Economic Terms – Study Notes for TISSNET
(General Awareness & Current Affairs – Economic Section)
Why these notes?
- The TISSNET admit‑test asks for conceptual clarity as well as the ability to compute key macro‑economic indicators.
- These notes present a rigorous, exam‑oriented treatment of the most frequently questioned terms: definitions, derivations, useful formulae, and the tricky aspects that often trip candidates.
- A hard practice question at the end will test your grasp of the material.
1. Overview
| Category | Key Indicator | What It Measures | Typical Unit |
|---|---|---|---|
| Production | GDP | Total value of final goods & services produced in a country | ₹ (or USD) |
| GNP | GDP + Net income from abroad | ₹ | |
| GNI | GNP + Net primary income | ₹ | |
| Price | CPI | Consumer price index, a weighted average of prices of a basket of goods | Index |
| PPI | Producer price index | Index | |
| Inflation | % change in CPI (or PPI) | % | |
| Balance | Current Account | Trade balance + net income + net transfers | ₹ |
| Fiscal Deficit | Total Expenditure – Total Revenue | ₹ | |
| Budget Deficit | Fiscal deficit – interest payments | ₹ | |
| Monetary | Money Supply (M1/M2/M3) | Total liquidity in the economy | ₹ |
| Interest Rates | Policy rates (repo, reverse‑repo, policy‑rate) | % per annum | |
| Exchange Rate | Domestic currency per unit of foreign currency | ₹/USD, ₹/EUR, etc. | |
| Other | Liquidity Preference | Demand for money at various rates (Keynes) | — |
Tip: In competitive exams, the definition is often enough. For calculation‑based questions, make sure you know the formulae.
2. Detailed Explanations & Derivations
2.1 Gross Domestic Product (GDP)
Definition:
The market value of all final goods and services produced within a country in a given time period (usually a year).
Derivation / Formulae
-
Expenditure Approach
[ \boxed{\text{GDP} = C + I + G + NX} ]- (C) – Consumption (household spending)
- (I) – Investment (firm capital expenditure + residential construction)
- (G) – Government consumption + investment
- (NX = X - M) – Net exports (Exports – Imports)
-
Income Approach (useful for checking consistency)
[ \text{GDP} = \text{Wages} + \text{Rent} + \text{Interest} + \text{Profit} + \text{Taxes} - \text{Subsidies} ] -
Production Approach
[ \text{GDP} = \sum_{i} P_i \times Q_i ] where (P_i) = price of good (i), (Q_i) = quantity produced.
Tricky point: GDP is nominal if measured at current prices, real if measured at constant (base‑year) prices.
2.2 Gross National Product (GNP) & Gross National Income (GNI)
| Indicator | Formula |
|---|---|
| GNP | (\text{GNP} = \text{GDP} + \text{Net income from abroad}) |
| GNI | (\text{GNI} = \text{GNP} + \text{Net primary income}) |
Key difference: GNP includes income earned by residents abroad, while GDP ignores it.
2.3 Consumer Price Index (CPI) & Producer Price Index (PPI)
CPI – measures consumer inflation.
[ \boxed{\text{CPI}t = \frac{\sum{i=1}^{n} w_i P_{i,t}}{\sum_{i=1}^{n} w_i P_{i,0}}} ]
- (w_i