| Word | Definition & Example |
|---|---|
| economy n. |
The system by which a country produces and uses goods and services. "The global economy is now interconnected to an unprecedented degree." Collocations: global economy, growing economy |
| recession n. |
A period of significant decline in economic activity. "The 2008 financial crisis triggered a global recession." Collocations: deep recession, enter a recession |
| inflation n. |
A general rise in prices over time. "High inflation reduces the purchasing power of consumers." Collocations: high inflation, inflation rate |
| unemployment n. |
The condition of being without paid work. "Unemployment rises during economic downturns." Collocations: high unemployment, unemployment rate |
| gross domestic product n. |
The total value of goods and services produced in a country in a year. "GDP per capita is a rough measure of average prosperity." Collocations: GDP growth, real GDP |
| supply n. |
The amount of a product available for sale. "When supply exceeds demand, prices typically fall." Collocations: supply and demand, food supply |
| demand n. |
Consumers' desire and ability to buy a good or service. "Demand for electric vehicles has risen sharply over the past decade." Collocations: consumer demand, demand curve |
| consumer n. |
A person who buys goods or services. "Consumer spending accounts for about 70% of economic activity in the US." Collocations: consumer behaviour, consumer goods |
| market n. |
A system in which goods and services are bought and sold. "Free markets rely on competition to set efficient prices." Collocations: free market, stock market |
| competition n. |
Rivalry between businesses for customers. "Competition tends to drive innovation and lower prices." Collocations: fierce competition, market competition |
| monopoly n. |
A situation where one company controls all supply of a product. "Anti-trust laws prevent the formation of monopolies in many industries." Collocations: natural monopoly, break a monopoly |
| trade n. |
The buying and selling of goods between countries or people. "International trade has lifted hundreds of millions out of poverty." Collocations: international trade, free trade |
| tariff n. |
A tax imposed on imported goods. "Tariffs make foreign products more expensive for domestic consumers." Collocations: import tariff, impose a tariff |
| investment n. |
Money put into a business or asset to earn a return. "Long-term investment drives economic growth." Collocations: foreign investment, return on investment |
| interest rate n. |
The percentage charged on borrowed money. "Central banks raise interest rates to slow inflation." Collocations: low interest rate, raise interest rates |
| currency n. |
Money used in a particular country or system. "The euro is the official currency of nineteen European countries." Collocations: foreign currency, currency exchange |
| budget n. |
A plan for income and spending. "The government balanced its budget for the first time in a decade." Collocations: balance the budget, federal budget |
| deficit n. |
When spending exceeds income. "The country ran a budget deficit for much of the 1980s." Collocations: trade deficit, budget deficit |
| surplus n. |
When income exceeds spending. "A trade surplus means a country exports more than it imports." Collocations: trade surplus, budget surplus |
| productivity n. |
The amount of output per unit of work. "Automation has steadily raised productivity since the Industrial Revolution." Collocations: labour productivity, productivity growth |
| growth n. |
An increase in the size of an economy. "Sustained growth requires investment in education and infrastructure." Collocations: economic growth, sustainable growth |
| allocate v. |
To distribute resources to a particular use. "Markets tend to allocate resources more efficiently than central planners." Collocations: allocate resources, allocate funding |
| fluctuate v. |
To rise and fall irregularly. "Commodity prices fluctuate with supply, demand, and global events." Collocations: fluctuate widely, prices fluctuate |
| sustain v. |
To keep something going at the same level. "Few economies can sustain double-digit growth for more than a decade." Collocations: sustain growth, sustain demand |
| scarce adj. |
Not available in sufficient quantity. "Fresh water is becoming scarce in many regions due to climate change." Collocations: scarce resource, in scarce supply |
How this vocabulary appears on the TOEFL
Economics terms appear directly in passages and audio across Reading · Listening · Writing. The questions you'll see most frequently target this vocabulary are paraphrase identification (the test rewords a sentence using a synonym from this list), inference questions (you need the term's meaning to follow the argument), and reference questions (the term is the antecedent of a pronoun in another sentence). Knowing the term plus one or two natural collocations lets you decode passages faster and recognise paraphrases on the answer choices without re-reading.
How to study this list effectively
Don't try to memorise the whole list in one sitting. Effective vocabulary study works in three passes: (1) recognise — read each entry once until the word feels familiar; (2) retrieve — cover the definitions and try to recall each one from the word alone; (3) produce — write a sentence of your own that uses the word in a TOEFL context. Spaced repetition over 5–7 days will make the words stick far better than a single intensive review session. Pair this list with a practice test in the same section so you encounter the words in real test contexts.
Practise this vocabulary on real TOEFL tests
- Reading practice tests — passages on academic topics
- Listening practice tests — campus conversations and academic talks
- Full-length practice tests — vocabulary in context across all four sections
- More TOEFL vocabulary by topic