TERMINOLOGY

Absolute advantage: A country has an absolute advantage if its output per unit of input of all
goods and services produced is higher than that of another country.

Accelerator Principle - the growth in output that would induce a continuation in net
investment.

Ad valorem tax:(in Latin: to the value added) - a tax based on the value (or assessed value) of
property. Ad valorem tax can also be levied on imported items.

Alternative minimum tax: An IRS mechanism created to ensure that high-income individuals,
corporations, trusts, and estates pay at least some minimum amount of tax, regardless of
deductions, credits or exemptions. Alternative minimum tax operates by adding certain taxpreference items back into adjusted gross income. While it was once only important for a small
number of high-income individuals who made extensive use of tax shelters and deductions, more
and more people are being affected by it. The AMT is triggered when there are large numbers of
personal exemptions on state and local taxes paid, large numbers of miscellaneous itemized
deductions or medical expenses, or by Incentive Stock Option (ISO) plans.

Asset: Anything of monetary value that is owned by a person. Assets include real property,
personal property, and enforceable claims against others (including bank accounts, stocks, mutual
funds, and so on).

Base year: In the construction of an index, the year from which the weights assigned to the
different components of the index is drawn. It is conventional to set the value of an index in its base
year equal to 100. Bear: An investor with a pessimistic market outlook; an investor who expects
prices to fall and so sells now in order to buy later at a lower price. A Bear Market is one which is
trending downwards or losing value.

Bid price: The highest price an investor is willing to pay for a stock.

Bill of exchange: A written, dated, and signed three-party instrument containing an

unconditional order by a drawer that directs a drawee to pay a definite sum of money to a payee on
demand or at a specified future date. Also known as a draft. It is the most commonly used financial
instrument in international trade.

Birth rate: The number of births in a year per 1,000 population.

Bond: A certificate of debt (usually interest-bearing or discounted) that is issued by a government

or corporation in order to raise money; the bond issuer is required to pay a fixed sum annually until
maturity and then a fixed sum to repay the principal. Bonds guide.

Bretton Woods: An international monetary system operating from 1946-1973. The value of the dollar
was fixed in terms of gold, and every other country held its currency at a fixed exchange rate against the
dollar; when trade deficits occurred, the central bank of the deficit country financed the deficit with its
reserves of international currencies. The Bretton Woods system collapsed in 1971 when the US abandoned the
gold standard.