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### Price/Earnings Ratio (P/E Ratio)

The Price/Earnings Ratio, also Price-to-Earnings Ratio, or shortly the P/E ratio, is a valuation metric of a company's current share price compared to its per-share earnings. The P/E ratio looks at the relationship between the stock price and the company’s earnings.

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### Price Elasticity

Price elasticity, as it relates to economics, is a measure of the responsiveness of demand or supply to a change in price. Elasticity is a measure of responsiveness.

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### Consumer Price Index (CPI)

The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services. It is the most commonly reported measure of the consumer price levels.

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### Game Theory

Game Theory, or Theory of Games, is a branch of mathematical and economic analysis developed to study decision making in conflict situations. Game theory analyzes strategic interactions in which the outcome of one's choices depends upon the choices of others.

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### Gross Domestic Product (GDP)

Gross Domestic Product (GDP) is the broadest measure of performance of an economy. It is defined as the output of goods and services produced by labor and property located in a country.

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### Liquidity Trap

Liquidity trap is a situation in which prevailing interest rates are low and savings rates are high. Liquidity trap makes monetary policy ineffective.

Liquidity trap also means that bank cash-holdings are rising and banks cannot find sufficient number of qualified borrowers even at extraordinary low rates of interest.

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### Pigou Effect

The Pigou Effect is an economics term that describes what happens in the economy, particularly with the aggregate consumption, if prices fall. It is an effect that deals with economic wealth.

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### Prisoner's Dilemma

The Prisoner's Dilemma is a favorite example in the game theory and social sciences that shows why co-operation is difficult to achieve even when it is mutually beneficial.

The base thesis behind the prisoner's dilemma is two prisoners having been arrested for the same offence and being held in different cells.

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The Purchasing Power Parity (PPP) is a theory of exchange rate determination and a way to compare the average costs of goods and services between countries.

PPP is the rate of currency conversion that equalize the purchasing power of different currencies by eliminating the differences in price levels between countries.

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### Big Mac Index

The Big Mac Index is an informal way of measuring the purchasing power parity (PPP) between two currencies. It provides a view of the extent to which market exchange rates deviate from their true values.

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