The most important economic concepts
Euribor, recession, inflation, GDP... We hear all these words on the news every day, but... Do we really understand the meaning and importance of these concepts? From Inmoself we explain it to you!
These words are related to each other, but the first one we should learn is the meaning of GDP [Gross Domestic Product] in broad strokes and how it influences us in every economic decision. It is a magnitude that measures the monetary value of all final goods and services produced by a country or geographic region in a certain period of time. It expresses the monetary value of everything that reaches the final consumer.
That is, it is the total value of the country.
To know this value, it is necessary to know and add all the products and services produced within a country, regardless of the nationality of the person who consumes or produces them. From buying books, houses to health or telecommunications.
Now, what does it mean that the GDP has increased 0.3 points or 2%?
Generally, the fact that the gross domestic product of a country increases is something positive, since it means that its productive activity and its economy are advancing in the right direction. But it is essential that the goods and services that drive this growth can continue to sustain it in the long term.
Now we will explain what the Euribor is and how it is calculated.
It refers to the price at which European banks lend money to each other. In the same way that people and companies go to the bank to request a loan, the banks themselves also lends funds to each other when they need them and for which they pay a corresponding interest. This is called the interbank market.
To calculate it, the main banking entities in the euro area report the interbank interest rate that they applied the previous day and the European Institute of Monetary Markets is in charge of calculating it in the following way: it eliminates the 15% of the highest data and the 15% of the lowest, and over 70% of the remaining data calculates the average, whose resulting value is the Euribor.
We hear these two concepts, the Euribor and the GDP, on a recurring basis, but lately two concepts have appeared that are being talked about more and more: recession and inflation. Next we will see how they are related to each other and what it means.
Many times it is said that inflation is good, but it is not that it is good in itself, but rather that even if the prices of an economy rise, wages also tend to rise according to the rise in prices. Thus, in the end the purchasing power of citizens remains stable.
However, the recession is understood as the decrease in commercial and industrial activity that entails a decrease in wages, benefits and employment. But in times of recession, it can also be a good time to make investments since it can bring opportunities.
So in the economy, not everything is black or white, there are nuances to take into account and the management of economic resources itself has a great influence.
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