Economic Terms

Name :: Kamran Shafiq

Roll No :: PS-21470

Course :: Economic crisis in Pakistan

Semester :: BS-7th

Submitted to :: Ma’am Sara

Department Of Pakistan Studies

National University of Modern Languages
Islamabad, Pakistan
Gross Domestic Product VS Gross National Product
Gross National Product ( GDP ) Gross National Product (GNP)

The value of goods and services produced
within the geographical boundaries of a
nation in a financial year is termed as GDP.
It measures only the domestic production.
It emphasizes on the production that is
obtained domestically.
It highlights the strength of the country’s
economy.
The goods and services that are being
produced outside the economy are excluded.
The goods and services that are being
produced outside the economy are excluded.
GDP = C + I + G + (X – M) Where,
C = Consumption spending, I = Business
investments G = Government purchases
X = Exports & M = Imports
The value of goods and services produced by
the citizens of a nation irrespective of the
geographical limits in a financial year is
known as GNP.
It measures only the national production
It emphasizes on the production that is
achieved by the citizens living in different
nations
It highlights the contribution of the
residents to the development of the
economy
The goods and services that are produced by
the foreigners living in the country are
excluded.
The goods and services that are produced by
the foreigners living in the country are
excluded.
GNP = GDP + NR – NP
Where,
GDP = Gross domestic product
NR = Net income receipts
NP = Net outflow to foreign assets

Per Capita Income

Per capita income is a measure of the amount of money earned per person in a nation or
geographic region. Per capita income is used to determine the average per-person income for an
area and to evaluate the standard of living and quality of life of the population. Per capita income
for a nation is calculated by dividing the country's national income by its population.
Total Income
Per Capita Income =
Total Population

Inflation
When general level of prices & goods is increasing, it is called inflation or
Inflation is the rate at which the general level of prices for goods and services in an economy is
rising over a period of time. It essentially means that your money loses value, and you can buy
fewer goods and services with the same amount of money as time progresses.
Current CPI−Previous CPI
Inflation Rate = × 100
Previous CPI

Where:
CPI stands for Consumer Price Index, a measure that examines the weighted average of prices of
a basket of consumer goods and services, such as transportation, food, and medical care.

Saving vs Investment
Saving Investment
Saving refers to the act of setting aside a Investment refers to the allocation of
portion of one's income or resources for future resources, typically money, with the
use rather than spending it immediately. expectation of generating income or profit in
the future.
It aimed at preserving capital, meeting short It at generating a return on the funds
to medium-term financial needs, or creating allocated, typically for long-term financial
an emergency fund. goals such as retirement or wealth
accumulation.
Savings are generally intended for short to Investments are typically held for an extended
medium-term needs period

Monetary and Fiscal Policy

Monetary Policy Fiscal Policy
It is a financial tool that is used by the central It is a financial tool that is used by the central
banks in regulating the flow of money and the government in managing tax revenues and
interest rates in an economy policies related to expenditure for the benefit
of the economy
It is managed by Central Bank of an economy It is by Ministry of Finance of an economy
It measures the interest rates applicable for It measures the capital expenditure and taxes
lending money in the economy of an economy
Exchange rates improve when there is higher It has no impact on the exchange rates
interest rates
Monetary policy targets inflation in an Fiscal policy does not have any specific target
economy

Stock Exchange
A stock exchange is an important factor in the capital market. It is a secure place where trading
is done in a systematic way. Here, the securities are bought and sold as per well-structured rules
and regulations. Its functions include facilitating the buying and selling of stocks, providing
liquidity to investors, setting prices through supply and demand dynamics, and ensuring fair and
transparent trading through regulations and oversight.

Sustainable Development
Sustainable Development is the process in which the exploitation of natural resources, the
direction of investment, the orientation of technological development, and institutional change
or reform are all in coordination and harmony and enhance both the current and future potential
for meeting human needs.

Utility
Utility, in economics, refers to the usefulness or enjoyment a consumer can get from a service
or good. Although the concept of utility is abstract, it is a useful way to explain how and why
consumers make their decisions. It has three types:

 "Ordinal" utility refers to the concept of one good being more useful or desirable than
another.
 "Cardinal" utility is the idea of measuring economic value through imaginary units,
known as "utils."
 Marginal utility is the utility gained by consuming an additional unit of a service or good

Infrastructure
Infrastructure is defined as the basic physical systems of a business, region, or nation and often
involves the production of public goods or production processes. Examples of infrastructure
include transportation systems, communication networks, sewage, water, and school systems.

 Large-scale infrastructure is usually produced by the public sector and funded by tax
revenue.
 Infrastructure can often be produced on a smaller scale by private firms or through local
authorities.
 Infrastructure can be classified as soft or hard and both are essential to the economy
and quality of life of a society.
(The End)