Economic Terms – Nagaland Patwari / Lekhpal – General Awareness & Current Affairs
Purpose: Quick‑reference study guide for the Economic Terms section of the Patwari/Lekhpal exam.
1. Simple Overview
Economic terms form the backbone of any General‑Awareness paper. They describe how a country’s economy behaves, how it is measured, and how the government manages it. Knowing the definition, the why behind each term, and a small example will help you answer MCQs or short‑answer questions accurately.
2. Key Economic Terms
| Term | Simple Explanation | Key Points |
|---|---|---|
| Gross Domestic Product (GDP) | Total value of all final goods & services produced inside a country in a year. | • Nominal vs Real GDP (adjusted for inflation). • Indicator of economic size & growth. |
| Gross National Product (GNP) | Value of goods/services produced by a country’s residents, whether inside or outside. | • Includes income earned abroad. • Useful for understanding national income. |
| Inflation | General rise in price level over time. | • Measured by CPI or PPI. • Causes erode purchasing power. |
| Deflation | General fall in price level. | • Opposite of inflation. • Can signal recession. |
| Consumer Price Index (CPI) | Basket‑based index that measures changes in consumer‑price levels. | • Core CPI excludes volatile food & fuel. • Basis for wage adjustments. |
| Producer Price Index (PPI) | Prices received by producers for goods/services. | • Leads CPI – a “head‑count” of inflation. |
| Fiscal Policy | Government decisions on taxes and spending. | • Expansionary (cut taxes, increase spending). • Contractionary (raise taxes, reduce spending). |
| Monetary Policy | Central bank actions to control money supply & interest rates. | • Easing (lower rates, increase supply). • Tightening (raise rates, restrict supply). |
| Interest Rate | Cost of borrowing money. | • Influences consumption & investment. • Kept by RBI (repo rate, reverse repo). |
| Fiscal Deficit | Government’s expenditure > revenue (excluding debt) in a year. | • Indicates borrowing requirement. |
| Primary Surplus/Deficit | Fiscal balance excluding interest payments. | • Shows underlying fiscal health. |
| Exchange Rate | Value of one currency relative to another. | • Floating vs fixed. • Affects imports/exports. |
| Balance of Payments (BOP) | Record of all international transactions. | • Current Account (trade, services, income). • Capital/Financial Account (investment flows). |
| Trade Deficit / Surplus | Difference between imports and exports. | • Deficit = imports > exports. • Surplus = exports > imports. |
| Tariff | Tax on imports/exports. | • Protects domestic industry, raises revenue. |
| Quota | Physical limit on the quantity of goods that can be imported. | • Used for scarcity management. |
| Subsidy | Government payment to reduce cost of production or consumption. | • Encourages production of essential goods. |
| Goods and Services Tax (GST) | Unified indirect tax on production, sale, and consumption. | • Replaces multiple state & central taxes. |
| Depreciation (of Currency) | Loss of value of a currency relative to others. | • Makes exports cheaper, imports more expensive. |
| Appreciation | Gain in value of a currency. | • Makes imports cheaper, exports more expensive. |
| Cyclical Unemployment | Unemployment that rises in recession, falls in boom. | • Reflects business‑cycle health. |
| Structural Unemployment | Mismatch of skills vs job requirements. | • Requires skills training & policy changes. |
| Real vs Nominal | Nominal values measured in current price; Real values adjusted for inflation. | • Real GDP = Nominal GDP ÷ CPI. |
| Multiplier Effect | Small change in autonomous spending can have a larger effect on GDP. | • Fiscal multiplier = ΔGDP / ΔGovernment spending. |
| Human Development Index (HDI) | Composite index of life expectancy, education, and per‑capita income. | • Measures overall development. |
💡 Tip: For exam answers, always start with the definition, then mention 2–3 key points that show why the term matters.
3. Worked Example – Calculating Inflation
Problem
The CPI in 2023 was 260 and in 2024 it is 274. What is the inflation rate for 2024?
Solution
- Formula
[ \text{Inflation\ Rate} = \frac{CPI_{2024} - CPI_{2023}}{CPI_{2023}} \times 100 ] - Plug in numbers
[ \frac{274 - 260}{260} \times 100 = \frac{14}{260} \times 100 \approx 5.38% ] - Answer
**Infl