Economic Terms – Assam TET (General Awareness & Current Affairs)
Purpose: Quick, clear notes that help you remember the most common economic terms you may encounter in the Assam TET exam.
1. Simple Explanation
Economic terms are the building blocks of national and international economics.
They help us describe how societies produce, distribute, and consume goods and services.
Understanding these terms lets you interpret news, policy decisions, and statistical data.
2. Key Points – Glossary
| Term | Short Definition | Why it matters for the exam |
|---|---|---|
| Gross Domestic Product (GDP) | Total value of all finished goods and services produced inside a country in a year. | Core indicator of economic health. |
| Gross National Product (GNP) | GDP + net income from abroad. | Shows national income vs. domestic production. |
| Inflation | Sustained rise in price level. | Affects cost of living, purchasing power. |
| Deflation | Sustained fall in price level. | Indicates economic slowdown. |
| CPI (Consumer Price Index) | Weight‑averaged basket of consumer goods & services. | Basis for inflation measurement. |
| PPI (Producer Price Index) | Price changes of goods at the production level. | Signals future consumer price changes. |
| Unemployment Rate | % of labor force that is job‑seeking but unemployed. | Indicator of labor market health. |
| Fiscal Policy | Government decisions on taxation & spending. | Tool to influence growth & employment. |
| Monetary Policy | Central bank actions (interest rates, money supply). | Controls inflation, credit, and exchange rates. |
| Supply & Demand | Price mechanism where quantity supplied meets quantity demanded. | Fundamental concept for market equilibrium. |
| Elasticity | Responsiveness of quantity demanded/supplied to price changes. | Determines how market participants react. |
| Opportunity Cost | Value of the next best alternative foregone. | Guides rational decision‑making. |
| Comparative Advantage | Ability of a country to produce a good at lower opportunity cost. | Basis of international trade. |
| Fiscal Deficit/Surplus | Gap between government spending and revenue. | Indicates fiscal sustainability. |
| Current Account Balance | Trade balance + services + income + transfers. | Reflects external economic health. |
| Exchange Rate | Price of one currency in terms of another. | Affects trade competitiveness. |
| Liquidity | Ease of converting assets into cash. | Determines financial flexibility. |
| Capital | Financial or physical assets used for production. | Drives long‑term growth. |
| Debt‑to‑GDP Ratio | Government debt expressed as % of GDP. | Measures debt sustainability. |
Tip: For each term, think of a real‑world example (e.g., “inflation = rising food prices”) to cement the concept.
3. Worked Example – Calculating GDP (Expenditure Approach)
Scenario
A small economy produces only three goods in 2023:
| Good | Quantity | Price (₹) |
|---|---|---|
| Wheat | 1,000 tonnes | ₹300/tonne |
| Tea | 200 tonnes | ₹1,200/tonne |
| Electricity | 50,000 MWh | ₹15/MWh |
Steps
-
Compute Value of Output
[ \text{GDP} = \sum (\text{Quantity} \times \text{Price}) ] -
Apply to each good
- Wheat: (1{,}000 \times 300 = ₹300{,}000)
- Tea: (200 \times 1{,}200 = ₹240{,}000)
- Electricity: (50{,}000 \times 15 = ₹750{,}000)
-
Sum up
[ \text{GDP} = 300{,}000 + 240{,}000 + 750{,}000 = ₹1{,}290{,}000 ]
Answer: The GDP of the economy for 2023 is ₹1,290,000.
Why this matters: Many exam questions ask you to calculate or interpret GDP figures or compare two countries based on GDP per capita.
4. Quick Revision Summary
| Concept | One‑Line Reminder |
|---|---|
| GDP | Total value of domestic output. |
| Inflation | Rising price level; CPI tracks it. |
| Monetary Policy | Central bank changes interest rates & money supply. |
| Fiscal Policy | Govt taxes & spends to influence economy. |
| Supply & Demand | Market price where supply = demand. |
| Elasticity | How much quantity changes when price changes. |
| Opportunity Cost | Best alternative forgone. |
| Comparative Advantage | Trade based on lower opportunity cost. |
| Current Account | Net flow of goods, services, income, transfers. |
| Exchange Rate | Value of one currency vs another. |
| Debt‑to‑GDP | Debt as a share of GDP – sustainability indicator. |
Revision Tip: Create flashcards for each term. Write the term on one side and the short reminder above. Quiz yourself daily.
Final Thought
Mastering these terms will give you a solid foundation for the General Awareness & Current Affairs section of Assam TET. Practice by reading recent news articles and spotting where these concepts are applied. Good luck!