Balance budget – Occurs when revenues equal expenditures (normally G=T or government spending equals taxes).
Balance of payments – The record of a country’s transactions in goods, services, assets and liabilities with the rest of the world. It also records the country’s supply (sources) and demand (uses) of foreign exchange.
Balance of trade – A country’s exports minus its imports (including all goods and services).
Balance on capital account – In the United States, it is the change in private US assets held abroad, the change in foreign private assets held in the US, the change in US government assets held abroad, and the change in foreign government assets held in the US, all added together.
Balance on current account – The net exports of goods and services plus the net investment income and transfer payments.
Balanced-budget multiplier – The ratio change in Y (equilibrium output) to a change in G (government spending) that must be balanced by a change in T (taxes) to not create a deficit. The simplest example is a ratio of 1, while the change in G is equal to the change in T.
Banking system – The Federal Reserve, banks and other institutions that accept deposits and provide other services that allow businesses and people to receive and make payments within the economy.
Barrier to entry – Any constraint (legal or economic) that protects a firm from competitors by limiting a new or rival firms access to the market.
Barter – The direct exchange of goods and services for other goods and services (precursor to money).
Base year – The year chosen for weights when calculating (GDP) deflators, or calculating the difference between nominal and real amounts. For example, 1.5 billion dollars in 2005 using 2000 as a base year means that the value of in 2005 would be equal to 1.5 billion dollars in 2000.
Beige Book – A report on the current economic conditions produced by each Federal Reserve district on each sector of the economy.
Below full-employment equilibrium – Occurs when Real GDP equilibrium is lower than potential GDP.
Benefit – The pleasure or gain that something brings. Usually associated with the consumption or presence of a good or service.
Big tradeoff – The tradeoff that exists between efficiency and fairness that occurs when deciding who gets to control resources, or receives income. The most basic example is that distributing wealth equally is fair, but not everyone is equally as efficient at managing their wealth.
Black market – A market where illegal trading takes place at market equilibrium prices. Normally happens due to government regulations such as making the item illegal, introducing high taxes, or powerful quotas.
Brain drain – When talented people from developing countries become educated in a developed country and stay there after graduating. Typically occurs because there are opportunities for higher wages in developed countries. One of the reasons for the existence of the catch up curve phenomena.
Budget deficit – The difference between G (government spending) and T (taxes), if G is larger than T. Shown as G-T.
Budget surplus – The difference between T (taxes) and G (government spending) if T is larger than G. Shown as T-G.
Business cycle – The cycle of the ups and downs in the economy in the short run (does not include the long run trend or growth of the economy).