Important terms in Economy
Terms you need to know
- Fiscal Deficit – Fiscal deficit is a state when government’s expenditures exceed the revenue generated, excluding money from borrowings.
- Current Account deficit – Difference between a nation’s investment and its savings. It is defined as the sum of the balance of trade (Export – Import), net income from abroad as well as the net current transfers.
- Current Transfers – Current transfers are transactions in which originator does not receive a “quid pro quo” in return; this absence of economic value on one side is represented in the balance of payments by one-sided transactions called transfers.
- Balance of Trade – It is the difference between value of all goods and services a country exports and imports. A country which exports more is a trade surplus economy whereas a country which imports more than the exports is a trade deficit economy
- Balance of payment – It is divided into three categories
- Current Account – Used to measure the inflow and outflow of goods and services into the country
- Capital Account – The capital account is where all international capital transfers are recorded. This refers to the acquisition or disposal of non-financial assets (for example, a physical asset such as land) and non-produced assets, which are needed for production but have not been produced, like a mine used for the extraction of diamonds.
- Financial Account – In the financial account, international monetary flows related to investment in business, real estate, bonds and stocks are documented.
- Gross Domestic Product – is the monetary value of all the finished goods and services produced within a country’s borders in a specific time period.
- Gross National Product – is an estimate of total value of all the final products and services produced in a given period by the means of production owned by a country’s residents.
- Economies of Scale – This essentially means that if the production capacity is increased then the same output can be achieved at a lesser cost. This explains a lot about why organizations run after market share. As the business grows it becomes more profitable.
