What Is the Industry Life Cycle? The industry life cycle refers to the evolution of an industry or business through four stages based on the business characteristics commonly displayed in each phase. The four phases of an industry life cycle are the introduction, growth, maturity, and decline stages. Industries are born when new products are
What Is an Industry Loss Warranty (ILW)? An industry loss warranty (ILW) is a reinsurance or derivative contract that pays out when the financial losses experienced by an industry exceed a specified threshold. Also known as original loss warranties, the contracts are often written by hedge funds or reinsurance companies, which are more able to absorb
What Is in Escrow? In financial transactions, the term “in escrow” indicates a temporary condition of an item, such as money or property, that has been transferred to a third party. This transfer is usually done on behalf of a buyer and seller. “In escrow” is a type of legal holding account for items, which can’t
What Is an Inferior Good? An inferior good is an economic term that describes a good whose demand drops when people’s incomes rise. These goods fall out of favor as incomes and the economy improve as consumers begin buying more costly substitutes instead. Key Takeaways An inferior good is one whose demand drops when people’s
Investopedia / Ellen Lindner What Is Inflation? Inflation is a rise in prices, which can be translated as the decline of purchasing power over time. The rate at which purchasing power drops can be reflected in the average price increase of a basket of selected goods and services over some period of time. The rise
What Is the Inflation-Adjusted Return? The inflation-adjusted return is the measure of return that takes into account the time period’s inflation rate. The purpose of the inflation-adjusted return metric is to reveal the return on an investment after removing the effects of inflation. Removing the effects of inflation from the return of an investment allows
What Is Inflation Targeting? Inflation targeting is a central banking policy that revolves around adjusting monetary policy to achieve a specified annual rate of inflation. This is known as the target rate, which is normally set at around 2% to 3%. The principle of inflation targeting is based on the belief that long-term economic growth
What Is Inflation Accounting? Inflation accounting is a special technique used to factor in the impact that soaring or plummeting costs of goods in some regions of the world have on the reported figures of international companies. Financial statements are adjusted according to price indexes, rather than relying solely on a cost accounting basis, to paint a
What Is an Inflationary Gap? An inflationary gap is a macroeconomic concept that measures the difference between the current level of real gross domestic product (GDP) and the GDP that would exist if an economy was operating at full employment. Key Takeaways An inflationary gap measures the difference between the current level of real GDP and
What Is Inflationary Psychology? Inflationary psychology is a state of mind that leads consumers to spend more quickly than they otherwise would in the belief that prices are rising. Most consumers will spend their money on a product immediately if they think its price is going to increase shortly. The rationale for this decision is
