Summary for Questions of 5th December:-

• What is the Fiscal Deficit? The fiscal deficit is the difference between the government's total expenditure and its total receipts (excluding borrowing). The elements of the fiscal deficit are (a) the revenue deficit, which is the difference between the government’s current (or revenue) expenditure and total current receipts (that is, excluding borrowing) and (b) capital expenditure. The fiscal deficit can be financed by borrowing from the Reserve Bank of India (which is also called deficit financing or money creation) and market borrowing (from the money market, that is, mainly from banks).
• Nominal GDP Growth vs. Real GDP GrowthGDP, or Gross Domestic Product is the value of all the goods and services produced in a country. The Nominal Gross Domestic Product measures the value of all the goods and services produced expressed in current prices. On the other hand, Real Gross Domestic Product measures the value of all the goods and services produced expressed in the prices of some base year. An example: Suppose in the year 2000, the economy of a country produced $100 billion worth of goods and services based on year 2000 prices. Since we're using 2000 as a basis year, the nominal and real GDP are the same. In the year 2001, the economy produced $110B worth of goods and services based on year 2001 prices. Those same goods and services are instead valued at $105B if year 2000 prices are used.

Then:

Year 2000 Nominal GDP = $100B, Real GDP = $100B

Year 2001 Nominal GDP = $110B, Real GDP = $105B

Nominal GDP Growth Rate = 10%

Real GDP Growth Rate = 5%

Similar is the case for Interest. General rates as we understand are nominal rates interest (Quoted by Banks) but we adjust the inflation, then remaining part is the real interest rates.