{"id":123768,"date":"2022-10-17T13:45:41","date_gmt":"2022-10-17T08:15:41","guid":{"rendered":"https:\/\/www.mapsofindia.com\/my-india\/?p=123768"},"modified":"2022-10-15T02:59:19","modified_gmt":"2022-10-14T21:29:19","slug":"important-economics-terms-everyone-must-know","status":"publish","type":"post","link":"https:\/\/www.mapsofindia.com\/my-india\/education\/important-economics-terms-everyone-must-know","title":{"rendered":"Important Economics Terms Everyone Must Know"},"content":{"rendered":"<p><span data-preserver-spaces=\"true\">Economics is not always a &#8220;boring&#8221; or &#8220;confusing&#8221; subject; it may even be enjoyable to learn if you know it well. If you think about it, studying economics is essential to understanding how a country operates. Thus it is essential to learn the fundamentals of economics.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">It also helps us explain why some nations are advanced while others are in the process of development. The study of economics helps people make decisions in life because it is concerned with the distribution of resources at a fundamental level.<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Let&#8217;s go through some of the most important economic terms:<\/span><\/strong><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Gross Domestic Product (GDP)<\/span><\/strong><\/p>\n<ul>\n<li><span data-preserver-spaces=\"true\">The entire value of goods and services generated in a nation over a year is known as the GDP.<\/span><\/li>\n<li><span data-preserver-spaces=\"true\">GDP measures the total value of commodities produced inside a nation&#8217;s borders, whether made by domestic or foreign labour.<\/span><\/li>\n<\/ul>\n<p><strong><span data-preserver-spaces=\"true\">Gross National Product (GNP)<\/span><\/strong><\/p>\n<ul>\n<li><span data-preserver-spaces=\"true\">Irrespective of a country&#8217;s geographic location, the GNP measures the total value of products and services generated by its people or businesses in a given year.<\/span><\/li>\n<\/ul>\n<p><strong><span data-preserver-spaces=\"true\">Net Domestic Product (NDP):\u00a0<\/span><\/strong><span data-preserver-spaces=\"true\">It is equal to GDP minus depreciation.<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Net national product (NNP):<\/span><\/strong><span data-preserver-spaces=\"true\">\u00a0It is calculated as GNP less depreciation.<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Depreciation:\u00a0<\/span><\/strong><span data-preserver-spaces=\"true\">The gradual loss of an asset&#8217;s value due to use and abuse.\u00a0<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Monetary Policy and its Instruments:<\/span><\/strong><\/p>\n<ul>\n<li><span data-preserver-spaces=\"true\">The process through which a nation&#8217;s central bank regulates the availability of money is known as monetary policy. The Reserve Bank of India is the country&#8217;s central bank (RBI).<\/span><\/li>\n<\/ul>\n<p><strong><span data-preserver-spaces=\"true\">Re-Purchase Option (REPO) rate:<\/span><\/strong><span data-preserver-spaces=\"true\">\u00a0The interest rate at which the RBI lends money to other banks.<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Reverse REPO rate:<\/span><\/strong><span data-preserver-spaces=\"true\">\u00a0The cost of borrowing from other banks by the RBI. It is less than the rate for REPO.<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Cash Reserve Ratio (CRR):<\/span><\/strong><span data-preserver-spaces=\"true\">\u00a0The amount of liquid cash each bank parks with RBI, which is mandatory for all national banks. It represents a portion of their deposits.<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Statutory Liquidity Ratio (SLR):<\/span><\/strong><span data-preserver-spaces=\"true\">\u00a0The proportion of liquid cash reserves each bank must hold with themselves as required by the RBI.<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Marginal Standing Facility (MSF):<\/span><\/strong><span data-preserver-spaces=\"true\">\u00a0The interest rate at which banks can get overnight loans from the RBI in exchange for officially recognised government assets. The borrowing cap, in this instance, is equal to 2% of the banks&#8217; Net Demand and Time Liabilities (NDTL).<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Bank Rate:<\/span><\/strong><span data-preserver-spaces=\"true\">\u00a0The rate (higher than the REPO rate) at which the RBI lends money to other banks is known as the &#8220;bank rate.&#8221; Bank lending rates would increase if the bank rate increased. To control liquidity, the RBI may increase the bank rate. There is no 2% NDTL restriction here.<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Capital-to-risk weighted assets ratio(CRAR):\u00a0<\/span><\/strong><span data-preserver-spaces=\"true\">The weighted assets ratio (CRAR) measures the capital-to-risk ratio of a bank.\u00a0<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Fiscal Policy:<\/span><\/strong><span data-preserver-spaces=\"true\">\u00a0A government&#8217;s strategy for adjusting tax rates and spending amounts. It has an impact on the overall economy of the nation.<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Fiscal Deficit:\u00a0<\/span><\/strong><span data-preserver-spaces=\"true\">It is the discrepancy between total government spending and total revenue (excluding borrowing). When this expenditure exceeds the money brought in, there is a fiscal deficit.<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Balance of Payment (BOP):<\/span><\/strong><span data-preserver-spaces=\"true\">\u00a0The balance of payments (BOP) is the total amount of payments made into and received from a nation during a specific period.<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Balance of Trade:<\/span><\/strong><span data-preserver-spaces=\"true\">\u00a0The difference between a country&#8217;s imports and exports over a specific period is known as the balance of trade (BOT). The BOP includes the BOT.<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Capital:<\/span><\/strong><span data-preserver-spaces=\"true\">\u00a0The amount of money invested in a firm to make a profit is known as capital.<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Carbon Tax:<\/span><\/strong><span data-preserver-spaces=\"true\">\u00a0Products that utilise carbon-based materials and contribute to greenhouse gas emissions are subject to the carbon tax.<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Inflation:<\/span><\/strong><span data-preserver-spaces=\"true\">\u00a0The rate at which a nation&#8217;s prices for goods and services increase is known as inflation. As a result, the value of the currency loses purchasing power.<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Depression:<\/span><\/strong><span data-preserver-spaces=\"true\">\u00a0A protracted and severe decline in a nation&#8217;s economic activity.<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Foreign Direct investments (FDI):<\/span><\/strong><span data-preserver-spaces=\"true\">\u00a0An investment made in commercial interests in another nation by a firm or a person of another country.<\/span><\/p>\n<p><strong><span data-preserver-spaces=\"true\">Special Economic Zones (SEZs)<\/span><\/strong><span data-preserver-spaces=\"true\">: A region or zone in a nation that has different businesses and trade rules from the rest of the nation. They are developed to boost commerce, attract investment, and provide job opportunities.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Economics is not always a &#8220;boring&#8221; or &#8220;confusing&#8221; subject; it may even be enjoyable to learn if you know it well. If you think about it, studying economics is essential to understanding how a country operates. Thus it is essential to learn the fundamentals of economics.\u00a0 It also helps us explain why some nations are [&hellip;]<\/p>\n","protected":false},"author":21834,"featured_media":125690,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11871,12230,12420,7,11315],"tags":[],"class_list":{"0":"post-123768","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-banks","8":"category-currency","9":"category-economy","10":"category-education","11":"category-india"},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/posts\/123768","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/users\/21834"}],"replies":[{"embeddable":true,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/comments?post=123768"}],"version-history":[{"count":3,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/posts\/123768\/revisions"}],"predecessor-version":[{"id":125682,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/posts\/123768\/revisions\/125682"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/media\/125690"}],"wp:attachment":[{"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/media?parent=123768"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/categories?post=123768"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.mapsofindia.com\/my-india\/wp-json\/wp\/v2\/tags?post=123768"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}