Research 2 - Basic Economics

GDP
Measure of the economy's performance within its own territory.
1 to 5 percent is healthy. Negative is unhealthy. Two consecutive negative quarters are defined as recession.

GNP
Abroad income added to GDP.

Inflation
Measure of how much each unit of currency is diminishing in its buying power. In a country with a high inflation rate, its currency value will drop. Reason is because nobody will want to pay for that currency as its buying power is low. Governments and Central Banks normally will manipulate interest rate and money supply to solve inflation.

Interest Rates
High interest rates retard the economy. High interest rates equate to high borrowing interest thus reducing investments by companies due to high borrowing charges. Also for mortgage holders, their buying power will reduce due to the high interest rate. This causes low demand which causes supply flow to stall and accumulate. Resulting in lowering of prices to eliminate the high inventories. Also people will tend to put their money in banks to earn interest thus reducing the buying power of the people.