BASIC TERMS IN ECONOMICS YOU NEED TO KNOW
GDP (gross domestic product): It is a standard used to determine the size of a nation’s economy. It is the monetary value of the total finished goods/output produced within the borders of a nation. Larger GDP is an indicator of the ability of a given nation to produce larger amounts of finished goods and services within a given period of time. Though other standards such as PPP, GNI, HDI etc exists for determining the best economies, GDP has proven with time to be the best and most effective and is as such adopted by the World Bank. Conversely a higher GDP indicates a growing economy and a lower GDP indicates a contracting economy. Key term -largest economy
GDP PER CAPITA: it is a country’s GDP divided by its total population. This importantly determines countries with the highest concentration of wealth in a given continent or across the globe in general. The USA has the largest GDP compared to any nation however Luxembourg has the highest GDP PER CAPITA of any nation. Key term-richest countries
HDI (human development index): it is a standard used to establish the level of human development in country. It is a composite summary of nation’s achievements in three cogent aspects of human development namely; knowledge, health and standard of living (life expectancy inclusive). HDI was developed by the UN in the 1990’S to serve as a means of grading nations based on social and economic development. Key terms- most developed nations
PPP (purchasing power parity): It is a money conversion rate used to determine the purchasing power of different currencies in common units. It is a theory which states that the exchange rates between currencies are in equilibrium when their purchasing power is the same in each of the two counties It shows adjustment needed to make two currencies exchange at the same level provide all situations are equal. Key terms –richest countries
PURCHASING POWER: Is simply defined as the financial ability to buy products and services, is also the determinant of the number of goods and services a unit of money can buy.
GNI (gross national income): it is the sum total of the amount of money earned by the businesses and people of a nation (it is inclusive of the overseas assets owned by a country). It is a measure of an economy’s size and growth. Key terms- fastest growing economies