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Dictionary of Financial, Economic, and Business Terms

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aggregate demand: The total demand for final (or “end-use”) goods and services within an economy. It makes up the national income of an economy.

annualized: A rate of change that has been converted into one that reflects the rate on an annual, or yearly, basis.

arbitrage: Exploiting price differentials between two or more markets. For example, if the C$ is trading at US$1.05551 in London and US$1.05552 in Paris, an arbitrageur can turn a profit by buying in London and selling in Paris.


bank rate: The bank rate is the annual rate of interest charged by the Bank of Canada on its one-day loans to financial institutions.
(The Conference Board does a 5-Year and 20 year forecast of this indicator)

barrel (bbl): Oil in North America is measured in “barrels.” One barrel equals 42 U.S. gallons, or 159 litres.

basis point: One basis point equals 1/100th of a percentage point. Therefore, if the Bank of Canada raises its key lending rate from 5 per cent to 5.25 per cent, it is said to have raised the rate by 25 basis points.

BEA: The Bureau of Economic Analysis is the U.S. equivalent of Statistics Canada and a key source of U.S. economic data. It is an agency of the U.S. Department of Commerce.

Bretton Woods: In 1944, officials from the Allied countries met in Bretton Woods, New Hampshire, to set up an international monetary structure for the post–Second World War era. It included the establishment of the World Bank and International Monetary Fund. Under the Bretton Woods structure, all currency exchange rates were pegged to the US$. The structure collapsed after the United States devalued its dollar in 1971, and by 1973 most major currencies were floating freely. (The Canadian dollar was an exception in that, from 1950 to 1962 it was allowed to float freely rather than be pegged to the US$.)

BRIC: The BRIC countries are Brazil, Russia, India, and China. They are grouped together because they are fast becoming new economic powers.

business confidence: The level of optimism or pessimism among business managers regarding the prospects for their organizations in particular and the economy in general. The Conference Board of Canada’s Index of Business Confidence, for example, is based on a quarterly survey of senior officers of Canadian business organizations and their responses to 10 questions regarding the business climate and investment intentions.

business size categories: As defined by Statistics Canada, small businesses are goods-producing businesses with fewer than 100 employees, or service-producing businesses with fewer than 50 employees. Medium-size businesses employ fewer than 500 workers. Large businesses have 500 or more employees.


capital cost allowance (CCA): Depreciable assets (such as building, machinery, and equipment) cannot be deducted by businesses as a single, one-time item for tax purposes. Instead, a percentage is deducted each tax year over a prescribed number of years. The CCA is the percentage allowed each year.

chained dollars: Statistics Canada uses “chained dollars” to express real volumes of production or expenditure. “Chained” refers to a methodology that removes the distorting effects of fluctuations in prices over time.

Cobb-Douglas: A mathematical function that measures the relationship between an output and inputs. (A common version in macroeconomic modelling defines output as a function of capital, labour, and productivity.)

COLA: Cost of living allowance.

Consumer Price Index (CPI): The CPI provides a broad measure of the cost of living in Canada. Statistics Canada produces the CPI by tracking the prices for some 600 of the most commonly bought goods and services.

conventional mortgage: In Canada, a conventional mortgage is one that does not exceed 80 per cent of the value of the property for which it was issued and which carries a fixed rate of interest.

core CPI: The core CPI excludes eight of the most volatile components (fruit, vegetables, gasoline, fuel oil, natural gas, mortgage interest, intercity transportation, and tobacco products) as well as the effect of changes in indirect taxes on the remaining components. This is the index the Bank of Canada looks at most closely when monitoring inflation.

corporate paper (also called commercial paper): Corporate paper is an unsecured promissory note. It is generally issued by banks and large corporations to finance their short-term credit needs. These notes have a fixed maturity date, usually between 1 and 270 days, and are backed only by the issuer’s good name. 

currency symbols: C$ (Canadian dollar); US$ (U.S. dollar); £ (British pound); ¥ (Japanese yen); € (euro); R$ (Brazilian real); MXN$ (Mexican peso); RUB (Russian ruble). (Currency depreciations have significant negative effects on investment in physical capital.

constant dollars: Dollars from other time periods that have been converted into present-day dollars by removing the effects of inflation. (For example, a car that cost $4,000 several decades ago might today be said to have cost $18,000 in constant dollars.)

consumer confidence: The degree of optimism on the state of the economy that consumers are expressing through their activities of savings and spending. Such measurement is indicative of consumption component level of the gross domestic product.


discount rate: The rate charged by the Federal Reserve Bank on loans to U.S. commercial banks and other depository institutions.

durable goods: Products that are expected to last at least three years (such as appliances, automobiles, furniture).


econometrics: A branch of economics that applies statistical analysis to economic theories.

elasticity: A measure of the responsiveness of changes in one variable to changes in another. For example, if the price of a good rises, the demand for that good may fall. If the price increases by 1 per cent and sales fall by more than 1 per cent, demand for the good is said to be elastic. If sales fall by less than 1 per cent, demand for the good is inelastic.

excess capacity: The amount of “plant and equipment” not in use. The more excess capacity, the less inflationary pressure.

excise tax: Any tax that is not deductible. Taxes on gasoline and tobacco are examples of excise taxes. In general, excise taxes are all taxes paid by individuals with the exception of income and property taxes.


Fed (the): The Fed is the colloquial name for the United States Federal Reserve.

federal funds rate: The federal funds rate is the U.S. overnight rate—the rate of interest U.S. financial institutions charge on one-day loans to each other. (Different from the “discount rate,” which is the rate the Fed charges financial institutions.)

Federal Reserve: The Federal Reserve is the central bank of the United States. It is made up of a Board of Governors and 12 regional Reserve Banks.

final goods: Goods purchased by the end user. These can be consumer goods purchased by households, or they can be capital goods (such as equipment) purchased by firms.

financial instrument: Certificate of ownership of a financial asset, such as a share or a bond.

fiscal year: For taxation and accounting purposes, governments and businesses operate on a 12-month fiscal year that does not necessarily follow the January 1–December 31 calendar year. The fiscal year for Canada’s federal government, for example, begins April 1 and ends on March 31. So, we talk of “fiscal year 2007–08.”


GAAP: Generally Accepted Accounting Principles—the common set of accounting principles, standards, and procedures companies are expected to use when compiling their financial statements.

Gini index: Measures income inequality. Zero equals perfect equality, 100 equals perfect inequality. The greater the difference in income between the lowest- and highest-paid sectors of a society, the higher the index number.

goods balance: Measures the difference between imports and exports of merchandise goods.

gross domestic product (GDP): GDP is the total of all goods and services produced within the boundaries of a country. For example, Canada’s GDP includes goods and services produced by Canadian and foreign-owned corporations inside Canada, but it does not include goods and services produced by Canadian corporations outside Canada.

  • GDP at basic prices: Equals GDP at market prices, minus taxes and subsidies on products.
  • GDP at market prices: The gross value at market prices of all goods and services produced by the economy, plus taxes but minus subsidies on imports.
  • GDP (expenditure-based): Equals the total expenditures of the four sectors of the economy (individual residents, individual non-residents, businesses, and governments).
  • GDP (income-based): Equals the total earnings from the two factors of production (labour and capital), plus taxes but minus subsidies.

gross national product (GNP): GNP is the total of all goods and service produced within the boundaries of a country, minus goods and services produced by foreign-owned businesses inside the country, plus goods and services produced by domestic-owned businesses outside the country. This was once the most common measure of national wealth production but has, in most cases, been replaced by GDP.


help-wanted index: The Help-Wanted Index is an indicator of the strength or weakness of the labour market. In Canada, the index is prepared monthly by The Conference Board of Canada and is based on the seasonally adjusted number of new, unduplicated jobs posted online during the month across 79 Canadian job-posting websites.

Henry Hub: The Henry Hub price is a benchmark price for natural gas. It is the price paid for natural gas futures contracts in New York, and is based on the settlement price paid for natural gas delivered at a key pipeline hub in Louisiana.

household formation: The number of new households that will be formed over the long term. Based on projections of population by age cohort and age-specific headship rates, household formation is the underlying driver of long-term demand for new housing and thus new home construction.

housing absorption: A dwelling is “absorbed” when a binding, non-conditional agreement is made to buy or rent the dwelling.

housing completion: The stage at which all proposed construction work on a residential unit has been completed.

housing starts: The number of residential units for which construction has begun.


indicators (leading, lagging, coincident): Leading indicators (such as bond yields) provide evidence of where the economy is headed. They tend to rise or fall ahead of the general economy. Lagging indicators (such as the unemployment rate) help confirm how the economy has been performing and where it is in the economic cycle. They tend to trail the general economy. Coincident indicators (such as personal income) rise and fall along with the general economy.

industrial product price index (IPPI): The Industrial Product Price Index measures price changes for major commodities sold by manufacturers in Canada. The prices are those the producer receives (as opposed to what the purchaser pays) for the goods. They exclude all indirect taxes and transportation and distribution costs beyond the factory gate.

inflation-control target range: The range of inflation that the Bank of Canada deems acceptable. The 1-to-3 per cent range was set in 1991. It was renewed on several occasions and has been extended to 2011. The Bank uses monetary policy to maintain inflation within the target range.

inflation rate: The current rate at which a basket of goods and services has increased for a year. The two current leading indicators that measure the current inflation rate are the Consumer Price Index (CPI) at the consumer level and the Producer Price Index (PPI) at the wholesale level.


Keynesian: Keynesian economic theory is based on the doctrines of British economist John Maynard Keynes (1883–1946). Keynes suggested that the state should play an active role in boosting economic growth and lowering unemployment through fiscal policy.


labour force: The non-institutionalized population aged 15 and over, excluding those who are unwilling or unable to work.

leveraged buy-out (LBO): Occurs when one company buys another using mostly borrowed money, and the debt is secured against the assets of the company being acquired.

long term: At The Conference Board of Canada, we define “long term” as anything beyond five years.


M1 money supply: Canada’s M1 supply comprises all banknotes and coins in circulation plus all the funds available in personal chequing accounts and current accounts at Canadian banks.

M2 money supply: The M2 money supply includes the M1 supply plus other chequing accounts, personal savings accounts, term deposits, and other non-personal deposits that require notice before withdrawal.

macroeconomics: The study of economics at the macro (or large-scale) level. Macroeconomics focuses on the movements and trends in the economy as a whole (e.g., inflation, gross domestic product, changes in the unemployment rate, etc.). In particular, it looks at the behaviour of all households or all firms together rather than examining the behaviour and decisions of a single household or firm.

M&E: Machinery and equipment.

market capitalization: The stock market value of a company. Calculated by multiplying the share price by the total number of outstanding shares.

mean: The mean is the average. Calculated by taking the sum of the numbers and dividing the result by however many numbers there are in the group.

median: The median is the point at which half the numbers or items in a group are higher and half are lower.

Medium term: At The Conference Board of Canada, we define “medium term” as the third, fourth, and fifth years.

microeconomics: The study of economics at the micro (firm or household) level. In particular, microeconomics tries to explain or predict the behaviour of individual firms or households based on the basic rules of supply and demand.


national accounts: The most wide-ranging measurement of the major transactions in an economy. Includes such things as taxes, spending, saving, trade, and investment flows.

NDI: Net domestic income. The total amount of income generated within the economy less taxes and capital cost allowances.

NIPA: National Income and Product Accounts. (In the U.S., it is equivalent Canada’s national accounts.)

Nominal: In The Conference Board of Canada documents, “nominal” most commonly refers to totals that have not been adjusted to take into account inflation or other fluctuations. As in “nominal wages,” “nominal GDP,” or “nominal [or current] dollars.”

non-durable goods: Products that are expected to last three years or less (such as food, clothing, gasoline).

NOPAT (net operating profit after tax): What a company would earn if it had no debt. Equals operating income minus taxes.


OECD: Organisation for Economic Co-operation and Development (note spelling of “organisation” and “co-operation”). The Paris-based OECD is made up of 30 countries committed to free market economies.

OPEC: The Organization of the Petroleum Exporting Countries. Members are Algeria, Angola, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela.

OPEC 10: All OPEC members except Iraq and Angola. (Iraq and Angola are not—as of 2007—subject to OPEC production quotas).

other primary industries: The Board defines “other primary industries” as all primary industries except agriculture.

output: The final product of the production activity. Ouput is obtained from the combination of resources such as labour, capital, materials, services and energy.

output gap: The output gap is the difference between the economy’s output and the level of output it can produce without igniting inflationary pressures.

output per hour worked: Measures the average ouput produced by the average worker in one hour. Can be on a national, industry, or sector basis.

overnight rate: The overnight rate is the annual rate of interest that Canada’s financial institutions charge each other on one-day loans.


participation rate: The percentage of the population 15 years of age and older that is in the labour force.

per cent/percentage: In our charts, the units of measurement are frequently listed as “per cent” or “percentage change.” We generally use “per cent” as a unit of measurement and “percentage” as an adjective. (Example: The bank rate now stands at 4.75 per cent—an increase of half a percentage point from a year ago.) “Percentage” can also stand alone (e.g., “the percentage of exports”) or it can follow an adjective (e.g., “a high percentage”).

percentile: Refers to a 1/100th increment. So, the top percentile of Canadian income earners is the top 1 per cent.

plant gate price: The price of natural gas that is sold from the producing plant (rather than from the wellhead or the transmission pipeline).

potential output: The highest level of activity an economy can maintain without creating inflationary pressures.

prime rate: The prime rate is the benchmark lending rate for commercial banks. It is often referred to as the rate the banks charge their most creditworthy customers. While this was true in the past, today the prime is simply the benchmark lending rate (and banks will often charge their favoured customers below-prime rates).

primary industries: The primary industries are agriculture, fishing, logging and forestry, mining, oil and natural gas extraction, and hunting and trapping.

public accounts: The financial statements produced by various levels of government. At the federal level, the accounts are prepared by the government and audited by the auditor general.

purchasing power parity (PPP): Measures the purchasing power of a currency as a means of comparing its value to that of other currencies.


rating: The Conference Board of Canada’s Provincial Outlook uses New York-based credit-rating agency Standard & Poor’s ratings for its listing of each province’s “credit quality.” AAA is the highest rating. AA is second highest. A is third. BBB is fourth. The lowest is D. The ratings are further refined by the addition of a “+” or “–” sign (e.g., AA–).

raw materials price index (RMPI): Measures changes in the prices paid by Canadian manufacturers for key raw materials. Those prices include all costs (and subsidies, if applicable) involved in bringing the materials to the industries, including transportation, taxes, and duties. Because the price changes must eventually be passed on to consumers, the RMPI acts as an early indicator of inflation.

real: Refers to totals that have been adjusted to correct for inflation or other fluctuations so as to reflect volume changes. As in “real wages” or “real GDP.” Constant or chained dollars are examples of this adjustment. The “real interest rate” is the interest rate less the expected rate of inflation.

real (Brazilian currency): Brazil’s currency is the real. (Note that the plural is reais.)

rule of origin: The set of laws and regulations that determine a product’s country of origin. Country of origin can determine whether a product qualifies for tariff preference, special duties, quota exemptions, or other trade measures.


scalability: The ease (or lack of ease) with which the supply of a good or service can be expanded to meet an increase in demand.

semi-durable goods: Goods that are neither perishable nor long lasting, or are expected to last about one year (but can include goods such as clothing that are also defined as “non-durable”).

short term: At The Conference Board of Canada, we define “short term” or “near term” as this year and next.

structural unemployment: Unemployment that is caused, not by lack of demand for labour, but by regulations that discourage people from joining the workforce or discourage employers from hiring additional workers.

systematic risk/systemic risk: Two different things. Systematic risk is the risk that a wide-spread stock market correction could reduce the value of even a well-diversified portfolio of assets. Systemic risk is the risk that an incident (such as the collapse of a bank) could damage the financial system as a whole.


terms of trade: The weighted average of a country’s export prices relative to its import prices. (Learn about our International Trade and Investment Centre) which helps Canadian leaders better understand what global economic dynamics mean for public policies and business strategies)

Tobin Tax: A suggested global tax on currency trades across borders. Proposed by economist James Tobin in the 1970s, the tax would be aimed at stabilizing currency markets by discouraging short-term currency trading by speculators. Supporters say the Tobin Tax would improve global economic stability. Opponents say it would be too cumbersome and would discourage globalization and economic growth.

Treasury bill: Short-term debt instruments (a year or less) sold by central banks at a discount. For example, a 91-day $1,000 T-bill might be sold to the investor for $988.50 but would be worth $1,000 at maturity.


unemployment rate:: Proportion of the active labour force aged 15 or older who do not have a job.


value added: Value added measures the value added through the production process. For a company, the calculation for value added takes the value of its output and subtracts the costs of inputs paid to other companies. The final total is equal to profit plus wages.

value-added tax (VAT): A tax levied at each stage from production through to the final consumption. In Canada, the federal goods and service tax (GST) is a value-added tax.


WCSB: Western Canadian Sedimentary Basin—a vast sedimentary basin lying below much of Western Canada. It contains vast reserves of oil, natural gas, and coal.

WTI: West Texas Intermediate—one of the benchmarks for oil prices.


YTD: Year-to-date.