Economic terms: General Awareness & Current Affairs Notes for Nagaland TET (Teacher Eligibility)

Economic Terms – Study Notes for Nagaland TET (General Awareness & Current Affairs)

Why it matters?
The TET exam tests not only subject‑specific knowledge but also a candidate’s awareness of basic economic concepts that shape policy, growth, and everyday life. Mastering these terms will help you answer questions on national & global economics, budget-related questions, and policy debates.

1. Simple Explanation

Term	What it means in plain English
Gross Domestic Product (GDP)	Total value of all goods and services produced inside a country in a year.
Gross National Product (GNP)	GDP + value of goods/services produced by nationals abroad – minus value produced by foreigners inside the country.
Inflation	General rise in price levels; measured by the Consumer Price Index (CPI).
Deflation	General fall in price levels.
Fiscal Policy	Government’s use of taxes and spending to influence the economy.
Monetary Policy	Central bank’s control of money supply & interest rates to manage inflation & growth.
Supply & Demand	Basic forces determining price & quantity of goods.
Opportunity Cost	Value of the next best alternative foregone when a choice is made.
Comparative Advantage	Ability of a country to produce a good at a lower relative opportunity cost than another.
Absolute Advantage	Ability of a country to produce more of a good with the same resources as another.
Fiscal Deficit	Government’s total expenditure exceeds its total receipts (excluding borrowings).
Current Account Deficit	Total imports of goods, services, income & transfers exceed exports.
Balance of Trade	Difference between value of exports and imports of goods.
Exchange Rate	Price of one currency expressed in terms of another (e.g., 1 USD = 140 INR).
Inflation Target	Central bank’s explicit goal for inflation (e.g., 4 ± 2 %).
Subsidy	Government financial help for a specific sector or group.
Tariff	Tax on imported goods to protect local industry or raise revenue.
Gross National Income (GNI)	Total income earned by residents of a country, including foreign earnings.

2. Key Points to Remember

Category	Important Points
GDP & GNP	• GDP = C + I + G + (X‑M) (Consumption, Investment, Government spending, Net exports). • GNP adds net factor income from abroad.
Inflation	• CPI tracks price changes of a basket of consumer goods. • Core CPI excludes volatile food & fuel.
Fiscal Policy	• Expansionary (low taxes, high spending) → ↑aggregate demand. • Contractionary (high taxes, low spending) → ↓aggregate demand.
Monetary Policy	• Reserve Bank of India (RBI) uses repo rate, reverse repo, cash reserve ratio (CRR). • Lower rates → cheaper borrowing → stimulate growth.
Supply & Demand	• Equilibrium price where quantity demanded = quantity supplied. • Shifts caused by price changes, consumer preferences, technology, costs.
Opportunity Cost	• Always consider what you give up when you choose something else.
Comparative Advantage	• Key to trade: countries export goods they produce most efficiently.
Fiscal Deficit	• Measured as % of GDP. • A large deficit may lead to inflation if financed by printing money.
Current Account Deficit	• Indicates a country borrows from abroad to finance imports.
Exchange Rate	• Fixed vs floating regimes. • Depreciation makes exports cheaper, imports expensive.
Subsidies & Tariffs	• Subsidies lower production costs; tariffs raise import costs.

3. Worked Example

Question:

The annual CPI for Delhi in 2024 is 152.3. The CPI in 2023 was 148.0. Calculate the inflation rate for Delhi from 2023 to 2024, and interpret its meaning.

Steps

Formula for inflation rate
[ \text{Inflation Rate (%)} = \frac{\text{CPI}{\text{new}} - \text{CPI}{\text{old}}}{\text{CPI}_{\text{old}}} \times 100 ]
Insert values
[ \text{Inflation} = \frac{152.3 - 148.0}{148.0} \times 100 = \frac{4.3}{148.0} \times 100 ]
Compute
[ \frac{4.3}{148.0} \approx 0.02905 ] [ 0.02905 \times 100 \approx 2.91% ]
Result
Inflation rate = 2.91 % for Delhi between 2023 and 2024.

Interpretation

Prices of consumer goods in Delhi rose, on average, by ~3 % from 2023 to 2024.
This is within the RBI’s 4 ± 2 % inflation target (if it were 3‑6 % range).
A moderate rise suggests healthy demand but warns against overheating.

4. Quick Revision Summary

Concept	Take‑away
GDP	Total economic output; broken into C+I+G+(X‑M).
GNP	GDP + net income from abroad.
Inflation	CPI ↑ → inflation; CPI ↓ → deflation.
Fiscal Policy	Taxes & spending → affect demand.
Monetary Policy	Repo rate, CRR, reverse repo → control money supply & inflation.
Supply & Demand	Equ