The business world is full of complicated jargon and specialized language that leaves many of us scratching our heads in confusion.
Fear not though, help is at hand!
In this exciting new column, Voice Money’s KABELO ADAMSON brings his expertise to the table, breaking down business terms in a simple, easy-to-understand manner.
GROSS DOMESTIC PRODUCT (GDP)
The simplified definition of GDP is the total of all value added to the economy.
This value-added means the value of goods and services minus the costs associated with producing such goods and services.
GDP can be calculated by adding up all the money spent by consumers, businesses, and the government during a certain period – usually a year. Similarly, it can also be calculated by adding up all of the money received by all those who take part in the economy, i.e. consumers, businesses, and government.
When the Minister of Finance and Economic Development delivers the Budget at the beginning of each year, you will likely come across the term ‘budget deficit’.
But what does this mean? This happens when the expenses of the country exceed the available revenue to finance such expenses.
Inflation can be described as a currency’s decline in purchasing power over a given time.
The increase in the level of prices, which is often expressed in percentage terms, means that a unit of currency buys less than it did in previous periods.
Factors that contribute to inflation include an increase in production costs like raw materials and wages.
An increase in demand for products and services can also cause an upsurge in inflation as consumers are willing to pay more for such goods.