Economic rent

A surplus paid to any factor of production over its supply price. Economic rent is the difference between what a factor of production is earning (its return) and what it would need to be earning to keep it in its present use. It is in other words the amount a factor is earning over and above what it could be earning in its next best alternative use (its transfer earnings).

Similar financial terms

Economic cycle
The economic cycle are predictable long-term pattern changes in national income. As for business cycles, the economic cycle has four (similar) stages:
- expansion
- prosperity
- contraction
- recession
After a recession, an expansion can start again. Some economists believe that major stock price movement patterns precede the stages of the economic cycle.

Economic indicators
Statistical indexes, rates, and other measurements of national financial and social trends, used to predict overall business climate and growth patterns.

Leading economic indicators
Economic series that tend to rise or fall in advance of the rest of the economy.

European Economic Area (EEA)
The European Economic Area (EEA) came into being on 1 January 1, 1994 following an agreement between the European Free Trade Association (EFTA) and the European Union (EU). It was designed to allow EFTA countries to participate in the European Single Market without having to join the EU. In a referendum, Switzerland (ever keen on neutrality) chose not to participate in the EEA (although it is linked to the European Union by bilateral agreements similar in content to the EEA agreement), so the cu ...

Macroeconomics
The subdivision of the discipline of economics that studies and strives to explain the functioning of the economy as a whole -- the total output of the economy, the overall level of employment or unemployment, movements in the average level of prices (inflation or deflation), total savings and investment, total consumption and so on. The focus of much of macroeconomic theory is analysis of the ways in which conscious government policies (and the unintended secondary consequences of these policie ...

Keynesian Economics
The economic theory that active government intervention in the marketplace and monetary policy is the best method of ensuring economic growth and stability.

Country economic risk
Developments in a national economy that can affect the outcome of an international financial transaction.

Microeconomics
The subdivision of the discipline of economics that studies the behavior of individual households and firms interacting through markets, how prices and levels of output of individual products are determined in these markets, the interconnections by which different markets affect each other, and how the price mechanism allocates resources and distributes income.

Classical Economics
The dominant theory of economics from the 18th century to the 20th century, when it evolved into neo-classical economics. Classical economists, who included Adam Smith, David Ricardo and John Stuart Mill, believed that the pursuit of individual self-interest produced the greatest possible economic benefits for society as a whole through the power of the "Invisible hand". They also believed that an economy is always in equilibrium or moving towards it. Equilibrium was ensured in the labor mar ...

Green economics
The study of environmental issues including the depletion of non renewable resources.

European Economic Community (EEC)
Now incorporated in the European Union (EU).

Current Assets
The value of assets held at the Balance Sheet date that are represented by cash, or can be expected to be converted into cash within the next 12 months.

Current Liabilities
The value of liabilities at the Balance sheet date that the company is required to settle (pay) either on demand, or within the next 12 months.

Current intrest rate
The rate being earned on a bond based on its current market value; that value varies with the degree of premium or discount value of the bond.

Current portion of long-term dept
Those liabilities that are payable within the next 12 months, including accounts and taxes payable, and the current portion (12 months' payments) of notes payable and current liabilities.

Current ratio
A ratio that tests the strength of a company's working capital. Current assets are divided by current liabilities and the result is expressed as a factor, x to y.

Tax differential view ( of dividend policy)
The view that shareholders prefer capital gains over dividends, and hence low payout ratios, because capital gains are effectively taxed at lower rates than dividends.

Other current assets
Value of non-cash assets, including prepaid expenses and accounts receivable, due within 1 year.

Current account
Net flow of goods, services, and unilateral transactions (gifts) between countries.

Current coupon
A bond selling at or close to par, that is, a bond with a coupon close to the yields currently offered on new bonds of a similar maturity and credit risk.

Current issue
In Treasury securities, the most recently auctioned issue. Trading is more active in current issues than in off-the-run issues.

Current maturity
Current time to maturity on an outstanding debt instrument.

Current / noncurrent method
Under this currency translation method, all of a foreign subsidiary's current assets and liabilities are translated into home currency at the current exchange rate while noncurrent assets and liabilities are translated at the historical exchange rate, that is, the rate in effect at the time the asset was acquired or the liability incurred.

Current rate method
Under this currency translation method, all foreign currency balance-sheet and income statement items are translated at the current exchange rate.

Current yield
For bonds or notes, the coupon rate divided by the market price of the bond.

Quasi-rent
Short-term economic rent arising from a temporary inelasticity of supply.

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Did you know?

Monetary neutrality

A proposition that in the long run, a percentage rise in the money supply is matched by the same percentage rise in the price level, leaving unchanged the real money supply and all other economic variables such as interest rates.

This theory, a core belief of classical economics, was first put forward in the 18th century by David Hume. He set out the classical dichotomy that economic vari ...


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