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| Term | Definition |
|---|---|
| Backward Induction | The process of reasoning backward in time, determining a sequence of optimal actions by considering the last time a decision might be made and choosing actions for every possible situation until the beginning of the problem. |
| Balance of Payments | A record of all economic transactions between a country’s residents and the rest of the world, including trade in goods and services, financial transfers, and investment income. |
| Balance of Trade | The difference between the monetary value of a nation’s exports and imports over a certain period, sometimes differentiated between goods and services. |
| Balanced Budget | A budget where revenues equal expenditures, resulting in neither a deficit nor a surplus. Cyclically balanced budgets may run surpluses in boom years and deficits in lean years, offsetting over the economic cycle. |
| Balanced Budget Laws | Laws requiring governments to maintain balanced budgets regardless of the overall economic state, potentially worsening economic downturns. |
| Bank for International Settlements | An international financial regulatory organization based in Berne, Switzerland, overseeing international regulations regarding capital adequacy and banking practices. |
| Banking Cycle | An economic cycle resulting from changes in banks’ attitudes toward lending risk, leading to credit expansion during economic upswings and contraction during downturns. |
| Bankruptcy | The inability to pay debts due to loss of income, increased spending, or unforeseen financial crisis, leading to legal status where debts cannot be repaid. |
| Banks | Financial institutions accepting deposits and issuing loans, making a profit through interest on loans and service charges. Banks create new money by issuing loans, essential for economic growth. |
| Barriers to Entry | Costs incurred by new entrants into a market that incumbents do not face, contributing to market distortions and potentially protecting incumbent firms from competition. |
| Barter | A form of trade where goods or services are exchanged directly without using money as an intermediary. |
| Behavioral Economics | The branch of economics studying the effects of psychological, cognitive, emotional, cultural, and social factors on economic decisions, deviating from classical economic theory. |
| Bellman Equation | An equation associated with dynamic programming, expressing the “value” of a decision problem in terms of initial choices’ payoff and the remaining decision problem’s “value.” |
| Bequest Motive | Economic justification for intergenerational transfers of wealth, explaining why people leave money behind when they die. |
| Bertrand–Edgeworth Model | A microeconomic model of price-setting oligopoly studying the effects of homogeneous products and limits to firms’ output on price and market structure. |
| Big Push Model | A concept in development economics emphasizing that a firm’s decision to industrialize depends on expectations of other firms’ actions, assuming economies of scale and an oligopolistic market structure. |
| Black–Scholes Model | A mathematical model for financial markets, providing estimates of European-style options’ prices based on a partial differential equation known as the Black–Scholes equation. |
| Board of Governors | The main governing body directing operations of the United States Federal Reserve System, consisting of seven members supervising the 12 Federal Reserve Districts. |
| Bond | A financial security representing a promise to repay a loan with specified interest over a specified time period, traded among investors. |
| Break-Even | The point at which total cost equals total revenue, resulting in neither profit nor loss. |
| Bretton Woods System | A monetary system established after the 1944 Bretton Woods Agreement, governing monetary relations among the United States, Canada, Western Europe, Australia, and Japan. |
| Budget Deficit | The amount by which government expenditures exceed revenues over a specific period, opposite of a budget surplus. |
| Budget Surplus | The amount by which government revenues exceed expenditures over a specific period, opposite of a budget deficit. |
| Business Cycle | The recurring pattern of economic expansion and contraction, involving periods of growth, peak, recession, and trough. |
| Business Economics | Applied economics analyzing business enterprises and factors contributing to organizational structures, relationships with labor, capital, and product markets. |
| Business Sector | The part of the economy composed of companies, considered a subset of the domestic economy, excluding government, households, and non-profit organizations serving individuals. |
| Basis Point | One-hundredth of a percentage point, commonly used in financial contexts to describe interest rates, yields, and other percentage-based measures. |
| Bear Market | A financial market characterized by declining asset prices over an extended period. |
| Behavioral Finance | The study of psychological factors influencing financial markets and decision-making. |
| Brand Equity | The perceived value or strength of a brand, influencing consumer behavior and market share. |
| Balance Sheet | A financial statement showing a company’s assets, liabilities, and equity at a specific point in time. |
| Blue Chip Stocks | Shares of large, well-established companies with a history of stable performance and reliability. |
| Budget Constraint | Limitations on spending imposed by income and prices, influencing consumer choices. |
| Bilateral Trade | The exchange of goods and services between two countries. |
| Base Year | The reference year used for comparison when measuring changes in economic variables like inflation or GDP. |
| Benefit-Cost Analysis | A method evaluating the desirability of a project or policy by comparing total benefits and costs. |