grants natural monopolies to utility plants. Public utilities are either a government entity or a closely regulated private entity.
A plan redistributing money from wealthy to low income members of society through the tax system. Low income people start with a stipend from the government. Let’s call it $20,000 for being alive. Essentially a form of welfare, negative income tax systems incentivize people to stay home and play video games instead of joining the work force.
The sticker price. Real values are adjusted for inflation and actual purchasing power. A salary increase for inflation is only a nominal increase in wage; the actual purchasing power of your salary hasn’t changed because prices of everything you buy have spiked. This is the money illusion.
No blood diamonds here. Normal goods trigger normal responses in demand to changes in income. If a person’s income goes up, ceteris peribus, they will demand more of a normal good.