English · B2 · vocabulary · 5 minutes
Economy and personal finance
Explain inflation, interest, income, debt, and purchasing power without false precision.
Understand the choice
Economic vocabulary needs careful scope. One expensive product is not general inflation, and a higher nominal income does not guarantee greater purchasing power.
Core rule: Inflation rises or falls; interest accrues; debt is repaid; savings earn interest; a budget balances income against spending.
Notice it in context
Inflation reduced the household’s purchasing power despite a rise in income.
La inflación redujo el poder adquisitivo del hogar a pesar de un aumento de los ingresos.
Despite takes noun phrase a rise; reduced marks an observed effect; household’s is possessive.
A higher interest rate makes some debt costlier but may reward savings.
More expensive borrowing can increase repayments while improving returns on saved money.
Interest rate, debt, and savings show different effects.
The budget assumes stable income and no serious shortage.
The spending plan depends on steady earnings and adequate supply.
Budget, income, and shortage expose planning assumptions.
What to remember
- Economic describes the economy; economical means inexpensive or avoiding waste.
- Salary is one type of employment income; revenue is money received by a business or government.
Common trap: Do not use inflation as a synonym for any isolated price increase.