Understanding Gross Domestic Product (GDP) and Monetary Policy

These flashcards cover important concepts regarding GDP and monetary policy, essential for understanding economic performance.

Gross Domestic Product (GDP)

The total market value of all goods and services produced in a country in a given year.

Nominal GDP

GDP measured using current prices without adjusting for inflation.

Real GDP

GDP adjusted for inflation, reflecting true changes in economic activity.

Expenditure Method

A way of calculating GDP by summing all spending in an economy.

Income Method

A method of calculating GDP that measures the total income earned by individuals and businesses.

Output Method

Calculation of GDP based on the actual value of goods and services produced.

Money Supply

The total value of money available in an economy at a specific time.

Monetary Policy

Tools used by central banks to influence the money supply and interest rates in the economy.

Open Market Operations (OMO)

The purchase and sale of securities in the open market by the central bank.

Inflation

The rate at which the general level of prices for goods and services rises, eroding purchasing power.

Interest Rates

The amount charged by lenders to borrowers for the use of money, usually expressed as a percentage.

Government Bonds

Debt securities issued by the government with a maturity period of one year or longer.

Reserve Requirements

The minimum amount of cash reserves that financial institutions must hold in relation to customer deposits.

Price Index

A measure that examines the weighted average of prices of a basket of consumer goods and services.

Fiscal Policy

Government decisions on taxation and spending to influence the economy.