📚 Delhi TET – General Awareness & Current Affairs
📌 Topic: Economic Terms
Why this topic?
The TET exam (especially for teaching Economics or Social Science) routinely checks a candidate’s grasp of basic macro‑economic concepts, indices, and their inter‑relationships.
- Exam‑style: Short‑answer definitions, multiple‑choice, and simple calculations.
- Competitive edge: Understanding the why behind numbers (e.g., why CPI rises, how fiscal deficit is calculated) saves time and avoids traps.
1. Core Macroeconomic Variables
| Term | Definition | Formula | Key Points/Tricky Aspects |
|---|---|---|---|
| Gross Domestic Product (GDP) | Total value of all final goods/services produced within a country in a given period. | Nominal GDP = Σ(Pᵢ × Qᵢ) Real GDP = Σ(P⁰ᵢ × Qᵢ) where Pᵢ = price, Qᵢ = quantity, P⁰ᵢ = base‑year price |
Real GDP uses constant prices → removes inflation effect. GDP deflator = (Nominal GDP / Real GDP) × 100 (shows price level change). |
| Gross National Product (GNP) | Value of goods/services produced by nationals (domestic + abroad). | GNP = GDP + Net Income From Abroad (NIFA) | GNP > GDP if nationals earn abroad. |
| Net National Product (NNP) | GNP minus depreciation. | NNP = GNP – Depreciation | Depreciation ≈ Capital Consumption Allowance (CFA). |
| Net Domestic Product (NDP) | GDP minus depreciation. | NDP = GDP – Depreciation | Equivalent to NNP for a closed economy. |
| Gross National Income (GNI) | Income earned by residents of a country (incl. abroad). | GNI = GNP – Depreciation + Net Primary Income From Abroad | GNI used in World Bank’s human development index. |
| Consumer Price Index (CPI) | Weighted average of prices of a basket of consumer goods & services. | CPI = (Σ (pᵢ × wᵢ) / Σ (p⁰ᵢ × wᵢ)) × 100 | Weights (wᵢ) fixed for a year; pᵢ current price; p⁰ᵢ base‑year price. High CPI → higher inflation. |
| Producer Price Index (PPI) | Average change in selling prices received by producers. | Similar to CPI but for producers’ goods. | Frequently used to gauge input cost inflation. |
| Producer Price Index (PPI) vs CPI | PPI measures price change at producer level; CPI measures at consumer end. | PPI → inflation in production costs; CPI → inflation in consumption. | In a cost‑push inflation scenario, PPI rises first → later CPI rises. |
| Inflation Rate | Percentage change in price index over a period. | Inflation = [(Indexₙ – Indexₙ₋₁) / Indexₙ₋₁] × 100 | Use CPI for consumer inflation. |
| Current Account Balance (CAB) | Trade balance + net income + net current transfers. | CAB = Exports – Imports + Primary Income + Secondary Income | Surplus ⇒ country is a net lender. |
| Fiscal Deficit | Government’s total expenditure minus total revenue (excluding borrowings). | Fiscal Deficit = (Total Expenditure – Total Revenue) | Debt Service excluded. |
| Current‑Year Deficit (CYD) | Fiscal deficit in the year in which it is incurred. | Same as Fiscal Deficit. | Important for India’s fiscal rules (e.g., 2023–24). |
| Total Debt | Sum of all outstanding government debt. | Total Debt = Securities + Loans + Bills + Other | Distinguish debt from deficit. |
| Debt‑to‑GDP Ratio | Percentage of debt relative to GDP. | Debt‑to‑GDP = (Total Debt / GDP) × 100 | Indicator of debt sustainability. |
| Money Supply (M) | Aggregate volume of money in an economy. | M0 = Currency in circulation + Bank reserves M1 = M0 + Demand deposits M2 = M1 + Time deposits |
RBI uses M2 for monetary policy. |
| Monetary Policy | Central bank’s strategy to control money supply & interest rates. | Tools: Repo Rate, Reverse Repo, Cash Reserve Ratio (CRR), Open Market Operations (OMO). | Expansionary → lower rates, ↑ money supply. Contractionary → higher rates, ↓ money supply. |
| Fiscal Policy | Government’s use of taxation & spending to influence the economy. | Expansionary → higher spending, lower taxes. | Contractionary → lower spending, higher taxes. |
| Supply‑Side Policy | Measures to increase productive capacity. | e.g., deregulation, infrastructure investment. | Often used to boost potential GDP. |
| Demand‑Side Policy | Measures to influence aggregate demand. | e.g., subsidies, tax cuts. | Used to manage inflation and |