James d. Gwartney

income transfers: Payments made by the government to individuals and businesses that do

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not reflect services provided by the recipients. They are funds taxed away from some and
index fund: Type of mutual fund with a portfolio constructed to match or track the
components of a market index, such as the Standard & Poor’s 500 Index (S&P 500). 
indexed equity mutual fund: An equity mutual fund that holds a portfolio of stocks which
matches their share (or weight) in a broad stock market index such as the S&P 500. The
overhead of these funds is usually quite low because their expenses on stock trading and
research are low. The value of the mutual fund shares will move up and down along with the
industrial policy: A government plan that is designed to encourage the development of
industry or of a particular type of industryinflation: A continuing rise in the general level of prices of goods and services. During
insolvency: The state of financial distress in which an individual or entity is unable to pay their
bills. This can be due to an underlying lack of resources (assets) or an inability to turn these
resources into cash (liquidity). 
insurance: An arrangement by which a company or the state undertakes to provide a guarantee
of compensation for specified loss, damage, illness, or death in return for payment of a
specified premium. 
international trade: see free trade
investment: The purchase, construction, or development of capital resources, including both

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investment goods: Goods and/or facilities bought or constructed for the purpose of producing
future economic benefits. Examples include rental houses, factories, ships, or roads. They are
also often referred to as capital goods.