Finance Explained

Gross domestic product, or GDP, is a measure of the total value of all goods and services produced within a country in a given period of time, typically a year. There are three approaches to measuring GDP: the expenditure approach, the production approach, and the income approach. Expenditure approach The expenditure approach to measuring GDP, denoted as GDP(E), measures the total value of all final goods and services produced within a country, based on the amount of money spent on these goods and services. Final goods and services are those that are consumed by the end user, rather than being used as inputs in the production of other goods and services. The expenditure approach to GDP includes four components: Personal consumption expenditures: This is the total value of all goods and services consumed by households, including durable goods (such as cars and appliances), nondurable goods (such as food and clothing), and services (such as healthcare and education). Gross private domest

Frictional unemployment refers to the unemployment that results from the normal functioning of the labor market.   It arises from the fact that it takes time for workers to search for and find new jobs, and for employers to search for and find suitable employees. Frictional unemployment is a natural and inevitable part of the labor market, and is not necessarily a sign of an unhealthy economy. There are several factors that contribute to frictional unemployment: Job search: When workers are looking for new jobs, they may temporarily be out of work while they search for suitable employment opportunities. This is known as job search unemployment. Resignation and retirement: When workers leave their current jobs in order to retire or to pursue other opportunities, they may be temporarily out of work while they transition to their new roles. Geographical mobility: When workers move to new areas in search of employment, they may experience temporary unemployment while they look for jobs in

Financial intermediation services indirectly measured, or FISIM, refers to the value of the services provided by financial intermediaries, such as banks and other financial institutions, in facilitating transactions between borrowers and lenders.  FISIM is typically calculated as the difference between the interest rates paid by borrowers and the interest rates received by lenders, minus the costs incurred by the financial intermediaries in providing these services. FISIM is an important concept in national accounts and macroeconomic analysis, as it helps to capture the economic value of the services provided by the financial sector. It is typically included in the measurement of gross domestic product (GDP) and other macroeconomic indicators, as it reflects the contribution of the financial sector to economic activity. There are several ways in which financial intermediaries provide value to the economy through their intermediation services. These include: Information gathering and pr

Final consumption expenditure is a measure of the amount of money that is spent on goods and services by households, governments, and nonprofit organizations for the satisfaction of their own needs and wants.  It is one of the main components of GDP, along with gross capital formation (investment) and exports minus imports (net trade). Final consumption expenditure can be divided into two categories: household final consumption expenditure and government final consumption expenditure. Household final consumption expenditure is the money that is spent by households on goods and services for their own consumption, such as food, housing, and healthcare. Government final consumption expenditure is the money that is spent by governments on goods and services, such as education, defense, and public health. Final consumption expenditure is an important measure of economic activity, as it reflects the demand for goods and services by households, governments, and nonprofit organizations. It is

The European System of Accounts (ESA) is a set of rules and guidelines for the compilation of national accounts data in the European Union (EU). National accounts data is a set of statistical indicators that measure the economic activity of a country, including gross domestic product (GDP), national income, and employment. The ESA is designed to ensure that national accounts data is compiled in a consistent and comparable manner across the EU, so that it can be used to compare economic performance between different countries. The ESA is updated periodically to reflect changes in economic circumstances and to ensure that it remains relevant and useful. The ESA consists of a set of principles and guidelines that outline how national accounts data should be compiled, including definitions of key concepts, classification systems, and methods for estimating and measuring economic activity. The ESA also includes a set of sector accounts, which provide a detailed breakdown of economic activit

The European Central Bank (ECB) is the central bank of the European Union (EU) and is responsible for implementing the monetary policy of the eurozone, which is the group of EU member states that have adopted the euro as their currency. The ECB was established in 1998 and is headquartered in Frankfurt, Germany. The primary objective of the ECB is to maintain price stability in the eurozone, which means keeping inflation under control. The ECB uses a variety of tools to achieve this objective, including setting interest rates, conducting open market operations, and providing liquidity to the banking system. One of the main tools used by the ECB to implement monetary policy is the setting of interest rates. Interest rates affect the cost of borrowing, and therefore influence the level of spending and economic activity in an economy. By setting interest rates, the ECB can influence the level of demand for goods and services, and help to keep inflation under control. The ECB also conducts