Balance of Payment: A summation of imports and exports made between a country and the other countries that it trades with.
Balance of trade: The difference in value over a period of time between a country's imports and exports.
Base year: In the construction of an index, the year from which the weights assigned to the different components of the index is drawn. It is conventional to set the value of an index in its base year equal to 100.
Variable Rate: Any interest rate that may fluctuate over the life of the loan is a variable rate loan or credit agreement. This fluctuation then causes changes in either the payments or the length of the term. This variable rate is often tied to an index that reflects changes in market rates of interest.
Bill of exchange: Often known as draft, Bill of Exchange is a document is a third party instrument (written, dated, and signed) containing an unconditional order by a drawer that directs a drawee to pay a definite sum of money to a payee on demand or at a specified future date. It is the most commonly used financial instrument in international trade.
Bretton Woods: It is an international monetary system, in which the value of the dollar was fixed in terms of gold, and every other country held its currency at a fixed exchange rate against the dollar. When trade deficits occurred, the central bank of the deficit country financed the deficit with its reserves of international currencies. The Bretton Woods system operated from 1946-1973 and collapsed in 1971 when the US abandoned the gold standard.
Capital account: Part of a nation's balance of payments that includes purchases and sales of assets, such as stocks, bonds, and land. A nation has a capital account surplus when receipts from asset sales exceed payments for the country's purchases of foreign assets. The sum of the capital and current accounts is the overall balance of payments.
Current account: Part of a nation's balance of payments which includes the value of all goods and services imported and exported, as well as the payment and receipt of dividends and interest. A nation has a current account surplus if exports exceed imports plus net transfers to foreigners. The sum of the current and capital accounts is the overall balance of payments.
Currency appreciation: An increase in the value of one currency relative to another currency. Appreciation occurs when, because of a change in exchange rates; a unit of one currency buys more units of another currency. Opposite is the case with currency depreciation.
Fiscal deficit: When a government's total expenditures exceed the revenue that it generates (excluding money from borrowings). A fiscal deficit is regarded by some as a positive economic event. Deficit differs from debt, which is an accumulation of yearly deficits.
Foreign exchange reserves: Also known as forex reserves or FX reserves, Foreign exchange reserves are 'only' the foreign currency deposits and bonds held by central banks and monetary authorities. Reserves enable the monetary authorities to intervene in foreign exchange markets to affect the exchange value of their domestic currency in the market. Reserves are invested in low-risk and liquid assets, often in foreign government securities.
Gross domestic product (GDP): It refers to the market value of all officially recognized final goods and services produced within a country in a given period, usually in one year. GDP per capita is often considered an indicator of a country's standard of livingbut is is not a measure of personal income. GDP per capita exactly equals the gross domestic income (GDI) per capita.
Gross national product (GNP): It is the value of all final goods and services produced within a nation in a given year by labour and property supplied by the residents of a country. It adds income earned by its citizens abroad, minus income earned by foreigners from domestic production.
Gross domestic income: GDI is the total income received by all sectors of an economy within a nation. It includes the sum of all wages, profits, and minus subsidies.
Inflation: Inflation is a rise in the general level of prices of goods and services in an economy over a period of time. It leads to less purchasing power of goods and services by each unit of currency; a loss of real value in the internal medium of exchange and unit of account in the economy.
International Monetary Fund (IMF): An international organisation that was created in the Bretton Woods Conference of 1944. Its main purpose is to regulate the international monetary exchange system, but has been modified since it creation. In particular, one of the central tasks of the IMF is to stabilize exchange rates of world currencies in a bid to alleviate severe balance of payments problems.
Monetary policy: The regulation of the money supply and interest rates by a central bank in order to control inflation and stabilize currency. If the economy is heating up, the central bank (such as RBI in India) can withdraw money from the banking system, raise the reserve requirement or raise the discount rate to make it cool down. If growth is slowing, it can reverse the process - increase the money supply, lower the reserve requirement and decrease the discount rate. The monetary policy influences interest rates and money supply.
Subsidy: It is an assistance paid to a business or economic sector by government to prevent the decline of that industry. Examples are export subsidies to encourage the sale of exports; subsidies on some foodstuffs to keep down the cost of living, especially in urban areas; and farm subsidies to encourage expansion of farm production and achieve self-reliance in food production.
Treasury bill: A short-term debt issued by a national government with a maximum maturity of one year. Treasury bills are sold at discount, such that the difference between purchase price and the value at maturity is the amount of interest.
WTO: The World Trade Organization is a global international organization that deals with the global rules of trade between nations. Its main function is to ensure that trade flows smoothly, predictably and freely as possible.
Black Market: A black market or underground economy is a market in goods or services which operate outside the formal ones supported by established state power. Typically the totality of such activity is referred to with the definite article as a complement to the official economies, by market for such goods and services, e.g. "the black market in bush meat" or the state jurisdiction "the black market in China".
Income inequality metrics: Income inequality metrics or income distribution metrics are used by social scientists to measure the distribution of income, and economic inequality among the participants in a particular economy, such as that of a specific country or of the world in general.
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