Slideshows | April 18, 2012

Easier economics: Six important terms

Inflation, GDP and consumer confidence are terms that regularly hit the headlines around the world.

This slideshow explains six popular economic terms and how they play a role in recessions, growth and other parts of life.

 

1

Going up

Inflation is a general rise in prices, often measured by the rise and fall in the prices of items in the consumer price index (CPI). A relatively simple concept but one that is potentially hazardous to savings.

2

Growing strongly

GDP – or gross domestic product – is arguably the most important indicator of how countries are faring economically. It measures activity and is compared over time. A technical definition of a recession is two consecutive negative quarters of GDP.

3

Feeling OK?

Consumer confidence is an indicator of current and future trends in consumer spending. It can offer an early hint of what’s to come as it surveys people before firm statistics, such as retail spending figures, are available.

4

Interest rates

Central banks can increase official interest rates – a move known as “monetary tightening” – to make borrowing money more expensive. Tightening usually aims to slow economic growth and lower inflation. Likewise, central banks can lower official rates to “loosen” policy to stimulate growth.

5

Within budget?

Budget deficits happen when a country spends more than it earns. Deficits do not necessarily cause trouble but if they are large and persist for a long time, problems can arise – including an increased chance of default.

6

Clocking in

The unemployment rate is a measure of how many people are willing to work but can’t find a job. It affects confidence, willingness to spend and buy homes – so influences the economy in a range of ways. High unemployment is usually associated with low growth.

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eZonomics team
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