Economy - Basic Concepts for Bank Exams

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GNP (Gross National Product)

The Market Value (in Money terms), of all the final goods and services that are produced in a year by the citizens of a country. It includes the value of exports minus imports.

GDP (Gross Domestic Product) 

The Market Value (in money terms), of all the final goods and services that are produced in a year in a country. It does not consider the value of exports and imports. 

GVA (Gross Value Added)

The Market Value (in Money terms), of all the final goods and services that are produced in a year in a country minus the cost of all inputs and raw materials that are directly used in the production of them. 

GSDP (Gross State Domestic Product)

The term is generally used to denote the income produced in a particular state of our country in a year. 

DSDP (District State Domestic Product)

The term is generally used to denote the income produced in a particular District of a state of our country in a year.

Per Capita Income

The income of an individual earned in a year on an average. It is calculated by dividing the National Income by the total population of a country. 

Disposable Income

It is the income, equal to Personal Income minus Personal Taxes (Direct Taxes).

What is NSO ?

National Statistical Office (NSO), the statistical wing of Ministry of Statistics and Programme Implementation of Govt. of India. It consists of CSO (Central Statistical Office) and NSSO (National Sample Survey Office). 

What is Statistics Day?

In recognition of the notable contributions made by (Late) Professor Prasanta Chandra Mahalanobis in the field of economic planning and statistical development, the Government of India has designated 29th June every year, coinciding with his birth anniversary, as the Statistics Day in the category of Special Day to be celebrated at the national level. 

What is MPLADS ?

Member of Parliament Local Area Development Scheme, initiated in 1993. At present, the annual entitlement per MP/Constituency is 5 crores. 

What is Economy ?

Economy is a man made arrangement to provide goods and services, employment, income for a society. Basically, it consists of Primary Sector (Agriculture etc.,), Secondary Sector (Industrial sector etc.,) and Services Sector (Banks, Insurance, Professionals etc., ) Ex. World economy, Indian economy, AP economy etc., Economic Activities are the day to day activities of a society with the help of money and to make money. 

What is the main goal of an Economy ?

The basic goal of an economy is to achieve Growth/development in the economy. The growth in economy is helpful in providing more employment, income and goods and services. This process when combined with* protection of environment and future generations needs also, it is commonly known as Sustainable Development. 

What are the goods and services ?

Goods examples : food, machinery, day to day needs items to satisfy our requirements. They are visible and handmade or produced with the help of machines. 

Services examples : cable tv, cell phone service, bank, insurance, teacher, lawyer, doctor services etc.They are invisible and mostly rendered with the help of human intellectual capabilities and not entirely on machines. 

In earlier days, people are satisfied with limited number of goods and services and exchanged them among themselves through barter system. But, now-a-days, people are interested in large scale production of goods and extensive services and are exchanging with the help of money as a medium of exchange. (Monetary System). Production of more goods and services has become the main goal of any society. 

What is Growth and What is Development ?

In Economics, both economic growth and economic development are used as synonyms most of the times. But 'economic growth' is a term broadly used to denote the increase in the National Income in a year as compared to the previous financial year. It is mostly a quantitative phenomenon. Whereas, the term 'economic development' has a deeper meaning. It represents the qualitative changes in an economy relating to technological and institutional changes (human rights, press freedom, autonomous institutions like RBI, Election Commission, good policy making etc., ) 

For a country to achieve full employment, high levels of availability of goods and services both growth and development are necessary. They are inseparable and for certain academic purposes, we distinguish them.

What is SDG ?

United Nations formulated Sustainable Development Goals (SDGs) to direct all the countries to achieve sustainable development. These SDGs consist of 17 goals and 169 measurable targets to be achieved by 2030. 

What happens in the absence of economic growth/development ?

If the economy is not able to achieve the needy growth, the situation is known as underdeve-lopment or backwardness. To achieve growth the economy needs investment. But, if the money circulation exceeds it may lead to inflation. If the level of investment and economic activities decline, it may lead to recession. 

How does the Monetary Policy help an economy ?

The policy to control the interest rates and money circulation in an economy is known as Monetary and Credit Policy of RBI. In the absence of proper monetary policy, the economy may face either inflation or recession. 

What is Fiscal Policy ?

The activities/policies related to the collection of revenue by the Govt. in the form of taxes and Public Expenditure by the Govt. and Public Debt (loans by the govt.) are collectively known as Fiscal Policy.The annual Budget by the Govts. is an indicator of Fiscal Policy. This policy mainly aims at achieving higher economic growth, reduction in social/economic/regional inequalities, provision of infrastructure (roads, electricity, water etc.,).

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