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Industry: Definition in Business and Investing What is an industry? An industry is a classification that groups companies with similar primary business activities or products. Firms are typically assigned to an industry based on their main source of revenue. Industries are often grouped into broader categories called sectors. Key takeaways Industries group companies with comparable…

Industrialization Key takeaways Industrialization is the transition from agriculture-based economies to mechanized, manufacturing-driven economies. It fuels economic growth, technological innovation, and urban migration, but also produces social upheaval and environmental costs. Different strategies—mercantilism, protectionism, import substitution, export-led growth, and state planning—have produced varying outcomes across regions and eras. Major innovations (steam engine, spinning jenny, cotton…

Industrial Revolution The Industrial Revolution was a transformative period that shifted economies from agrarian, handcraft-based production to machine-based manufacturing. It began in Great Britain in the late 18th century and spread across Europe, North America, and beyond. A later wave of more advanced industrialization—often called the Second Industrial Revolution—took place in the late 19th and…

Industrial Revenue Bonds: What They Are and How They Work Key takeaways Industrial revenue bonds (IRBs) are municipal bonds issued by a state or local government on behalf of a private company to finance industrial projects. IRBs are a type of private activity revenue bond; bondholders are repaid from the revenues generated by the financed…

What Is the Industrial Production Index (IPI)? How It Measures Output The Industrial Production Index (IPI) is a monthly economic indicator that measures real output in the industrial sector—primarily manufacturing, mining (including oil and gas field drilling services), and electric and gas utilities—relative to a base year. It tracks production levels, estimated sustainable production capacity,…

Industrial Organization Industrial organization is the branch of economics that analyzes how firms behave in markets, how industries are structured, how firms compete, and how public policy (regulation and antitrust) affects market outcomes. The term “industrial” applies to any large-scale business activity—manufacturing, tourism, agriculture, technology—rather than only traditional industry. Key takeaways Focuses on strategic firm…

Industrial Goods Sector The industrial goods sector comprises companies that produce capital goods—machinery, equipment, and supplies—used by manufacturers, builders, and service providers. These firms supply the tools and infrastructure that enable production across the economy, from construction and transportation to aerospace and manufacturing. Key takeaways Produces capital goods essential for manufacturing, construction, and services. Subsector…

Industrial Banks (Industrial Loan Companies): Overview and Criticism Key takeaways * An industrial bank (industrial loan company, ILC) is a state-chartered depository institution that accepts deposits and makes consumer and small-business loans. * Industrial banks are typically owned by commercial firms and are insured by the FDIC, but they are not supervised by the Federal…

Individual Retirement Account (IRA) What is an IRA? An Individual Retirement Account (IRA), formally an Individual Retirement Arrangement, is a tax-advantaged account that helps individuals save for retirement. IRAs are available to people with earned income and can be opened at banks, brokerages, credit unions, and other IRS-approved institutions. They are intended for long-term retirement…

Indirect Tax: Definition, Examples, and Effects Key takeaways * An indirect tax is collected by an intermediary (manufacturer, importer, or retailer) and passed on to the consumer through higher prices. * Unlike direct taxes (e.g., income tax), the party legally liable to remit the tax is not necessarily the one who bears the economic burden….

Indirect Quote What is an indirect quote? An indirect quote (also called a quantity quotation) in foreign exchange shows how much foreign currency is required to buy one unit of the domestic currency. It treats the domestic currency as the base and the foreign currency as the counter. The opposite is a direct quote (or…

Indirect Method (for the Statement of Cash Flows) The indirect method is a common approach to prepare the cash flow statement’s operating section. It converts accrual-basis net income into cash flow from operating activities by adjusting for noncash items and changes in balance sheet accounts. How it works Start with net income (accrual basis). Add…

Indirect Loan An indirect loan is an installment loan arranged through an intermediary rather than directly between the borrower and the ultimate lender. Commonly used in industries that sell big-ticket items (especially auto dealerships), the intermediary—such as a dealer or retailer—submits the borrower’s application to one or more third‑party lenders. The lender that ultimately funds…

Indifference Curve An indifference curve is a graphical tool used in microeconomics to represent combinations of two goods that provide the same level of satisfaction (utility) to a consumer. Any point along a given indifference curve indicates a bundle of the two goods between which the consumer is indifferent. How indifference curves work The chart…

What is an indicator? An indicator is a statistic or calculated measure used to assess current financial or economic conditions and to help forecast future trends. In finance, indicators fall into two broad categories: Economic indicators — data that reflect the health and direction of an economy (e.g., inflation, GDP). Technical indicators — mathematical calculations…

Indicative Net Asset Value (iNAV): What it is, How it Works Key takeaways * iNAV is a near‑real‑time estimate of a fund’s per‑share net asset value, typically updated every ~15 seconds. * Exchanges or designated calculation agents publish iNAV so traders can see intraday value between official end‑of‑day NAV calculations. * iNAV helps keep exchange‑traded…

Indication of Interest (IOI): Definition and How It Works An Indication of Interest (IOI) is a non-binding expression that a buyer intends to purchase a security or acquire a company. IOIs are used in two main contexts: Securities markets—commonly before an initial public offering (IPO) while the issue is still in registration and awaiting regulatory…

Indian Rupee (INR) The Indian rupee (symbol: ₹; ISO code: INR) is the official currency of India, issued and regulated by the Reserve Bank of India (RBI). It is subdivided into 100 paise and is used as the primary medium of exchange across the country. Introduced as a silver coin in the 16th century by…

Indexing: Definition and Uses in Economics and Investing Indexing means using a benchmark or reference measure to summarize, compare, or track change. In economics, indexing compresses complex data into a single metric (for example, inflation or employment trends). In finance, indexing also refers to passive investment strategies that replicate market indexes to achieve broad market…

Indexed Annuities Key takeaways An indexed annuity is an insurance contract that credits interest linked to the performance of a market index (e.g., S&P 500) while protecting your principal from negative index returns. Indexed annuity gains are typically limited by participation rates and rate caps, so you rarely receive the full index return. Typical participation…

Indexation What is indexation? Indexation is the practice of linking the value of a price, wage, payment, asset, or tax parameter to changes in a predetermined price index or composite indicator. It ensures values move in step with changes in costs—commonly to protect purchasing power, maintain profit margins, or prevent tax “bracket creep.” Indexation is…

Real Estate Investment Trusts (REITs) Real Estate Investment Trusts (REITs) are companies that own, operate, or finance income-producing real estate and sell shares to investors. They provide a way to gain exposure to real estate without buying or managing properties directly. Key takeaways REITs let investors earn income from real estate via dividends and potential…

Real Estate Investment Group (REIG): Definition and How They Work A real estate investment group (REIG) is an entity formed by two or more investors that pools capital to invest in real estate. REIGs buy, renovate, manage, finance, or sell properties while sharing profits, losses, and responsibilities among members. They are distinct from real estate…

Real Estate Agent: Definition, Role, and Compensation Key takeaways * A real estate agent is a licensed professional who represents buyers or sellers in property transactions. * Agents typically earn commissions—percentages of the sale price—but fee structures are evolving (flat fees, reduced commissions, à la carte services). * Most agents work under a licensed real…

Real Estate: Definition, Types, and How to Invest What is real estate? Real estate refers to land and anything permanently attached to it—natural features and man-made improvements such as buildings, roads, utilities, and other fixtures. It differs from personal property (cars, furniture, jewelry), which is movable and not permanently affixed to land. Real property includes…

Real Effective Exchange Rate (REER) What is REER? The Real Effective Exchange Rate (REER) is an index that measures a currency’s value against a basket of foreign currencies after adjusting for relative price levels (inflation). Each partner currency is weighted according to its share in the home country’s trade. REER is used to assess trade…

Real Economic Growth Rate The real economic growth rate measures how much a country’s output of goods and services (GDP) changes over time after adjusting for inflation. Because it strips out price-level changes, it gives a clearer picture of changes in actual economic activity than nominal GDP. Why it matters Removes inflation’s distortion to show…

Real Assets A real asset is a physical, tangible asset whose value comes from its substance and properties. Examples include real estate, land, machinery, and commodities such as gold, oil, and agricultural products. Real assets contrast with intangible assets (patents, trademarks, brand value) and financial assets (stocks, bonds, cash), which derive value from contractual claims…

Reaganomics: Definition, Policies, and Impact What is Reaganomics? Reaganomics describes the economic program promoted by President Ronald Reagan (1981–1989). It combined large tax cuts, reduced domestic social spending, deregulation of many industries, and support for a tighter monetary policy to fight inflation. The approach drew on supply-side economics and the idea—often labeled “trickle-down”—that tax relief…

Understanding Raw Materials: Definition and Importance Raw materials are the basic inputs used to produce goods. They can be sourced from nature (minerals, timber, crops), animals (wool, milk), or industrial processes (steel, plastics). Raw materials drive production costs, influence supply chains, and affect national and global economic activity. Key Points Raw materials are essential inputs…

Rationing: Definition, Purpose, and Examples What is rationing? Rationing is the deliberate control and allocation of scarce goods or services to manage shortages. Typically implemented by governments, rationing limits how much individuals or households can obtain of essentials—food, fuel, medical supplies, or other constrained commodities—during crises such as war, natural disasters, embargoes, or severe economic…

Understanding Rationalization in Business What is rationalization? Rationalization is the deliberate reorganization of a company’s structure, assets, products, processes, or strategy to increase efficiency, reduce waste, and improve profitability. It can mean expanding or contracting operations, changing policies, modernizing systems, or shifting product portfolios. In a broader sense, rationalization also describes the use of financial…

Rational Expectations Theory Rational expectations theory is a framework in macroeconomics that assumes people form forecasts about the future using all available information, their understanding of economic relationships, and past experience. Because expectations shape decisions—by households, firms, and policymakers—they in turn influence actual economic outcomes. The theory is central to modern macroeconomic models and underpins…

Rational Choice Theory Rational choice theory is an analytical framework that assumes individuals make decisions to maximize their personal benefit (utility) based on available information and options. When faced with alternatives, a rational actor selects the option expected to yield the greatest satisfaction or advantage. Core Principles Utility maximization: Individuals evaluate costs and benefits and…

Rational Behavior: Definition and Examples in Economics Rational behavior describes decision-making that aims to maximize an individual’s benefit or utility given the available options. In economics, this assumption underpins many models: people are presumed to choose actions that yield the greatest personal satisfaction, which can be monetary, emotional, moral, or otherwise non‑material. Key takeaways Rational…