Glossary of Economic and Financial Terms

Key Terms and Definitions

GDP (Gross Domestic Product)

The total monetary value of all goods and services produced within a country during a specific period.

Inflation

The rate at which the general level of prices for goods and services is rising, causing purchasing power to fall.

Fiscal Deficit

The shortfall in the government's income compared to its expenditure in a financial year.

Monetary Policy

Actions by a central bank to control money supply and interest rates to achieve economic goals.

Balance of Payments (BoP)

A record of all economic transactions between residents of a country and the rest of the world.

Capital Market

A market where long-term debt or equity-backed securities are bought and sold.

Liquidity

The ease with which assets can be converted into cash without loss of value.

Deflation

A decrease in the general price level of goods and services over a period of time.

Current Account

Part of the Balance of Payments that includes trade in goods and services, income, and current transfers.

Exchange Rate

The price of one currency in terms of another currency.

Recession

A period of temporary economic decline, typically identified by a fall in GDP for two consecutive quarters.

Subsidy

Financial assistance provided by the government to support businesses or reduce prices for consumers.

Tariff

A tax imposed on imported goods and services to protect domestic industries.

Trade Deficit

Occurs when a country's imports exceed its exports over a given period.

Fiscal Policy

Government adjustments in spending and taxation to influence the economy.

Inflation Targeting

A monetary policy strategy where the central bank sets a specific inflation rate as its goal.

Gross National Product (GNP)

The total market value of all final goods and services produced by a country's residents, regardless of location.

Human Development Index (HDI)

A composite index measuring average achievement in key dimensions of human development: health, education, and standard of living.

Non-Performing Asset (NPA)

Loans or advances for which the borrower has stopped making interest or principal repayments for a specified period.

Fiscal Year

The accounting period used by the government for budgeting and financial reporting (e.g., April 1 to March 31 in India).