Basic Economics Terms and Their Meanings
Basic economics terms generally consist of concepts that you often encounter in everyday life. Economic terms, which are frequently used especially when talking about financial developments in economic news, make it easier for you to follow the agenda when you know their meanings. Knowing the meaning of many economic terms is of great benefit to you, not only when following financial news, but also when bringing your business ideas to life. So, what do these basic economic terms that you are familiar with in terms of economic terminology mean? Let’s examine it together.
Inflation is the decrease in purchasing power as a result of a continuous increase in the general level of product and service prices. If the increase in money supply is balanced with the increase in the amount of goods and services, it is expected that there will be no change in the general level of prices. However, if the production of one of them is excessive, the balance is disturbed. When inflation increases, the number of goods and services that money can buy decreases. Inflation rate is measured over the Consumer Price Index and Domestic Producer Price Index published by TURKSTAT.
Deflation is the opposite of inflation. Deflation refers to a continuous fall in the general level of prices for goods and services. In deflationary economies, the purchasing power of money increases. However, in deflationary environments, despite the decline in prices of goods and services, consumption demand declines with the expectation that prices will continue to decline. This causes the downward trend in prices to continue.
3. Gross Domestic Product (GDP)
Gross Domestic Product (GDP) is the monetary value of final goods and services produced in a country in a calendar year. The annual rate of change in the values calculated with the chained volume index from the GDP data published by the Turkish Statistical Institute (TUIK) shows the annual economic growth rate as of the relevant period.
4. Current Balance
Current balance includes foreign trade, services, investment income and current transfers accounts included in the balance of payments accounts of a country. In the current account, which shows the balance between the incomes obtained from exports and other transactions that bring foreign currency, and the expenses paid as a result of imports and other transactions that lose foreign currency, the current account surplus is the situation where the income exceeds the expenses; The situation where expenses exceed revenues is called current account deficit.
5. CPI (Consumer Price Index)
The Consumer Price Index is an index that measures the change in the price of a good or service group purchased by the consumer. TurkStat announces the index results to the public on the 3rd of each month or on the first business day following the 3rd, at 10:00 am.
6. Domestic Producer Price Index (D-PPI)
Domestic Producer Price Index is an index that measures the changes in producer prices of product groups produced in the national economy and subject to domestic sale. With D-PPI, changes in the prices of products in the mining, manufacturing industry and energy (electricity, gas, water) sectors are measured.
Devaluation is the name given to the decrease in the value of the national currency against foreign currencies in the fixed exchange rate regime.
8. Fiscal Policy
Fiscal policy is the policies implemented by the state to ensure that the economy reaches full employment by using public expenditures and public revenues. In other words, fiscal policy is the policies implemented by the government to have an impact on the economy by using financial instruments such as the budget, tax revenues and public expenditures. Fiscal policy aims to achieve certain targets such as economic growth, employment and inflation. In addition, it is aimed to minimize economic fluctuations and to create a fair income distribution.
9. Money Politics
Monetary policy is the decisions taken to affect the availability and cost of money in order to achieve the targets of central banks regarding employment increase, economic growth and price stability.