James d. Gwartney

economic growth: An increase in the real Gross Domestic Product (real value of the
production and services produced in a given period in a given economy) from period to period.
economic institutions: The legal, regulatory, and monetary rules, laws, and customs that affect
the security of property rights, enforcement of contracts, and the volume of exchange. They
exert a major impact on transaction costs between parties, particularly when the trading
partners do not know each othereconomic prosperity: Persistent increases in per capita income and improvements in the
standard of living. 
economics: The study of how individuals, government, businesses, and other organizations
make choices that affect the allocation and distribution of scarce resources. 
economies of scale: Reductions in the firm’s per-unit costs that occur when large plants are
used to produce larentrepreneur: A profit-seeking decision-maker who assumes the risk of developing
innovative approaches and products with the expectation of realizing profits. A successful

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entrepreneur’equilibrium: A state in which the conflicting forces of supply and demand are in balance.
When a market is in equilibrium, the decisions of consumers and producers are brought into
harmony and the quantity demanded will equal the quantity supplied at the market clearing
price. 
equities: Shares of stock in a company. They represent fractional ownership of the company.
equity mutual fund: An entity that pools the funds of investors and uses them to purchase a
bundle of stocks. Mutual funds make it possible for even small investors to hold a diverse
bundle of stocks. 
exchange rate: The domestic price of one unit of a foreign currency. For example, if it takes
$0.035 to purchase one Ukrainian hryvnia, the dollar-hryvnia exchange rate is 0.035.