Layman reference on some of the economic terms

Given below are some of the economic terms for people who might not be aware of some of the economic terms.



Balance of trade: The difference in value over a period of time between a country's imports and exports.

Budget Deficit : The budget deficit is the amount by which government spending exceeds government revenues during a specified period of time usually a year

Closed economy: A closed economy is one in which there are no foreign trade transactions or any other form of economic contacts with the rest of the world. For India prior, 1990 was considered as a closed economy and liberlization was started post 1990.

Collateral security: Additional security a borrower supplies to obtain a loan. For business loan, one might need to pledge land or house

Fiscal deficit is the gap between the government's total spending and the sum of its revenue receipts and non-debt capital receipts. The fiscal deficit represents the total amount of borrowed funds required by the government to completely meet its expenditure


Gross domestic product (GDP): The total of goods and services produced by a nation over a given period, usually 1 year. Gross Domestic Product measures the total output from all the resources located in a country, wherever the owners of the resources live.

Monetary policy: The regulation of the money supply and interest rates by a central bank in order to control inflation and stabilize currency.
If the economy is heating up, the central bank can withdraw money from the banking system, raise the reserve requirement or raise the discount rate to make it cool down. If growth is slowing, it can reverse the process - increase the money supply,
lower the reserve requirement and decrease the discount rate. The monetary policy influences interest rates and money supply.

Subsidy: A payment by the government to producers or distributors in an industry to prevent the decline of that industry (e.g., as a result of continuous unprofitable operations) or an increase in the prices of its products or simply to encourage it to hire more labor (as in the case of a wage subsidy). Examples are export subsidies to encourage the sale of exports; subsidies on some foodstuffs to keep down the cost of living, especially in urban areas; and farm subsidies to encourage expansion of farm production and achieve self-reliance in food production.

Economic growth: Quantitative measure of the change in size/volume of economic activity, usually calculated in terms of gross national product (GNP) or gross domestic product(GDP).

Per capita income means how much each individual receives, in monetary terms,it is the measure of the amount of money that each person earns in the country, of the yearly income generated in the country