Economic Survey Important Terms Part 5

By BYJU'S Exam Prep

Updated on: September 13th, 2023

  1. Nominal GDP and Real GDP:

Nominal GDP is gross domestic product (GDP) evaluated at current market prices, GDP being the monetary value of all the finished goods and services produced within a country’s borders in a specific time period.

Nominal GDP differs from real GDP as real GDP includes changes in prices due to inflation or a rise in the overall price level. As a result, nominal GDP will often appear higher than real GDP.

  1. GDP Deflator:

It is a measure of the level of prices of all new, domestically produced, final goods and services in an economy. It is calculated by dividing Nominal GDP/ Real GDP.

If we wish to analyze the impact of price changes throughout an economy, then the GDP deflator is the preferred price index.

  1. Marginal Standing Facility (MSF):

Marginal standing facility (MSF) is a window for banks to borrow from the RBI in an emergency situation when inter-bank liquidity dries up completely. It was introduced by RBI in 2011.

Banks borrow from the central bank by pledging government securities at a rate higher than the repo rate under liquidity adjustment facility or LAF in short.

  1. Quantitative Easing:

Quantitative easing is an unconventional monetary policy in which a central bank purchases government securities or other securities from the market in order to lower interest rates and increase the money supply.

Quantitative easing increases the money supply by flooding financial institutions with capital in an effort to promote increased lending and liquidity.

Quantitative easing does not involve the printing of new banknotes.

  1. Index of Industrial Production:

The Index of Industrial Production (IIP) is an index which shows the growth rates in different industry groups of the economy in a stipulated period of time.

It is a composite indicator expressed in terms of an index number which also measures the short term changes in the volume of production of a basket of industrial products during a given period with respect to the base period.

The IIP index is computed and published by the Central Statistical Organisation (CSO) on a monthly basis.


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