Concepts of the interactive economic circuit
The economic circuit is composed of 400 notions and more than 1000 interrelations.
Below you will find some of the definitions of the notions of the diagram.
You can find all of them in the interactive diagram.
Definition of economic concepts used in the circuit
| Nr. | Concept | General: Descrition (summary) | General: Description (detail) |
| L4 | Outgoing cross-border commuters | Number of people living in our country and moving daily to work abroad. | |
| T37 | Taxes and excise duty rates | The rate applied to taxes and excises: value-added tax (VAT), excises on cigarettes or alcohol. | |
| U35 | % of GDP spent on public administration | Calculating that allows to see what is the size of the expenditure of public administration in relation to GDP. | |
| H4 | % of seniors | Percentage of people above the age of 60. | |
| L27 | Added value | When a company produces a good (or service), it adds value to products (intermediates) it has purchased. + | VA = Total sales revenue – Value of purchased intermediates. This added value is distributed among those who contributed: providers of capital (business owners, shareholders) and workers. |
| U36 | Administrative simplification | Measures taken by the government to simplify the interaction of the population with the state administration, e.g.: online tax declaration, a clear procedure for building permits or for the creation of a business, etc. | |
| K33 | Amount of debt repayment (companies) | The amount that must be paid monthly by a company to repay debt. This is the amortization of the debt. | The debt service is the amount of repayment (amortization) plus interest (interest expense) on the amount borrowed. |
| M31 | Anticipation of higher sales | The forecast that sales will increase. | |
| E18 | Anticipation of inflation | Anticipation of inflation is the fact that economic agents predict inflation. Inflation is the phenomenon of general, continuous and self-sustaining increase in prices. | |
| G11 | Anticipation of tight monetary policy | Economic agents expect that the central bank will lead a tight monetary policy in future and react accordingly (eg by borrowing at fixed interest rates). | |
| L37 | Assets (companies) | Value of all the elements included in the balance sheet of a company. So these are all ways in which an enterprise owns that: real estate, furniture, transportation equipment, commodities, credit, ave, have on hand, etc. | |
| U32 | Austerity policy | Fiscal policy of the state, which intends to save government funds meaning to reduce public spending. + | It is conducted when the public deficit and public debt are considered exorbitant. It is also applied in the case of an economic overheating with risk of inflation. |
| K23 | Automatic indexation of wages | System under which wages increase automatically with inflation. Whenever prices increased by a certain percentage, wages rise in this percentage for all workers in a country. + | In Europe, this system exists only in Belgium and Luxembourg. |
| E31 | Balance of curr. banl. and financial transact. | The balance between the current balance and the balance of financial transactions. | |
| E28 | Balance of current transfers | Document (often in form of a table) in which all inputs and all outputs of funds in relation to transfers are grouped. + | Transfers are payments made without a counter payment. If economic agents in our countries support projects for developing countries, there is a transfer of funds from our country without a counter payment. In this example, there is an exit of funds. |
| E30 | Balance of financial transactions | Document (often in form of a table) in which the following transactions between a country and abroad are included: All entries and exits of capital Loans and credits that were received and granted Repayments of loans and credits that were received and granted. + | The balance of financial transactions is calculated in the difference between revenues and expenses generated by the operations listed above. There is an excess in balance (surplus) if revenues exceed expenditures. The opposite case is called a deficit balance (deficit). If revenues are equal to expenses, there is an equilibrium in the balance of services. |
| E27 | Balance of labour and capital income | Document (often in form of a table) in which all inputs and all outputs of funds in relation to labor income and capital income are grouped. + | In the case of salaries, there is an entry of funds, if an employee of the country (national frontier worker) worked abroad and receives his salary from his foreign employer (labor income). There is an export of funds if a worker from abroad (foreign frontier worker) worked in our country and receives his salary from his boss. In the case of capital income, currency enters the country, if a national economic agent has put his money in a bank abroad and receives interest that are sent to our country. Currency leaves the country, if a foreign economic agent has put his money in a bank in our country and receives interest paid to him in his overseas bank. |
| J26 | Balance of power in favor of capital | A confrontation between two parties (capital vs employees) with capital taking the upper hand. | |
| J25 | Balance of power in favor of labor | A confrontation between two parties (capital vs employees) with employees taking the upper hand. | |
| E26 | Balance of services | Document (often in form of a table) in which all imports and exports of services from one country within one year are listed. + | The balance of services is the difference between exports and imports. The balance is called excess (surplus) if exports exceed imports. In the opposite case there is a balance deficit (deficit). If exports are equal to imports, the balance of services is in equilibrium. |
| E25 | Balance of trade | Document (often in form of a table) in which all imports and exports of goods from a country within one year are listed. + | The trade balance is the difference between exports and imports. There is an excess of balance (surplus) if exports exceed imports. In the opposite case there is a deficit in balance (deficit). If exports are equal to imports, the balance of goods is in equilibrium. |
| E10 | Bank assets | All items shown in the asset sheet of a bank. These are all means (expressed in monetary values) that the bank possesses for its activity: buildings, furniture, transportation equipment, assets from clients, other assets, cash and cash items. | |
| E11 | Bank liquidity | All assets that are quickly convertible into cash funds. Eg : Cash on hand, claim on the central bank, etc. We say that a bank is liquid, if it has plenty of liquidities, meaning quickly available money. | |
| C7 | Banking crisis | Situation in which many banks have problems. For example, problems of liquidity or solvency: http://www.economist.com/news/schoolsbrief/21584534-effects-financial-crisis-are-still-being-felt-five-years-article | Banks have problems repaying their debts for three reasons: They have speculated (for considerable amounts) on objects that have lost their value. They have lent money (large sums) to borrowers which are unable to repay. The banks are thus pulled down in to bankruptcy with the borrowers . Confidence in the banking system declined sharply (bank runs) |
| B6 | Banking share prices | The value of bank shares. A bank share is a unit of ownership that represents an equal proportion of a bank’s capital. It entitles its ownrt to a portion of the profit distributed: the dividend. | |
| K31 | Bankruptcy (companies) | Number of businesses that have closed down because they could no longer pay their debts. They say they are in a state of insolvency. + | When a company can no longer repay its debts, the commercial court declares bankruptcy on the company. Then follows a set of procedures that might include the business rescue (and jobs) or liquidation of the company. In the first case, we will try to reach an agreement with creditors for debt relief or a lengthening of repayment deadlines. We will also try to find a buyer or new shareholders of the company. In the second case, all the company’s assets are then sold and the revenue from the sale is distributed among the creditors. |
| B5 | Bankruptcy of banks | Situation in which a bank cannot pay back its debts. + | The Commercial Court then declares bankruptcy and organizes the liquidation of the bank. This situation may arise for example if a bank purchased assets that have lost much of its value or has lent money to deptors who cannot repay. |
| D10 | Banks purchasing securities and stocks | Banks purchasing securities and stocks | |
| D5 | Bear trading | Taking initiatives in order to benefit economically from the decline in value. (In this case, the speculator is convinced that prices will drop). + | How it works: Short-selling (bear trading) on the futures market. This means we sell at the current price something we are not yet the owner. It is committed to deliver later, for example in two months. Within two months after the sale, the speculator hopes to buy at a lower price. He speculates on the downside, because he believes that prices will decline. If he does happen to buy cheaper than its selling price, he will have made a profit. Note that the short-selling is only possible on a futures market. |
| B27 | Bear trading (speculation) on national currency | Taking initiatives in order to benefit economically from the decrease in national currency. (In this case, the speculator is convinced that national currency prices will drop). + | How it works: Short-selling (bear trading) on the futures market. This means we sell national currency at the current price without being yet the owner of it. It is committed to deliver these national currencies later, for example in two months. Within two months after the sale, the speculator hopes to buy national currency at a lower price. He speculates on the downside, because he believes that prices will decline. If he does happen to buy cheaper than its selling price, he will have made a profit. Note that the short-selling is only possible on a futures market. |
| F2 | Bear trading in government bonds | Taking initiatives in order to benefit economically from the decline in the value of government bonds. (In this case, the speculator is convinced that government bond prices will drop). + | How it works: Short-selling (bear trading) on the futures market. This means we sell government bonds we are not yet the owner of at the current price. It is committed to deliver in the future, for example in two months. Within two months after the sale, the speculator hopes to buy the bonds at a lower price. He speculates on the downside, because it believes that prices will decline. If it happens to actually buy them cheaper than its selling price, it will have made a profit, otherwise it will have made a loss. |
| C45 | Bear trading in natural resources | Taking initiatives in order to benefit economically from the decline in the value of natural resources. (In this case, the speculator is convinced that natural resource prices will drop). + | It is also called short-selling or bear trading. Selling natural resources on the futures market. This means we sell at the current price natural resources of which we are not the owner yet. A commitment is made to deliver later, for example in two months. Within two months after the sale, the speculator hopes to buy natural resources at a lower price. He speculates on the downside, because he believes that prices will decline. If he happens to actually buy them cheaper than its selling price, he will have made a profit. Note that the short-selling is only possible on a futures market. |
| G4 | Bear trading in private bonds | Taking initiatives in order to benefit economically from the decrease of corporate bonds. (In this case, the speculator is convinced that corporate bond prices will drop). + | How it works: Short-selling (bear trading) on the futures market. This means we sell corporate bonds at the current price without being yet the owner of it. It is committed to deliver these corporate bonds later, for example in two months. Within two months after the sale, the speculator hopes to buy corporate bonds at a lower price. He speculates on the downside, because he believes that prices will decline. If he does happen to buy cheaper than its selling price, he will have made a profit. Note that the short-selling is only possible on a futures market. A corporate bond is a debt to another company. When a company wants to borrow money (a significant amount), it can do so by issuing a bond. Instead of borrowing a large sum to a lender, it splits the loan into a multitude of small parts called bonds. It sells bonds to the public. A bond is a debt to the company. The bondholder has the right to obtain an annual fixed interest and to be repaid at maturity. There are two bond markets: – The primary market where new bonds are issued; – The secondary market is for bonds that have been issued and are then being resold. |
| C4 | Bear trading on banking shares | Taking initiatives in order to benefit economically from the decline in bank shares. (In this case, the speculator is convinced that banking share prices will drop). + | How it works: Short-selling (bear trading) on the futures market. This means we sell banking shares at the current share price without being yet the owner of it. It is committed to deliver these shares later, for example in two months. Within two months after the sale, the speculator hopes to buy the shares at a lower price. He speculates on the downside, because he believes that prices will decline. If he does happen to buy cheaper than its selling price, he will have made a profit. Note that the short-selling is only possible on a futures market. |
| J27 | Binding legislation of redundancy | When laws are very strict to prevent more possible layoffs. | |
| C5 | Bull trading | Taking initiatives in order to benefit economically from the rise of a value. Buying a property (to resell it later) because one is convinced that it will increase in value. | |
| A27 | Bull trading (speculation) on national currency | Taking initiatives to economically benefit from the rise of the national currency. + | Undertaking that economic agents make, if they think the value of the currency will increase. They then buy a large amount of national currencies or securities denominated in national values (eg, stocks or bonds). |
| B4 | Bull trading in banking shares | Taking initiatives in order to benefit economically from increasing values of bank shares. Buying bank shares because one is convinced that they will gain in value. | |
| F4 | Bull trading in corporate bonds | Taking initiatives in order to benefit economically from the increase in the value of corporate bonds. Buying bonds (to resell them later) because one is convinced that prices will increase. | |
| G2 | Bull trading in government obligations | Taking initiatives in order to benefit economically from the increase in the value of government bonds. Buying bonds (to resell them later) because one is convinced that prices will increase. | |
| C43 | Bull trading in natural resources | Taking initiatives in order to benefit economically from the increase in the value of natural resources. + | Buying natural resources because one is convinced that they will gain in value. |
| E4 | Bull trading in shares | Taking initiatives in order to benefit economically from the decrease of shares. (In this case, the speculator is convinced that share prices will drop). | How it works: Short-selling (bear trading) on the futures market. This means we sell shares at the current price without being yet the owner of it. It is committed to deliver these shares later, for example in two months. Within two months after the sale, the speculator hopes to buy shares at a lower price. He speculates on the downside, because he believes that prices will decline. If he does happen to buy cheaper than its selling price, he will have made a profit. Note that the short-selling is only possible on a futures market. |
| D4 | Bull trading in shares | Taking initiatives in order to benefit economically from the increase in share value. Buying shares (to resell them later), because one is convinced that they will gain in value. | |
| A38 | Bull trading on foreign currency | Taking initiatives in order to benefit economically from the increase in foreign exchange rates. + | For example buying a currency because one is confident that it will gain in value. |
| B13 | Bull trading on property | Taking initiatives to economically benefit from the increase in property values. If economic agents believe that property prices will rise (anticipating a price increase), they buy to take advantage of the gain in value. | |
| B2 | Bursting housing bubble | The housing bubble bursts when property prices experience a sharp and strong decline. The phenomenon occurs when agents are starting to have doubts about the continued rise in stock prices and think that they are overvalued. They will therefore want to quickly get rid of their properties. | The supply increases, demand drops and prices fall. An increase in interest rates may cause or exacerbate the problem. Indeed, economic agents who borrowed at variable rates see their financial burdens increase and some are unable to pay and are forced to sell, with supply increasing. |
| U45 | Business subsidies | Financial assistance from the state to businesses to support their activities. | |
| P45 | Capital expenditure | A set of exceptional measures of state spending. They contribute to an increase in public heritage. Also referred to as capital expenditures. Repayment of public debt is classified as capital expenditure. | |
| C37 | Capital outflow | Whenever economic agents from our country invest abroad, there is an export of capital (starting a business abroad, purchase of shares of a foreign company by a national agent, etc.). | |
| P38 | Capital revenue | Exceptional set of state revenue which include, for example, revenue from the sale of state property or shares. New loans issued by the state are also treated as a revenue. | |
| E14 | CB allows banks credit | When the central bank facilitates giving loans to other banks (usually by lowering interest). | |
| F14 | CB buys company issued bonds | The central bank buys bonds issued by companies. A way for the company to use credit is to issue bonds they sell. If the CB buys bonds, it is the same as lending money to businesses. Hence the CB puts more money in circulation. | |
| G18 | CB demands foreign currency | Expression by the central bank of wanting to buy a certain amount of foreign currency. In return, the central bank sells some of the national currency. | |
| G17 | CB demands national currency | Expression by the central bank of wanting to buy a certain amount of national currency. In return, the central bank sells the foreign currencies it has in its reserves. | |
| E13 | CB: Interests collected on bank deposits | This is the interest rate that banks receive from the central bank when they deposit money. In “normal” times , these rates are positive. But in times of crisis and especially of deflation, these rates may become negative. One objective is to discourage investors to invest money in the country to limit the exchange of money. | |
| F18 | Central Bank offers foreign currency | The Central bank sells currencies to lead its monetary policy. + | If the CB offers big quantities of currencies, the value of the national currency will trend to be lowered |
| C31 | Claim on foreign countries | Amounts that economic agents from other countries owe to economic agents in our country. + | When agents of foreign countries indebt their self towards our country, the debt in foreign countries increases. This is the case if economic agents abroad buy credits from domestic firms. |
| J47 | Competition | Other rival companies that produce the same (or similar) good or service in a market. | |
| K43 | Competitiveness | A firm is competitive if its products are of better quality and / or lower priced than those of the competition. Competitiveness is its ability to face competition. | |
| J43 | Competitiveness in relation to foreign countries | The fact that products made in the own country are of equal or better quality and less expensive than foreign products, such that they are easily sold compared to those from abroad. Ability to cope with foreign products. | |
| L30 | Construction of buildings | Production of new buildings: houses, apartments, offices. | |
| B9 | Consumer credit | Credit granted to a household to satisfy a consumer need (eg: car, travel). | |
| C19 | Core inflation rate | Also called underlying inflation rate. Inflation rate measuring the change in bottom price. This rate depends on the costs of production and the confrontation between supply and demand. + | As for the rates of inflation, core inflation is calculated by the change in prices of a “basket” (whole set) of goods which reflect the consumption of an average household. This produces the index of consumer prices. Nonetheless this rate excludes – Products whose prices are highly volatile (oil, fresh food) – The products over which the government has influence (tobacco, alcohol, gasoline, etc.) – The impact of state measures on indirect taxes – Seasonal variations in prices. |
| S36 | Corruption | Illegal situation in which one can obtain benefits by giving bribes to public officials. | |
| C29 | Countries intervention to slow exchange rate | In some situations, the government estimates that the exchange rate of their currency is too high. For example, if this rate has increased sharply and quickly such that exports have become expensive and as consequence difficult. + | In this situation the government have several opportunities to intervene. The central bank will provide (sells) a massive amount of the national currency and (demand) buy other currencies. |
| G19 | Country bans short-term investments | Prohibition for investment such as purchases of shares and bonds from foreign players. The goal is to reduce the exchange rate of the currency. While investment is prohibited, money demand decreases and therefore the exchange rate decreases too. | The interest rate is the amount expressed as a percentage that the debtor must pay the creditor to be available to borrow for one year. % Amount that a borrower must pay the lender. Interest rates can be seen as the price of money. |
| G20 | Country fixes taxes on financial transactions | A financial transaction is a purchase or sale of an asset (stocks, bonds). It happens that countries impose these operations e.g. to prevent short-term speculation or to remedy an excessive exchange rate. | |
| L29 | Creation of new companies | The fact that new companies are created by investment. | |
| K44 | Creation of new products | Producing products not yet sold on the market. | |
| D13 | Credit facility | When credits are granted easily by banks. Easily in the sense that the banks do not require severe safeguards. | Banks extend loans at easier conditions when they have a lot of liquidity and the economic situation is very promising. |
| E29 | Current balance | The current balance includes these 4 balances: Trade balance (balance of goods) Balance of services Balance of labor income and capital Balance of current transfers. | |
| P46 | Current expenditure | The entirety of regular state spending. They are classified into three parts: public consumption transfers to households, companies and the rest of the world public loan interest payments (interest on the public debt). | |
| P39 | Current revenue | All regular state revenue. They mainly include taxes and fees, but also other incomes such as dividends received on shares held by the state, rents received through the leasing of state-owned real estate, the interests received on bank deposits etc. | |
| F31 | Customs barriers (abroad) | Devices used by foreign countries to prevent or reduce imports. Most often they consist of import taxes or customs duties. This is referred to as tariff barriers. + | These taxes make imported goods more expensive in order to make them more competitive against domestic products. It is a measure to protect domestic producers against foreign products (in this case , our products). Other types of barriers : standards of different types, quotas (limiting imported volumes). |
| F42 | Customs barriers (our country) | Trade barriers from our country to prevent or reduce imports towards us. Most often they consist of import taxes or customs duties. These are known as tariff barriers. + | These taxes make imported goods more expensive in order to improve the competitiveness of domestic products. This is a measure to protect domestic producers against foreign products. Other types of barriers: different product standards, quotas (limiting import volumes). |
| K6 | Debt (households) | Amount of household debt. Total amount of loans not yet repaid. | |
| Q30 | Debt interest paid to non-residents | A state that has debts needs to pay interest on them annually. In this case we are considering interest paid annually to persons living abroad (as opposed to interest paid to domestic creditors). | |
| Q28 | Debt interest paid to residents | When government borrows, it does so in part from economic agents living in the country and partly from economic agents living abroad. At the maturity date, the state must repay loans. In this case we are considering interest paid annually to domestic creditors (as opposed to interest paid to foreign creditors). | |
| L32 | Debt ratio (companies) | The percentage of corporate debt relative to their own capital. | |
| K5 | Debt ratio (households) | It is the ratio between the monthly repayments of a household and its monthly income. Depending on the situation, a debt ratio of 20-30 % is already problematic | |
| T27 | Debt ratio (State) | Ratio of debt of a country and its GDP expressed in percentage. The Maastricht criterions impose a debt ratio below 60% of the countries’ GDP as part of the European Monetary Union. | Note that the public debt is all debt that the State has incurred in previous years, but GDP is the total value created by the agents of a country within a single year. The debt ratio is often used to measure the probability of debt repayment. But here we must be careful. First, a country produces value every year and can use some of the value created to repay. In addition, the State must annually pay only interest and part of the refund. As a result, a high percentage of debt to GDP ratio would not be a problem if the state would not each year contract additional debt. On the other hand it is important to see if the debt is a debt to nationals or a dept to economic agents of foreign countries. |
| P31 | Debt service to non-residents | Part of the payment of interest of the public debt which is made annually to persons and institutions living abroad. | |
| P29 | Debt service to residents | Part of the interest payments of public debt, which is made annually to persons and institutions living inside the country. | |
| C38 | Debt to countries | Amounts that economic agents of our country owe towards economic agents in foreign countries. Whenever a national economic agent buys with credits or borrowed money from abroad, the foreign debt increases. | |
| R30 | Debt to non-residents | State debt held by foreigners. | |
| R29 | Debt to residents | State debt held by nationals. | |
| Q25 | Default (State) | Situation in which the state is no longer able to pay its debts. | |
| R25 | Default risk (state) | The probability that the state is no longer able to pay its debts. | |
| U46 | Defense | Military spending. | |
| D21 | Deflation | Phenomenon of general and continuous reduction in prices. + | Deflation is calculated by the change in prices of a “basket” (whole set) of goods which reflect the consumption of an average household. This produces the index of consumer prices. We can calculate the change in the price index in percentage from which we then obtain (if negative) the rate of deflation. |
| I11 | Demand (goods and services) | Expression by economic agents in the country of wanting to buy a certain amount of goods or services. These assets can be from the own country or from abroad. | |
| I13 | Demand (goods and services) sent to domestic products | Expression by economic agents in the own country and from abroad wanting to buy a certain amount of goods or services from within the country. | |
| H13 | Demand (goods and services) sent to foreign producers | Expressions by domestic economic agents of wanting to buy a certain amount of goods and services from abroad. | |
| C6 | Demand for banking shares | Expression of willingness from economic agents to buy a certain amount of bank shares. | |
| F7 | Demand for funds | Expression by economic agents of wanting to borrow a certain amount of cash. | |
| M34 | Demand for funds by companies | Companies expressing the willingness to borrow some amount of money. | |
| T30 | Demand for funds by the State | The state expressing its willingness to borrow a certain amount of cash. | |
| A18 | Demand for gold | Interest in buying gold expressed by economic agents. Amount of gold that economic agents wish to purchase. | |
| F1 | Demand for government bonds (primary market) | Expression by economic agents to buy a certain amount of government bonds on the primary market. + | A government bond is a debt to the state. When the state wants to borrow money (a significant amount), it normally does so by issuing these bonds. Instead of borrowing a large sum to a lender, the government splits the loan into a multitude of small parts called bonds. It sells bonds to the public. A government bond is a debt to the state. The bondholder has the right to obtain an annual fixed interest and be repaid at maturity. There are two bond markets of the State: The primary market where new bonds are issued The secondary market for bonds that have been issued and are being resold. |
| F8 | Demand for government bonds secondary market) | Expression by economic agents of wanting to buy a certain amount of government bonds on the primary market. + | A government bond is a debt from the government. When the government wants to borrow money (a significant amount), it normally does so by issuing bonds. Instead of borrowing a large sum to a lender, it splits the loan into a multitude of small parts called bonds. He sells these bonds to the public. A government bond is a debt to the government. The bondholder has the right to obtain an annual fixed interest and to be repaid at maturity. There are two bond markets of the State: – The primary market where new bonds are issued; – The secondary market is for bonds that have been issued are then being resold. |
| C39 | Demand for natural resources | Expression of willingness to buy a certain amount of natural resources from economic agents. | Natural resources means all the elements that nature provides namely energy, forestry, mining, water, etc. |
| F9 | Demand for private bonds secondary market) | Expression by economic agents of wanting to buy a certain amount of corporate bonds on the secondary market. + | When a company wants to borrow money (a significant amount), it can do so by issuing bonds. Instead of borrowing a large sum to a lender, it splits the loan into a multitude of small parts called bonds. The company then sells these bonds to the public. A bond is a debt to the company. The bondholder has the right to obtain an annual fixed interest and to be repaid at maturity. There are two private bond markets: The primary market where new bonds are issued The secondary market is for bonds that have been issued are then being resold. |
| A14 | Demand for real-estate | Interest in buying property expressed by economic agents. Amount of buildings that economic agents wish to purchase. | |
| C3 | Demand for shares | Expression of willingness from economic agents to buy a certain amount of shares. | |
| F3 | Demand in private bonds (primary market) | Expression by economic agents of wanting to buy a certain amount of corporate bonds on the primary market. + | A corporate bond is a debt to another company. When a company wants to borrow money (a significant amount), it can do so by issuing bonds. Instead of borrowing a large sum to a lender, it splits the loan into a multitude of small parts called bonds. It sells bonds to the public. A bond is a debt to the company. The bondholder has the right to obtain an annual fixed interest and to be repaid at maturity. There are two bond markets: The primary market where new bonds are issued; The secondary market is for bonds that have been issued and are then being resold. |
| A39 | Demand of foreign currency | When an economic agent expresses its willingness to buy a certain amount of foreign currency, this corresponds to an demand. + | If an importer has purchased goods or services abroad, he must pay in the respective foreign currency (currencies) .This is why the importer will express a demand for this foreign currency and is willing to trade it with the local currency. |
| A28 | Demand of national currency | When an economic agent expresses its desire to buy a certain amount of national currency, this corresponds to a demand. + | If an exporter sells abroad, he receives the foreign currency which he will want to trade for his own currency. The exporter will thus offer the foreign currency in exchange for the national currency. |
| D12 | Deposits with banks | Economic agents with a financial surplus (which have a cash surplus) place their money in bank deposits. + | The primary function of banks is lending money using these deposits. Unfortunately they also use these deposits to speculate. |
| L33 | Deptl of companies | The total amount of corporate debt. | |
| R39 | Direct taxes | Taxes paid directly to the tax authorities. Taxes that the state levies on the incomes of households and businesses. Examples: – Income tax for physical persons – Taxes on capital – Taxes on capital gains – Taxes on corporate income. | |
| L13 | Disposable income | Primary income (income from work + property income) plus transfer income less taxes. | |
| H41 | Dividends | Distributed profit per share. + | In the case of a limited company, the Annual General Meeting will work out the distributable profits and decides how much is distributed to shareholders. This part is divided by the number of shares and this amount is the dividend that each shareholder receives for each share that he holds. |
| J19 | Domestic employment | Number of people who work in a country, no matter which is their country of residence. + | These include: Foreign frontier workers, i.e. people living abroad and working in the country Does not belong: Nationals working abroad Officials of international institutions because they are considered extraterritorial |
| H7 | Duration of studies | Number of years that inhabitants of a country are engaged in school on average. | |
| I15 | Duration of unemployment benefits | The period which unemployment benefit will be paid. The period an unemployed person is entitled to unemployment benefit. | |
| N29 | Economic crisis | Period in which an economy of a country is functioning poorly: decline in production, high unemployment, excessive debt, high inflation or deflation. + | Dysfunction and lasting contraction (slowdown) in economic activity expressed through a brutal downturn in the economy. |
| M1 | Education | All the skills and knowledge of a population: Social skills, cultural, etc. Knowledge in many different fields: mathematics, mechanics, biology, music, art, etc. | |
| T47 | Education | Set of state measures in the field of education. These measures are controlled by the Ministry of Education. | |
| N3 | Effective system of social security | The social security system is made up of compulsory social insurance against social risks. It includes services such as health insurance, pensions, accident insurance, unemployment insurance, etc. + | Set of agencies to collect social security contributions and to pay benefits. We can say that it is an efficient system if it covers all the social risks of a population. |
| T35 | Effectiveness of state structures | A term that describes to which degree state structures permit the effective implementation of policies. | |
| J5 | Excessive debt | When an economic agent has so much debt that it cannot or difficultly repay. It is difficult to quantify this. Most often the debt ratio is used. + | It is the ratio between the monthly repayments of a household and its monthly income. Depending on the situation, a debt ratio of 20-30 % is already problematic. |
| A41 | Excessive exchange rate of currencies | The excessiveness of the course is obviously very relative. However, we can say that the government and monetary authorities consider the exchange rate of their currency as excessive if it has risen sharply in a short time, so as to make the products exported abroad unsaleable. + | In 2010/2011, the exchange rate of the Swiss franc rose excessively because investors were using the Swiss franc as a security asset. The course rosses from € 1.5 in 2009 to € 1 in 2010. |
| A30 | Excessive exchange rate of national currency | The excessiveness of the course is obviously very relative. However, we can say that the government and monetary authorities consider the exchange rate of their currency as excessive if it has risen sharply in a short time making exported products unsellable for foreign countries. | |
| A29 | Exchange rate of national currency | The value of the national currency against another currency. This is the price of one currency expressed in another. + | € 1 = $ 1.3 means that for 1 euro, we must give 1.3 dollars. The euro exchange rate (the price of the euro), expressed in dollars, is 1.3. |
| G15 | Expansive monetary policy | Monetary policy used by the central bank, which aims to increase the amount of money that is in circulation, most often in order to stimulate economic activity. + | It does so, for example, by reducing the key interest rate, making it cheaper to borrow money or purchasing securities(for example by buying bonds, it puts more money in circulation). |
| B43 | Expansive monetary policy by foreign central banks | Monetary policy used by the foreign central banks, which aims to increase the amount of money that is in circulation, most often in order to stimulate economic activity. + | They do so, for example by reducing the key interest rate, making it cheaper to borrow money or purchasing securities(for example by buying bonds, it puts more money in circulation). |
| J41 | Expenses (companies) | All expenses for companies: production costs, advertising expenses, expenses for transportation, etc. | |
| U2 | Explanation Click and see Info to your right. In the Info window, click the magnifying glass (top right). | You can find detailed instructions on LinkNotions website under Menu: Info: User Manual: View mode However, here are the most important instructions to get you started: Click the bottom half of a notion (concept): the influences (consequences) of the notion are highlighted. Green influences go in the same direction, red in the opposite direction. Click the top half of a notion: the notions that influence the notion (the causes of this notion) are highlighted. Example: If you click the bottom part of the notion “Prices”, the notion “Wage demands” is highlighted in green and the notion “Demand” is highlighted in red. Please read the link: If prices increase, this has an influence in the same direction on “Wage demands” and an influence in the opposite direction on “Demand”. You can also read: If prices increase, wage demands increase and demand decreases. or: If prices decrease, wage demands decrease and demand increases. If you click the top of the notion “Prices”, the notion “Demand sent to domestic products” is highlighted in green and the notion “Supply” is highlighted in red. Please read the link: If demand sent to domestic products increases, this has an influence in the same direction on prices and if supply increases, this has an influence in the opposite direction on prices. You can also read: If demand sent to domestic products increases, prices increase and if supply increases, prices decrease. or: If demand sent to domestic products decreases, prices decrease and if supply decreases, prices increase. The Info window informs you about the notion or link on which the cursor is placed. To do this first click an empty corridor between the notions to deactivate them. Once a notion (or link) has been clicked, you can click on the magnifying glass in the info window to get additional information. (There is only additional information if there is a “+” sign after the description (summary)). Click on the magnifying glass at the top right of this text for more information. + | A right click (or double-click) on a notion allows you to see and access outgoing and incoming links. Feel free to try the features found in the tool bar. Here you find: different kinds of zooms the hand tool undo/redo show/hide the line of the links: if this tool is active, you can only see the active links link types: here you can choose which link types you want to see; in edit mode you can add and modify link types the ramification function shows a table of all the links of a notion clicked the XY function shows a table of all the paths that lead from one notion to any other the choice of languages. To modify the world, click the icon behind the title (this is the two files icon located above the tool bar). A window opens. Click “Create copy” to create a copy in your LinkNotions account. Now you can change the world, create new notions or new links, move notions, add files, images, etc. If you do not have an account yet, this is the opportunity to register by buying a license or by asking for a one-month free trial. |
| F35 | Export prices | Price which foreign economic agents have to pay for our products. | |
| G35 | Exports | The value from sales of domestic goods and services to foreign countries. | |
| G34 | Exports of goods | The value from sales of national goods to foreign countries within a year. | |
| N1 | Fertility | Number of births per woman aged 15 to 49 years in a country. | |
| L47 | Fight against monopolies | (State) activity is to fight monopolies. + | A monopoly is a market where only one company is offering a product/service. Thus, there competition has vanished in this market. To avoid such a situation, the state intervenes by passing laws that make the elimination of competition more difficult. Examples: prohibition of agreements between undertakings, businesses subject to prior authorization by public authorities mergers. |
| D7 | Finacial sector crisis | The financial sector includes all financial institutions such as banks, insurance companies, investment funds, etc. There is a situation of crisis in this sector if some of its institutions are in danger of making significant losses and bankruptcy. | |
| K34 | Financial expenses (companies) | The amount of interest that companies have to pay on their debts. | |
| J7 | Financial expenses (households) | The amount of interest (and any commissions) that households have to pay on their debts. | |
| A47 | Foreign countries fix taxes on financial transactions | If taxes are levied on financial transactions (purchases of shares or bonds), they are discouraged. If foreigners buy fewer shares, money demand becomes lower and the value of the currency decreases. | |
| A45 | Foreign countries prohibit short-term investments | Bans of investments such as buying shares or obligations on the part of foreign players. + | The goal is to reduce the exchange rate of their currencies. Indeed, if investments are prohibited, money demand decreases and therefore the exchange rate. |
| B41 | Foreign currency exchange rates | The value of a foreign currency relative to the value of a national currency. This is the price of one currency expressed in another. Further explanations in the files attached below. + | € 1 = $ 1.3 means that for 1 euro, we must pay 1.3 dollars. The euro exchange rate (the price of the euro), expressed in dollars, is thus 1.3. or: $ 1 = € 0.77 means that for one dollar, we must pay 0.77 euros. The dollar (the price of the dollar), expressed in euro, is thus 0.77. |
| E32 | Foreign currency reserves | The amount of foreign currency held by the Central Bank. | |
| B39 | Foreign currency supply | When an economic agent expresses its willingness to sell foreign currency (foreign currency), this corresponds to an offer. If an exporter has sold goods or services abroad, he will receives foreign currency which he wants to exchange for the national currency, i.e. the currency of the country where the product is produced (he may need national currency for example to pay his workers). | |
| G33 | Foreign demand | Demand from foreign countries towards domestic goods and services within a year. Foreign demand for goods and services of our country. | |
| D33 | Foreign investments (investments coming from abroad) | Amounts of money that economic agents abroad send to our country in order to invest. + | The creation or the expansion of a business. |
| G39 | Foreign supply | Expression by economic agents of their willingness to sell goods and services. | |
| B46 | Free movement of capital | The fact that capital can cross borders without hindrance. The Bretton Woods system gives individual states the right to control capital movements . Until the 1970s, capital movements were strictly regulated. It was from that moment that freedom of capital movement is gradually gaining ground. | As long as capital flows are controlled, investors and especially the speculators can not decide to bring or take out capital of a country, according to their short-term interests.Conversely, the decisions of a government are more independent and less influenced by these movements that may occur if the interests of investors / speculators are compromised. |
| R45 | Free public goods and survices | Goods and services that the state freely provides to the public. E.g.: one needn’t pay entrance fees to enter a public park. | |
| B45 | Free trade | Situation in which the exchange can be made freely and without hindrance. There are no customs barriers or regulations restricting trade or making it difficult . Free trade, encouraged by bilateral and multilateral treaties, led to the globalization of the economy. | |
| K1 | General health | State of the entire population of a country as regards its physical and mental well-being. | |
| N5 | Gini coefficient | Number (between 0 and 1) that expresses the distribution of wealth among residents of a country. If 0, the equality is perfect, if it is 1, we are in a situation where one person has everything and others have nothing. | |
| A17 | Gold Price | Value of gold expressed in money. | |
| B18 | Gold supply | Willingness to sell gold expressed by economic agents. Amount of gold that agents want to sell. | |
| O39 | Government revenue | The amount of total state revenues (within a year). | |
| N31 | Gross Domestic Product (GDP) | Value of all goods and services produced in a country. Sum of added value made by economic agents within a year in a country. | |
| N33 | Growth | There is economic growth if a country’s GDP increases. | |
| C47 | Growth in emerging countries | There is economic growth if the GDP of a country increases. Growth increases when GDP grows faster. | |
| C46 | Growth in industrialized countries | There is economic growth if the GDP of a country increases. | |
| J9 | Hoarding | Amount of money (in various forms: coins, paper money, gold) that agents keep their home without putting it back into the economic circuit. | |
| N15 | Household confidence | Attitudes from households about their near future. It is said that households have confidence if they believe their situation will remain positive and it will improve in future. | |
| A10 | Housing bubble | There is formation of a property bubble if property prices increase sharply, quickly and continuously. + | In this situation, households but also investors realize that prices rose in recent months, even the last few years and consider the phenomenon will perpetuate. Demand for real estate increases and thus prices. This phenomenon is supported by low interest rates. Note that the price increase comes from an excess of demand, not an increase in production costs. The strong demand comes from anticipation by economic agents of a price increase. In fact, there is speculation on the rise. The danger of a bubble is that the price increase is self-reinforcing and the bubble grows continuously. Prices are less related to the actual value of property. The risk is that the bubble bursts and all those who hold real property, experience strong declines in value. A real property owner can be dealing with a property for which he paid a large amount of money at the time of purchase but is now worth only a fraction of the original price. |
| M3 | Immigration | Phenomenon consisting in the fact that people from other countries come to live and work in a country. | |
| G37 | Imports | The value from purchases of goods and services from foreign countries within a year. | |
| G41 | Imports of energy products | Value of energy products (oil, gas, electricity, etc.) that the country has purchased. | |
| G47 | Imports of equipment | Value of capital goods (computers, machines, etc.) that the country has purchased abroad. | |
| G45 | Imports of finished products | Value of finished products (computers, cars, etc.) that the country has purchased abroad. | |
| G43 | imports of food products | Value of food (wheat, rice, etc.) that the country has purchased abroad. | |
| G36 | Imports of goods | The value from purchased goods from foreign countries within a year. | |
| G48 | Imports of raw materials | Value of raw materials (ore, cotton, etc.) that the country has purchased abroad. | |
| M17 | Income from capital (dividends) | Part of the benefit accruing to the owners of the business because they have injected capital into it. + | In the case of a corporation, the owners are called shareholders. Compensation for their contribution (buying a share or more) is called the dividend. |
| D47 | Income paid abroad | This is labor income and capital income. | In the case of salaries, a foreign economic agent (commuter) worked in our country and received his salary from his employer (labor income). In the case of capital income, foreign economic agents can put money in banks of our country and earns interests that are sent to his country. |
| D27 | Income received from abroad | This is labor income and capital income. + | In the case of labor income, an economic agent in the country (border) worked abroad and receives his foreign boss’s salary (labor income). In the case of capital income, a national economic agent put his money in a bank abroad and receives interest that are sent to his country. |
| S39 | Income taxes (state income) | Amount of taxes that the state levies on the incomes of households and businesses. | |
| L3 | Incoming cross-border commuters | Number of people living abroad and moving daily to work in our country. | |
| R40 | Indirect taxes | Total of the taxes taxpayers have to pay on some transactions (VAT, excise duties, etc.). + | These taxes are paid to an intermediary (business) which transmits them to the tax authorities. |
| D20 | Inflation | Phenomenon of general, continuous and self-sustaining increase in prices. + | Inflation is calculated by the change in prices of a “basket” (whole set) of goods which reflect the consumption of an average household. This produces the index of consumer prices. We can calculate the change in the price index in percent from which we then obtain the inflation rate. The european central bank wants an inflation rate around 2 %. |
| C35 | Inflow of capital | Whenever foreign economic agents invest in our country, there is an entry of capital (creation of a business by a foreign person, purchase of shares of a domestic company by a foreign person, etc.). | |
| B35 | Inflow of foreign currency | Foreign currencies are currencies other than the domestic currency. Foreign currencies enter a country if companies export goods or services. | |
| R43 | Infrastructure | All structures that allow a society to function, including structures facilitating circulation / mobility. Eg : Roads, railways, airport, telephone network, drainage canals, power lines, gas pipes, etc. | |
| M44 | Innovation | All new procedures and products that represent an improvement over previous ones. | |
| B30 | Insufficient exchange rate of national currency | The failure of the course is obviously very relative. However, we can say that the government and monetary authorities consider the exchange rate of their currency as inadequate if it fell sharply in a short time, making imported products very expensive. | |
| C9 | Interbank credits | Loans that banks give to other banks. + | Depending on the circumstances, some banks have too much cash (cash surplus) and others not enough (cash deficit). If banks trust each other, they lend each other money. If trust is absent, they no longer do so and banks in need of cash must be found elsewhere, namely at the central bank. The benchmark interest rate at which banks lend each other money are called “EONIA” and “EURIBOR “. |
| O32 | Interest on public debt | Amount of money that the State has to pay annually as interests on its debt to his creditors. | |
| F21 | Interest rate | Amount expressed as a percentage of the face value that the debtor must pay the creditor in order to have for a year by a certain amount. Further explanations in the file attached below (graph). + | Amount in% of the nominal value of the borrowed capital that a borrower must pay the lender. Interest rates can be considered the price or cost of money. |
| F5 | Interest rate on private bonds | Interest rate that the lender (company) must pay annually to the holder of a newly issued bond. The rate is entered on the bond. | |
| E19 | Interest rates on bank reserves required from central banc | The interest rate that the central bank gives to ordinary banks on money they have deposited with the central bank. | |
| Q26 | Interest rates on government bonds | A bond is a security that represents a portion of a loan. One who holds such a title has lent money to the state and thus has the right to receive an interest rate. The interest rate is expressed as a percentage (eg 3%) of the amount loaned. A bond of € 100 is thus worth three Euros per year. | |
| G5 | Interest rates on government bonds (primary market) | Interest rate that the state pays annually on newly issued bonds. | |
| S41 | Interests on public funds | Interests received by the state from bank deposits. | |
| L40 | Intermediate products | A handful of products used, converted or taken apart in order to produce other products. | |
| F48 | International demand | Expression of the economic agents of their will for purchasing a certain quantity of products on the international market. | |
| E48 | International demand for goods and services | Expression by economic agents of wanting to buy a certain amount of goods and services on the international market. | |
| D48 | International supply of goods | Expression of willingness to sell a certain amount of products by economic agents on the international market. | |
| A43 | Intervention of foreign countries to slow down their exchange rate | Intervention by foreign countries to curb their exchange rate: If the exchange rate of a currency rises too high, the governments can take action to stop the exchange rate of money, such as a ban on short-term investments or setting taxes on financial transactions. | |
| A21 | Investment in safe havens | In an uncertain economy, investors will purchase secure assets they consider safe, even if they yield little gain. For example, the Swiss franc, gold or bonds of the German state in 2011 and 2012. | |
| D45 | Investments abroad (investments done abroad) | Amounts of money that economic agents in our country send abroad in order invest. Eg creating or expanding companies located abroad. | |
| A23 | Investor confidence | An investor is an economic agent who has cash with which it may purchase assets (shares, bonds, property, gold) in order to earn the benefits. + | Investors have confidence if they think the economy will evolve positively and so they believe their investments will bring profits to them. |
| D24 | Investor confidence in government bonds | Investors have confidence in the extent that they are confident that the bonds will be repaid at maturity. The bonds were issued by the state. + | An investor is an economic agent who has cash with which he may purchase securities (stocks, bonds, real estate, gold) in order to get the benefits. One should speak of investment. |
| C24 | Investor confidence in private bonds | An investor is an economic agent who has cash with which he may purchase assets (shares, bonds, property, gold) in order to earn the benefits. One can also speak of placement. + | Investors have confidence to the extent that they are confident that the bonds will be repaid at maturity. Corporate bonds are debt securities issued by companies (as opposed to government bonds, issued by a government). |
| B24 | Investor confidence in shares | Investor confidence in shares increase if they believe that the share value will increase. This situation occurs if companies are considered successful and the overall economic situation is perceived as healthy. | |
| A24 | Investors bancruptcy | Bankruptcy is a situation in which the economic agent cannot repay its debts. The Commercial Court will then declare bankruptcy and liquidation of the organizing company of investors. + | An investor is someone who has bought assets (stocks, bonds, real estate, gold, etc.) in order to earn the benefits. In our case the value of the securities in which it has invested fell sharply. |
