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Economic and Financial English Vocabulary

Mastering economic and financial English vocabulary is essential not only for professionals working in these fields but also for anyone who wants to understand the intricacies of the economy and personal finance. Here are several key terms, their definitions, and examples used in sentences:

An asset is anything of value or a resource of value that can be converted into cash. Assets can be categorized as either current or fixed (long-term) and are owned by individuals, companies, or governments.
The company’s assets included real estate, equipment, and intellectual property.

A liability is an obligation that the company owes to an entity or an individual outside of the company, typically debts or service obligations.
The business took on significant liabilities to finance its expansion.

Equity represents the ownership value held in an asset after deducting liabilities. In the context of a business, it’s also known as shareholders’ equity.
After all debts were paid off, the investors had considerable equity in the company.

Gross Domestic Product (GDP)
GDP is the total market value of all goods and services produced within a country in a specific period. It’s used as an indicator of the economic health of a country.
Analysts expect the country’s GDP to grow by 2% in the next quarter.

Inflation is the rate at which the general level of prices for goods and services is rising, which, in turn, erodes the purchasing power of a currency.
The central bank is introducing measures to curb the rising inflation that has hit a 10-year high.

Interest Rate
The interest rate is the amount charged by a lender to a borrower for the use of assets, usually expressed as a percentage of the principal, commonly noted on an annual basis.
They secured a loan with an interest rate lower than the industry average.

An investment is the action or process of investing money for profit. It can also refer to any asset or instrument purchased with the intention of selling it for a higher price in the future.
Her financial advisor recommended diversifying her investments to manage risk better.

Liquidity is a measure of the ability and ease with which assets can be converted into cash without affecting their market price.
The company prides itself on its high level of liquidity, allowing it to meet sudden expenses.

A bond is a fixed-income instrument representing a loan made by an investor to a borrower, typically corporate or governmental, which includes the details of the loan and its payments.
The government issued bonds to finance new infrastructure projects.

A dividend is a sum of money paid regularly by a company to its shareholders out of its profits or reserves.
This quarter, the corporation declared a dividend of $0.50 per share.

A budget is an estimation of revenue and expenses over a specified future period of time and is utilized by governments, businesses, and individuals.
The finance department prepared a budget forecast for the next fiscal year.

Bull Market
A bull market is a financial market in which prices are rising or are expected to rise. The term is most often used with the stock market but can apply to any asset class.
Investors were optimistic during the bull market, as the stock prices continued to climb.

Bear Market
A bear market is a condition in which securities prices fall 20% or more from recent highs and widespread pessimism causes the downward spiral to be self-sustaining.
Many traders become cautious in a bear market, seeking to limit their losses.

Understanding and correctly using these financial and economic terms can greatly enhance your comprehension of news articles, reports, and discussions related to business and the economy. As you continue to encounter new vocabulary, always look for concrete examples of how each term is used in context to solidify your understanding and improve your financial literacy.