Overheated Economy

Overheated Economy
When a prolonged period of good economic growth and activity causes high levels of inflation (from increased consumer wealth) and inefficient supply allocations as producers overproduce and create excess production capacity in an attempt to capitalize on the high levels of wealth. Unfortunately, these inefficiencies and inflation will eventually hinder the economy's growth and cause a recession.

Rising rates of inflation are typically one of the first signs that an economy is overheating. As a result, governments and central banks will usually raise interest rates in an attempt to lower the amount of spending and borrowing.

Between June 2004 and June 2006, the Federal Reserve Board increased the interest rate 17 times as a gradual means of slowing America's overheated economy.


Investment dictionary. . 2012.

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  • overheated — o|ver|heat|ed [ˌəuvəˈhi:tıd US ˌouvər ] adj 1.) too hot ▪ an overheated waiting room 2.) an overheated ↑economy grows too fast, leading to increases in prices, salaries, interest rates etc 3.) too full of anger or excitement ▪ her overheated… …   Dictionary of contemporary English

  • overheated — o|ver|heat|ed [ ,ouvər hitəd ] adjective 1. ) too hot: The fire was caused by an overheated electric fan. 2. ) an overheated economy is growing too fast, causing prices to rise in an uncontrolled way 3. ) too emotional: an overheated debate …   Usage of the words and phrases in modern English

  • overheated — UK [ˌəʊvə(r)ˈhiːtɪd] / US [ˌoʊvərˈhɪtəd] adjective 1) too emotional an overheated debate 2) economics an overheated economy is growing too fast, causing prices to rise in an uncontrolled way 3) too hot The fire was caused by an overheated… …   English dictionary

  • economy — Synonyms and related words: GNP, barter economy, brevity, briefness, budget, capitalistic economy, carefulness, cheap, cheeseparing, collectivized economy, compactness, conciseness, concision, conservation, conservatism, consumer economy, control …   Moby Thesaurus

  • overheated — adjective Date: 1693 1. perfervid 2. characterized by marked inflation from an increase in demand and a decrease in supply < an overheated economy > …   New Collegiate Dictionary

  • overheated — adjective 1 too hot: the overheated waiting room 2 full of angry feelings: an overheated quarrel that turned into a fight 3 an economy 1 (1) that is overheated is too active to work properly …   Longman dictionary of contemporary English

  • economy — noun 1 operation of a country s money supply ADJECTIVE ▪ booming, buoyant (esp. BrE), dynamic, healthy, prosperous, robust, sound, stable, strong, thriv …   Collocations dictionary

  • overheated — adj. Overheated is used with these nouns: ↑economy, ↑imagination …   Collocations dictionary

  • Goldilocks economy — (GOHL.dee.lawks i.KAWN.uh.mee) n. An economy that is not so overheated that it causes inflation, and not so cool that it causes a recession. Example Citation: America s not too hot, not too cold Goldilocks economy is getting too hot. The result… …   New words

  • china — /chuy neuh/, n. 1. a translucent ceramic material, biscuit fired at a high temperature, its glaze fired at a low temperature. 2. any porcelain ware. 3. plates, cups, saucers, etc., collectively. 4. figurines made of porcelain or ceramic material …   Universalium

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