Economics is a very crucial subject for all the completive exams like IAS/PCS/SSC/Banking etc. Every competitive exam asks some questions based on the terminology of economics. So to cater the objectives of the aspirants Jagran josh is giving some important terms of economics in this article.
1. Monetary policy: This comprises the instruments used by the Reserve bank of India to regulate the flow of money or liquidity in the economy. Its main instruments are interest rate, CRR, SLR, cash reserve ratio, repo rate, reverse repo rate, bank rate.
2. Fiscal policy: this policy is mainly used by the finance ministry. It deals in the government economic policy like taxation, public expenditure, public debt etc. this policy decides the infrastructural development and expenditure on the social welfare schemes within the country.
3. Budget deficit: It is the difference between the estimated public expenditure and public receipts. The government meets this deficit by the printing of new currency or by borrowing.
4. Lorenz curve: This curve shows the degree of inequalities of a frequency distribution in a graphical manner. This curve is commonly used to depict income distribution showing the cumulative percentage of people from the poorest up and their cumulative share of national income.
5. Amalgamation: It means: ‘merger’. As per the requirement of the market; when two or more than two companies are merged into a new large company, it is called merger. In this process old firms completely lose their identity when the merger is completed.
6. Arbitrage: When a person performs the job of middle man and buys and sells goods at a particular time to cash the price difference of two markets. Purchases are made in those markets where prices are low and sold at high price market.
7. Balance of Trade: It is the difference between export and import of visible goods only. Services are not included in this count. It comes under the umbrella of Balance of Payment (BOP).
8. Bank rate: It’s a rate at which Reserve Bank of India lends money to the commercial banks of the country. Repo rate and bank rate both are similar in nature but former is called a short term interest rate while later is a long term rate of interest.
9. Reverse Repo Rate: Reverse repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) borrows money from commercial banks within the country. It is a monetary policy instrument which can be used to control the money supply in the country.
10. Blue chip: It is concerned with such equity shares whose purchase is extremely safe. It a safe investment and does not involve any risk.
11. Consumer Price Index: It is the method used to know the price of retail market in India. It is also known as the cost of living index. This index compiled by Central Statistical Organisation (CSO) which tries to encompass the entire population under its ambit.
12. Whole Sale Price Index: Under this method the price of goods and services are measured on the basis of wholesale prices. Inflation rate of India is calculated on the basis of this index.
13. Cost Push Inflation: If the rate of inflation rises due to increase in the cost of factors of production (land. Labour ,capital and entrepreneur)
14. Deflation: Deflation is the state of falling prices in the economy. In this satiation the Price of goods and services falls in the absence of their demand. It’s an opposite situation of inflation.
15. Disinflation: It refers to the process of bringing down the prices moderately from their high level without any adverse impact on production and employment. Thus disinflation is an anti inflationary measure.
16. Laffer Curve: It’s a curve given by the American economist Arthur Laffer. It represents the relationship between the total tax revenue and corresponding tax rate. If tax rate is increased then tax revenue decreases and vice versa.
image source:Calafia Beach Pundit
17. Liquidity: Any asset which can easily be converted into cash very easily is called most liquid asset. ‘Land’ takes a long time to get converted into cash. Currency (100, 500 and 1000 notes) is most liquid because you can easily use them to purchase goods and services.
18. Mixed Economy: It refers to an economic system where public (ONGC) and private (TCS) system exists together. India is the example of a mixed economy.
19. Monopoly: It refers to a market where there is only one seller in the market. This seller controls the full supply of the market so he/she charges higher price for goods and services.
20. Plastic Money: This type of money refers to the generally credit card and debit card.
21. Privatization: When the 51% shares of a public company are sold to private investor/many investors then this company is termed as the private company; although government may have 49% shares of this company.
22. Shadow Price: It is an imputed value for a good based on the opportunity costs of the resources used to produce it such values are of particular significance in resolving the problems of resource allocating with respect to the effect on welfare.
23. Trickle down Theory: This theory signifies the attempt of transferring the benefits of high growth rate of national income to the lowest strata of the society. This theory ensures to reduce income disparities in the society.
24. Statutory Liquidity Ratio: The amount of liquid assets, such as cash, precious metals (Gold) or other short term securities that a financial institution must maintain in its reserves. Every bank is required to maintain a minimum proportion of their net demand and time liabilities as liquid assets in the form of cash, gold and unencumbered approved securities.
25. VAT: Its expansion is Value added tax. VAT seeks to tax the value added at every stage of manufacturing and sale, with a provision of refunding the amount of VAT already paid at the earlier stage to avoid double taxation.