Plain-English definitions for the terms you'll encounter on your financial journey.
The specific year used as a benchmark for comparison when calculating economic indices like the CPI or Real GDP.
A phase of the business cycle in which the economy moves from a peak to a trough. It is characterized by falling GDP and rising unemployment.
A metric that compares a country's public debt to its gross domestic product. It indicates the country's ability to pay back its debt based on its total economic output.
Gross Domestic Product is a measure of the total value of all goods and services produced within a country over a specific time. You can think of it as a giant thermometer that tells us how 'hot' or active an economy is—if the number goes up, the country is generally producing more and growing.
A metric that breaks down a country's economic output per person. It is calculated by dividing the total GDP by the country's population and is often used as a measure of standard of living.
A summary measure of average achievement in key dimensions of human development, including life expectancy, education, and per capita income. It provides a broader view of a nation's well-being than GDP alone.
The total value of all goods and services produced within a country at current market prices. Unlike Real GDP, it does not account for the effects of inflation or deflation.
The difference between actual GDP and potential GDP. A positive gap suggests an overheating economy, while a negative gap suggests underutilized resources.
The maximum level of output an economy can produce when it is operating at full capacity. It assumes that labor and capital are being used efficiently without causing inflation.
A metric comparing a country's public debt to its gross domestic product to indicate its ability to pay back debts.
An inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year. It allows economists to compare economic output over time by accounting for price changes.
A significant decline in economic activity spread across the economy, lasting more than a few months. It is traditionally defined as two consecutive quarters of negative GDP growth.