Economic terms

Economic Terms – Simple Study Notes

For Village Development Officers – General Awareness & Current Affairs

1. Gross Domestic Product (GDP)

What it is: The total value of everything a country makes in a year.
Everyday analogy: Imagine a big basket that holds all the fruits, food, and goods you produce. GDP is the worth of that basket.
Tiny example:

• Your village grows 100 kg of wheat at ₹20/kg → ₹2,000.
• It also sells 50 kg of mangoes at ₹30/kg → ₹1,500.
• Total village GDP = ₹3,500.

2. Inflation

What it is: When the general price of goods and services goes up.
Everyday analogy: Think of a balloon that keeps filling up. The more it inflates, the harder it is to keep the same amount of air.
Tiny example:

• A packet of rice used to cost ₹20.
• Next month it costs ₹22.
• That ₹2 rise is 10 % inflation.

3. Interest Rate

What it is: The price you pay (or earn) for borrowing (or saving) money.
Everyday analogy: Like a rent you pay when you borrow a friend’s bicycle.
Tiny example:

• You borrow ₹5,000 from a bank at 5 % yearly.
• After one year you must pay ₹5,250 (₹5,000 + ₹250 interest).

4. Tax

What it is: Money that people or businesses give to the government.
Everyday analogy: A small fee you pay to use a public park.
Tiny example:

• A farmer pays 5 % of the sale value of his produce as tax to the district office.

5. Subsidy

What it is: Money or goods that the government gives for free or at a lower price.
Everyday analogy: A free lunch given to students.
Tiny example:

• The government supplies ₹10,000 worth of fertilizer to every farmer in the village at no cost.

6. Fiscal Deficit

What it is: When a government spends more than it earns in a year.
Everyday analogy: If you spend ₹80 on a party but only earned ₹70, you have a deficit of ₹10.
Tiny example:

• Village council collects ₹50,000 in taxes but spends ₹70,000 on roads → ₹20,000 deficit.

7. Per Capita Income

What it is: The average income of each person in a country or area.
Everyday analogy: Splitting a pot of money evenly among all family members.
Tiny example:

• Village total income = ₹1,000,000.
• Population = 1,000.
• Per capita income = ₹1,000.

8. Exchange Rate

What it is: How much one currency can buy of another currency.
Everyday analogy: A trade of apples for oranges – how many oranges equal one apple.
Tiny example:

• 1 US dollar buys 75 Indian rupees.
• If you need ₹750, you get 10 dollars.

9. Balance of Trade

What it is: Difference between what a country sells (exports) and buys (imports).
Everyday analogy: If you sell 10 mangoes and buy 5 bananas, you have a positive balance.
Tiny example:

• Village exports 200 kg of mangoes worth ₹6,000.
• Imports 50 kg of rice worth ₹2,500.
• Balance of trade = ₹3,500 (surplus).

10. Employment

What it is: The state of having a job or the number of jobs available.
Everyday analogy: Having a seat on a bus.
Tiny example:

• 80 % of village adults have a job → high employment rate.

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