Federal Budget Glossary
Concise definitions of federal budget related terms
by Jennie Wood
In 2013, Congress continues to struggle to resolve ongoing Federal Budget issues, constantly creating headlines in the news. What does it all mean? Here is a Federal Budget glossary to help explain some of the terms being used.
- Adjusted Gross Income: Amount of income subject to federal income tax. In addition to any other tax credits, contributions to IRAs and 401(k) plans are subtracted from the total.
- Annual Percentage Rate (APR): A standardized method of calculating interest rates. It permits the comparison of different interest rates just as unit pricing enables comparison shopping at the supermarket.
- Appreciation: An increase in value of an asset.
- Austerity: A policy used to reduce budget deficits during adverse economic conditions by governments. The policy could include spending cuts and/or tax increases.
- Balanced Budget: A budget where receipts equal outlays.
- Bear Market: An extended period of general price declines in the securities market.
- Bond: A long-term promissory note that obligates the borrower to make specified payments over a specific period of time. Bonds vary widely in maturity, security and type of issuer, although most are sold in $1,000 denominations.
- Bull Market: An extended period of general price increases in the securities market.
- Capital Gain: The excess by which proceeds from the sale of a capital asset exceeds the cost.
- Collateral: Assets used as security for a loan.
- Compound Interest: Interest paid on interest from previous periods in addition to principal.
- Consumer Price Index (CPI): A measure of the average change over time in the prices paid by urban consumers for a fixed "market basket" of day-to-day expenses (including food, automobile registration, clothing).
- Continuing Resolution: Legislation enacted by the U.S. Congress to fund government agencies if a federal budget has not been agreed on by the end of the Congressional fiscal year
- Correction: Reverse movement in the price of an individual stock, bond, commodity or index after any long-term move. Can be a movement up or down, but usually refers to a fall in the price.
- Credit Rating: A grading of a borrower's ability to meet financial obligations in a timely manner.
- Default Risk: Risk that a particular debtor will fail to make timely payments of interest and principal. Interest rates on a debt instrument rise as the default risk increases.
- Deficit: The amount of spending that exceeds revenue over a period of time.
- Depression: An on-going downturn in economic activity for a country or group of nations.
- Dow Jones Industrial Average (DJIA): A widely quoted measure of stock market price movements of 30 large, seasoned industrial firms.
- Earnings: Income of a business, typically after-tax income, but it may refer to before-tax income or revenues.
- Federal Funds: Reserve balances above those required that are maintained by commercial banks in the Federal Reserve System.
- Federal Funds Rate: The rate of interest, determined by the Federal Reserve, on overnight loans of excess reserves among commercial banks. A declining federal fund rate may indicate the Federal Reserve has decided to stimulate the economy by making it cheaper for one bank to borrow from another.
- Federal Reserve: The independent central bank that influences the U.S.'s supply of money and credit through its control of bank reserves.
- Federal Reserve Board: The seven governing members of the Federal Reserve System who determine the country's monetary policy.
- Fiscal Cliff: An increase in tax rates and decrease of government spending through budget cuts set to go into effect on January 1, 2013, through a series of previously enacted laws.
- Fiscal Policy: The use of taxation and expenditure by a government to influence the economy.
- Gross National Product (GNP): The dollar output of final goods and services in the economy during a period of time.
- Index: Statistical composite that measures changes in the economy or in financial markets and that can be expressed in percent changes from a base year or from the previous month. Most common are the S&P and the Dow Jones Industrial Average.
- Inflation: A general increase in prices resulting in the loss of value of currency.
- Interest Rate: A measure of the cost of credit, expressed as a percent.
- Keynesian Economics: The economic philosophy espoused by John Maynard Keynes that advocated an active government role in maintaining the economy.
- Misery Index: An index that considers both inflation and unemployment rates.
- Outlay: The release of cash, checks or the electronic transfer of monetary funds to liquidate a federal obligation.
- Recession: An economic downturn marked by two consecutive quarters of declines in the gross national product.
- Securities and Exchange Commission (SEC): Federal agency that administers U.S. securities law; created in 1934.
- Sequester: Budget cuts to particular categories of federal spending that were implemented on March 1, 2013, as an austerity fiscal policy.
- Stagflation: A period of time in an economy where the inflation and unemployment is high while economic growth slows.
- Standard of living: The level of wealth, comfort, and material goods experienced in a country or geographical area.
- Surplus: The amount by which the receipts exceed outlays for a set period, for example, a fiscal year.
- Unemployment: The number of people without a job, often as a percentage of the total labor force.