GK,INDIAN ECONOMY
GLOSSARY OF ECONOMIC TERMS
1. Absolute advantage: A country has an absolute advantage if its
output per unit of input of all goods and services produced is higher than that
of another country.
2. Ad valorem tax: (in Latin: to the value added) - a tax based on the
value (or assessed value) of property.
3. Aggregate demand is the sum of all demand in an economy.
This can be computed by adding the expenditure on consumer goods and services,
investment, and not exports (total exports minus total imports).
4. Aggregate supply is the total value of the goods and
services produced in a country, plus the value of imported goods less the value
of exports.
5. Alternative minimum tax: An IRS mechanism created to ensure that
high-income individuals, corporations, trusts, and estates pay at least some
minimum amount of tax, regardless of deductions, credits or exemptions. It
operates by adding certain tax-preference items back into adjusted gross
income. While it was once only important for a small number of high-income
individuals who made extensive use of tax shelters and deductions, more and
more people are being affected by it. The AMT is triggered when there are large
numbers of personal exemptions on state and local taxes paid, large numbers of
miscellaneous itemized deductions or medical expenses, or by Incentive Stock
Option (ISO) plans.
6. Asset: Anything of monetary value that is owned by a person.
Assets include real property, personal property, and enforceable claims against
others (including bank accounts, stocks, mutual funds, and so on).
7. Average propensity to consume is the proportion of income the average
family spends on goods and services.
8. Average propensity to save is the proportion of income the average
family saves (does not spend on consumption).
9. Average total cost is the sum of all the production costs
divided by the number of units produced.
10. Balance of trade: The difference in value over a period of
time between a country's imports and exports.
11. Barter system: System where there is exchange goods without involving
money.
12. Base year: In the construction of an index, the year from which
the weights assigned to the different components of the index is drawn. It is
conventional to set the value of an index in its base year equal to 100.
13. Bear: An investor with a pessimistic market outlook; an
investor who expects prices to fall and so sells now in order to buy later at a
lower price.
14. Bid price: The highest price an investor is willing to pay for a
stock.
15. Bill of exchange: A written, dated, and signed three-party
instrument containing an unconditional order by a drawer that directs a drawee
to pay a definite sum of money to a payee on demand or at a specified future
date. Also known as a draft. It is the most commonly used financial instrument
in international trade.
16. Birth rate: The number of births in a year per 1,000 population.
17. Bond: A certificate of debt (usually interest-bearing or
discounted) that is issued by a government or corporation in order to raise
money; the issuer is required to pay a fixed sum annually until maturity and
then a fixed sum to repay the principal.
18. Boom: A state of economic prosperity
19. Break
even: This is a term used
to describe a point at which revenues equal costs (fixed and variable).
20. Bretton
Woods: An international
monetary system operating from 1946-1973. The value of the dollar was fixed in
terms of gold, and every other country held its currency at a fixed exchange
rate against the dollar; when trade deficits occurred, the central bank of the
deficit country financed the deficit with its reserves of international
currencies. The Bretton Woods system collapsed in 1971 when the US
21. Budget: A summary of intended expenditures along with
proposals for how to meet them. A budget can provide guidelines for managing
future investments and expenses.
22. Budget deficit is the amount by which government spending exceeds
government revenues during a specified period of time usually a year.
23. Bull: An investor with an optimistic market outlook; an
investor who expects prices to rise and so buys now for resale later.
24. c.i.f., abbrev: Cost, Insurance and Freight: Export term in
which the price quoted by the exporter includes the costs of ocean
transportation to the port of destination and insurance coverage.
25. Call money: Price paid by an investor for a call option. There is
no fixed rate for call money. It depends on the type of stock, its performance
prior to the purchase of the call option, and the period of the contract. It is
an interest bearing band deposits that can be withdrawn on 24 hours notice.
26. Capital: Wealth in the form of money or property owned by a
person or business and human resources of economic value. Capital is the
contribution to productive activity made by investment is physical capital
(machinery, factories, tools and equipments) and human capital (eg general
education, health). Capital is one of the three main factors of production
other two are labour and natural resources.
27. Capital account; Part of a nation's balance of payments that includes
purchases and sales of assets, such as stocks, bonds, and land. A nation has a
capital account surplus when receipts from asset sales exceed payments for the
country's purchases of foreign assets. The sum of the capital and current
accounts is the overall balance of payments.
28. Capital budget: A plan of proposed capital outlays and the
means of financing them for the current fiscal period. It is usually a part of
the current budget. If a Capital Program is in operation, it will be the first
year thereof. A Capital Program is sometimes referred to as a Capital Budget.
29. Capital gain tax: Tax paid on the gain realized upon the sale
of an asset. It is a tax on profits from the sale of capital assets, such as
shares. A capital loss can be used to offset a capital gain, reducing any tax
you would otherwise have to pay.
30. Cartel: An organization of producers seeking to limit or
eliminate competition among its members, most often by agreeing to restrict
output to keep prices higher than would occur under competitive conditions.
Cartels are inherently unstable because of the potential for producers to
defect from the agreement and capture larger markets by selling at lower
prices.
31. Census: Official gathering of information about the population
in a particular area. Government departments use the data collected in planning
for the future in such areas as health, education, transport, and housing..
32. Central bank: Major financial institution responsible for issuing
currency, managing foreign reserves, implementing monetary policy, and
providing banking services to the government and commercial banks.
33. Centrally planned economy: An economic system in which the production,
pricing, and distribution of goods and services are determined by the
government rather than market forces. Also referred to as a "non market
economy." Former Soviet Union ,
China
34. Classical economics: The economics of Adam Smith, David Ricardo,
Thomas Malthus, and later followers such as John Stuart Mill. The theory concentrated
on the functioning of a market economy, spelling out a rudimentary explanation
of consumer and producer behaviour in particular markets and postulating that
in the long term the economy would tend to operate at full employment because
increases in supply would create corresponding increases in demand.
35. Closed economy: An economy in which there are no foreign
trade transactions or any other form of economic contacts with the rest of the
world.
36. Collateral security: Additional security a borrower supplies to
obtain a loan.
37. Commercial Policy: encompassing instruments of trade
protection employed by countries to foster industrial promotion, export
diversification, employment creation, and other desired development-oriented
strategies. They include tariffs, quotas, and subsidies.
38. Comparative advantage: The ability to produce a good at a lower
cost, relative to other goods, compared to another country. With perfect
competition and undistorted markets, countries tend to export goods in which
they have a Comparative Advantage and hence make gains from trading
39. Compound interest: Interest paid on the original principal and
on interest accrued from time it became due.
40. Conditionality: The requirement imposed by the
International Monetary Fund that a borrowing country undertake fiscal,
monetary, and international commercial reforms as a condition to receiving a
loan for balance of payments difficulties.
41. Copyright: A legal right (usually of the author or composer or
publisher of a work) to exclusive publication production, sale, distribution of
some work. What is protected by the copyright is the "expression,"
not the idea. Notice that taking another's idea is plagiarism, so copyrights
are not the equivalent of legal prohibition of plagiarism.
42. Correlation coefficient: Denoted as "r", a measure of the
linear relationship between two variables. The absolute value of "r"
provides an indication of the strength of the relationship. The value of
"r" varies between positive 1 and negative 1, with -1 or 1 indicating
a perfect linear relationship, and r = 0 indicating no relationship. The sign
of the correlation coefficient indicates whether the slope of the line is
positive or negative when the two variables are plotted in a scatter plot.
43. Cost benefit analysis: A technique that assesses projects through
a comparison between their costs and benefits, including social costs and
benefits for an entire region or country. Depending on the project objectives
and its the expected outputs, three types of CBA are generally recognised: financial;
economic; and social. Generally cost-benefit analyses are comparative, i.e.
they are used to compare alternative proposals. Cost-benefit analysis compares
the costs and benefits of the situation with and without the project; the costs
and benefits are considered over the life of the project.
44. Countervailing duties: duties (tariffs) that are imposed by a
country to counteract subsidies provided to a foreign producer Current account:
Part of a nation's balance of payments which includes the value of all goods
and services imported and exported, as well as the payment and receipt of
dividends and interest. A nation has a current account surplus if exports
exceed imports plus net transfers to foreigners. The sum of the current and
capital accounts is the overall balance of payments.
45. Cross elasticity of demand: The change in the quantity demanded of one
product or service impacting the change in demand for another product or
service. E.g. percentage change in the quantity demanded of a good divided by
the percentage change in the price of another good (a substitute or complement)
46. Cross elasticity of demand: The change in the quantity demanded of one
product or service impacting the change in demand for another product or
service. E.g. percentage change in the quantity demanded of a good divided by
the percentage change in the price of another good (a substitute or complement)
47. Crowding out: The possible tendency for government spending on goods
and services to put upward pressure on interest rates, thereby discouraging
private investment spending.
48. Currency appreciation: An increase in the value of one currency
relative to another currency. Appreciation occurs when, because of a change in
exchange rates; a unit of one currency buys more units of another currency.
Opposite is the case with currency depreciation.
49. Currency board: Form of central bank that issues domestic
currency for foreign exchange at fixed rates.
50. Currency substitution: The use of foreign currency (e.g., U.S.
dollars) as a medium of exchange in place of or along with the local currency
(e.g., Rupees).
51. Customs duty: Duty levied on the imports of certain goods. Includes
excise equivalents Unlike tariffs customs duties are used mainly as a means to
raise revenue for the government rather than protecting domestic producers from
foreign competition.
52. Death rate: numbers of people dying per thousand population.
53. Deflation: a reduction in the level of national income and
output, usually accompanied by a fall in the general price level.
54. Developed country is an economically advanced country whose
economy is characterized by a large industrial and service sector and high
levels of income per head.
55. Developing country, less developed country, underdeveloped
country or third world country: a country characterized by low levels of GDP
and per capita income; typically dominated by agriculture and mineral products
and majority of the population lives near subsistence levels.
56. Dumping occurs when goods are exported at a price
less than their normal value, generally meaning they are exported for less than
they are sold in the domestic market or third country markets, or at less than
production cost.
57. Direct investment: Foreign capital inflow in the form of
investment by foreign-based companies into domestic based companies. Portfolio
investment is foreign capital inflow by foreign investors into shares and
financial securities. It is the ownership and management of production and/or
marketing facilities in a foreign country.
58. Direct tax: A tax that you pay directly, as opposed to indirect
taxes, such as tariffs and business taxes. The income tax is a direct tax, as
are property taxes. See also Indirect Tax.
59. Double taxation: Corporate earnings taxed at both the
corporate level and again as a stockholder dividend Economic growth:
Quantitative measure of the change in size/volume of economic activity, usually
calculated in terms of gross national product (GNP) or gross domestic product (GDP).
61. Econometrics: The application of statistical and mathematical
methods in the field of economics to test and quantify economic theories and
the solutions to economic problems.
62. Economic development: The process of improving the quality of
human life through increasing per capita income, reducing poverty, and
enhancing individual economic opportunities. It is also sometimes defined to
include better education, improved health and nutrition, conservation of
natural resources, a cleaner environment, and a richer cultural life.
63. Economic growth: An increase in the nation's capacity to
produce goods and services.
64. Economic infrastructure: The underlying amount of physical and
financial capital embodied in roads, railways, waterways, airways, and other
forms of transportation and communication plus water supplies, financial
institutions, electricity, and public services such as health and education.
The level of infrastructural development in a country is a crucial factor
determining the pace and diversity of economic development.
65. Economic integration: The merging to various degrees of the
economies and economic policies of two or more countries in a given region. See
also common market, customs union, free-trade area, trade creation, and trade
diversion.
66. Economic policy: A statement of objectives and the methods
of achieving these objectives (policy instruments) by government, political
party, business concern, etc. Some examples of government economic objectives
are maintaining full employment, achieving a high rate of economic growth,
reducing income inequalities and regional development inequalities, and
maintaining price stability. Policy instruments include fiscal policy, monetary
and financial policy, and legislative controls (e.g., price and wage control,
rent control).
67. Elasticity of demand: The degree to which consumer demand for a
product or service responds to a change in price, wage or other independent
variable. When there is no perceptible response, demand is said to be
inelastic.
68. Excess capacity: Volume or capacity over and above that
which is needed to meet peak planned or expected demand.
69. Excess demand: the situation in which the quantity demanded at a
given price exceeds the quantity supplied. Opposite: excess supply
70. Exchange control: A governmental policy designed to restrict
the outflow of domestic currency and prevent a worsened balance of payments
position by controlling the amount of foreign exchange that can be obtained or
held by domestic citizens. Often results from overvalued exchange rates
71. Exchange rate: The price of one currency stated in terms of another
currency.
72. Export incentives: Public subsidies, tax rebates, and other
kinds of financial and nonfinancial measures designed to promote a greater
level of economic activity in export industries.
73. Exports: The value of all goods and nonfactor services sold to
the rest of the world; they include merchandise, freight, insurance, travel,
and other nonfactor services. The value of factor services (such as investment
receipts and workers' remittances from abroad) is excluded from this measure.
See also merchandise exports and imports.
74. Exchange control A governmental policy designed to restrict
the outflow of domestic currency and prevent a worsened balance of payments
position by controlling the amount of foreign exchange that can be obtained or
held by domestic citizens. Often results from overvalued exchange rates.
75. Externalities: A cost or benefit not accounted for in the price of
goods or services. Often "externality" refers to the cost of
pollution and other environmental impacts.
76. Fiscal deficit is the gap between the government's total spending and
the sum of its revenue receipts and non-debt capital receipts. It represents
the total amount of borrowed funds required by the government to completely
meet its expenditure
77. Fiscal policy is the use of government expenditure and taxation to
try to influence the level of economic activity. An expansionary (or
reflationary) fiscal policy could mean: cutting levels of direct or indirect
tax increasing government expenditure The effect of these policies would be to
encourage more spending and boost the economy. A contractionary (or
deflationary) fiscal policy could be: increasing taxation - either direct or
indirect cutting government expenditure These policies would reduce the level
of demand in the economy and help to reduce inflation
78. Fixed costs: A cost incurred in the general operations of the
business that is not directly attributable to the costs of producing goods and
services. These "Fixed" or "Indirect" costs of doing
business will be incurred whether or not any sales are made during the period,
thus the designation "Fixed", as opposed to "Variable".
79. Fixed exchange rate: The exchange value of a national currency
fixed in relation to another (usually the U.S. dollar), not free to fluctuate
on the international money market.
80. Foreign aid The international transfer of public funds in the form
of loans or grants either directly from one government to another (bilateral
assistance) or indirectly through the vehicle of a multilateral assistance
agency like the World Bank. See also tied aid, private foreign investment, and
nongovernmental organizations.
81. Foreign direct investment (FDI): Overseas investments by private
multinational corporations.
82. Foreign exchange reserves: The stock of liquid assets denominated in
foreign currencies held by a government's monetary authorities (typically, the
finance ministry or central bank). Reserves enable the monetary authorities to
intervene in foreign exchange markets to affect the exchange value of their
domestic currency in the market. Reserves are invested in low-risk and liquid
assets, often in foreign government securities.
83. Free trade: Trade in which goods can be imported and exported
without any barriers in the forms of tariffs, quotas, or other restrictions.
Free trade has often been described as an engine of growth because it
encourages countries to specialize in activities in which they have comparative
advantages, thereby increasing their respective production efficiencies and
hence their total output of goods and services.
84. Free-trade area A form of economic integration in which there exists
free internal trade among member countries but each member is free to levy
different external tariffs against non-member nations.
85. Free-market exchange rate Rate determined solely by international supply
and demand for domestic currency expressed in terms of, say, U.S. dollars.
86. Fringe benefit: A benefit in addition to salary offered to
employees such as use of company's car, house, lunch coupons, health care
subscriptions etc.
87. Gains from trade The addition to output and consumption
resulting from specialization in production and free trade with other economic
units including persons, regions, or countries.
88. General Agreement on Tariffs and Trade
(GATT) An international
body set up in 1947 to probe into the ways and means of reducing tariffs on
internationally traded goods and services. Between 1947 and 1962, GATT held
seven conferences but met with only moderate success. Its major success was
achieved in 1967 during the so-called Kennedy Round of talks when tariffs on
primary commodities were drastically slashed and then in 1994 with the signing
of the Uruguay Round agreement. Replaced in 1995 by World Trade Organization
(WTO).
89. Global warming Theory that world climate is slowly warming as a
result of both MDC and LDC industrial and agricultural activities.
90. Gross domestic product: (GDP) Gross Domestic Product: The total of goods
and services produced by a nation over a given period, usually 1 year. Gross
Domestic Product measures the total output from all the resources located in a
country, wherever the owners of the resources live.
91. Gross national product (GNP) is the value of all final goods and
services produced within a nation in a given year, plus income earned by its
citizens abroad, minus income earned by foreigners from domestic production.
The Fact book, following current practice, uses GDP rather than GNP to measure
national production. However, the user must realize that in certain countries
net remittances from citizens working abroad may be important to national well
being. GNP equals GDP plus net property income from abroad. Globalisation: The
process whereby trade is now being conducted on ever widening geographical
boundaries. Countries now trade across continents and companies also trade all
over the world.
92. Human capital Productive investments embodied in human persons. These include
skills, abilities, ideals, and health resulting from expenditures on education,
on-the-job training programs, and medical care.
93. Imperfect competition A market situation or structure in which
producers have some degree of control over the price of their product. Examples
include monopoly and oligopoly. See also perfect competition.
94. Imperfect market A market where the theoretical assumptions
of perfect competition are violated by the existence of, for example, a small
number of buyers and sellers, barriers to entry, nonhomogeneity of products,
and incomplete information. The three imperfect markets commonly analyzed in
economic theory are monopoly, oligopoly, and monopolistic competition.
95. Import substitution A deliberate effort to replace major
consumer imports by promoting the emergence and expansion of domestic
industries such as textiles, shoes, and household appliances. Import
substitution requires the imposition of protective tariffs and quotas to get
the new industry started.
96. Income inequality The existence of disproportionate
distribution of total national income among households whereby the share going
to rich persons in a country is far greater than that going to poorer persons
(a situation common to most LDCs). This is largely due to differences in the
amount of income derived from ownership of property and to a lesser extent the
result of differences in earned income. Inequality of personal incomes can be
reduced by progressive income taxes and wealth taxes.
97. Index of industrial production: A quantity index that is designed to
measure changes in the physical volume or production levels of industrial goods
over time.
98. Inflation is the percentage increase in the prices of goods and
services.
99. Indirect tax: A tax you do not pay directly, but which is passed on
to you by an increase in your expenses. For instance, a company might have to
pay a fuel tax. The company pays the tax but can increase the cost of its
products so consumers are actually paying the tax indirectly by paying more for
the merchandise.
100. Interdependence Interrelationship between economic and noneconomic variables.
Also, in international affairs, the situation in which one nation's welfare
depends to varying degrees on the decisions and policies of another nation, and
vice versa. See also dependence.
101. International commodity agreement Formal agreement by sellers of a
common internationally traded commodity (coffee, sugar) to coordinate supply to
maintain price stability.
102. International Labor Organization (ILO) One of the functional organizations of the
United Nations, based in Geneva, Switzerland, whose central task is to look
into problems of world labor supply, its training, utilization, domestic and
international distribution, etc. Its aim in this endeavor is to increase world
output through maximum utilization of available human resources and thus
improve levels of living.
103. International Monetary Fund (IMF) An autonomous international financial
institution that originated in the Bretton Woods Conference of 1944. Its main
purpose is to regulate the international monetary exchange system, which also
stems from that conference but has since been modified. In particular, one of
the central tasks of the IMF is to control fluctuations in exchange rates of
world currencies in a bid to alleviate severe balance of payments problems.
104. International poverty line An arbitrary international real income measure,
usually expressed in constant dollars (e.g., $270), used as a basis for
estimating the proportion of the world's population that exists at bare levels
of subsistence. Land reform A deliberate attempt to
reorganize and transform existing agrarian systems with the intention of
improving the distribution of agricultural incomes and thus fostering rural
development. Among its many forms, land reform may entail provision of secured
tenure rights to the individual farmer, transfer of land ownership away from
small classes of powerful landowners to tenants who actually till the land,
appropriation of land estates for establishing small new settlement farms, or
instituting land improvements and irrigation schemes.
105. Macroeconomic stabilization Policies designed to eliminate macroeconomic
instability.
106. Macroeconomics The branch of economics that considers the
relationships among broad economic aggregates such as national income, total
volumes of saving, investment, consumption expenditure, employment, and money
supply. It is also concerned with determinants of the magnitudes of these
aggregates and their rates of change over time.
107. Market economy A free private-enterprise economy governed by consumer
sovereignty, a price system, and the forces of supply and demand.
108. Market failure A phenomenon that results from the existence of market
imperfections (e.g., monopoly power, lack of factor mobility, significant
externalities, lack of knowledge) that weaken the functioning of a free-market
economy--it fails to realize its theoretical beneficial results. Market failure
often provides the justification for government interference with the working
of the free market.
109. Market-friendly approach: World Bank notion that successful
development policy requires governments to create an environment in which
markets can operate efficiently and to intervene selectively in the economy in
areas where the market is inefficient (e.g., social and economic
infrastructure, investment coordination, economic "safety net").
110. Market mechanism: The system whereby prices of commodities or
services freely rise or fall when the buyer's demand for them rises or falls or
the seller's supply of them decreases or increases.
111. Market prices: Prices established by demand and supply in a
free-market economy.
112. Merchandise exports and imports: All international changes in ownership of
merchandise passing across the customs borders of the trading countries.
Exports are valued f.o.b. (free on board). Imports are valued c.i.f. (cost,
insurance, and freight).
113. Microeconomics: The branch of economics concerned with
individual decision units--firms and households--and the way in which their
decisions interact to determine relative prices of goods and factors of
production and how much of these will be bought and sold. The market is the central
concept in microeconomics.
114. Middle-income countries (MICs): LDCs with per capita income above $785 and
below $9,655 in 1997 according to World Bank measures.
115. Mixed economic systems: Economic systems that are a mixture of both
capitalist and socialist economies. Most developing countries have mixed
systems. Their essential feature is the coexistence of substantial private and
public activity within a single economy.
116. Monetary policy: The regulation of the money supply and
interest rates by a central bank in order to control inflation and stabilize
currency. If the economy is heating up, the central bank (such as RBI in India
117. Money supply: the total stock of money in the economy; currency held
by the public plus money in accounts in banks. It consists primarily currency
in circulation and deposits in savings and checking accounts. Too much money in
relation to the output of goods tends to push interest rates down and push inflation
up; too little money tends to push rates up and prices down, causing
unemployment and idle plant capacity. The central bank manages the money supply
by raising and lowering the reserves banks are required to hold and the
discount rate at which they can borrow money from the central bank. The central
bank also trades government securities (called repurchase agreements) to take
money out of the system or put it in. There are various measures of money
supply, including M1, M2, M3 and L; these are referred to as monetary
aggregates.
118. Monopoly A market situation in which a product that does not
have close substitutes is being produced and sold by a single seller.
119. Multi-Fiber Arrangement (MFA) A set of nontariff bilateral quotas
established by developed countries on imports of cotton, wool, and synthetic
textiles and clothing from individual LDCs
120. Multinational corporation (MNC) An international or trans-national
corporation with headquarters in one country but branch offices in a wide range
of both developed and developing countries. Examples include General Motors,
Coca-Cola, Firestone, Philips, Volkswagen, British Petroleum, Exxon, and ITT.
Firms become multinational corporations when they perceive advantages to
establishing production and other activities in foreign locations. Firms
globalize their activities both to supply their home-country market more
cheaply and to serve foreign markets more directly. Keeping foreign activities
within the corporate structure lets firms avoid the costs inherent in arm's-length
dealings with separate entities while utilizing their own firm-specific
knowledge such as advanced production techniques.
121. National debt: Treasury bills, notes, bonds, and other debt
obligations that constitute the debt owed by the federal government. It
represents the accumulation of each year's budget deficit Public debt:
Borrowing by the Government of India internally as well as externally. The
total of the nation's debts: debts of local and state and national governments
is an indicator of how much public spending is financed by borrowing instead of
taxation.
122. Newly industrializing countries (NICs) A small group of countries at a relatively
advanced level of economic development with a substantial and dynamic
industrial sector and with close links to the international trade, finance, and
investment system (Argentina ,
Brazil , Greece , Mexico ,
Portugal , Singapore , South
Korea , Spain ,
and Taiwan
123. Nongovernmental organizations (NGOs) Privately owned and operated organizations
involved in providing financial and technical assistance to LDCs. See foreign
aid.
124. Non-Tariff trade barrier: A barrier to free trade that takes a form
other than a tariff, such as quotas or sanitary requirements for imported meats
and dairy products.
125. Official development assistance (ODA) Net disbursements of loans or grants made
on concessional terms by official agencies of member countries of the
Organization for Economic Cooperation and Development (OECD).
126. Official exchange rate: Rate at which the central bank will buy and
sell the domestic currency in terms of a foreign currency such as the U.S.
dollar.
127. Open economy An economy that encourages foreign trade and has
extensive financial and nonfinancial contacts with the rest of the world in
areas such as education, culture, and technology. See also closed economy.
128. Organization for Economic Cooperation and
Development (OECD):An
organization of 20 countries from the Western world including all of those in
Europe and North America . Its major objective
is to assist the economic growth of its member nations by promoting cooperation
and technical analysis of national and international economic trends.
129. Overvalued exchange rate An official exchange rate set at a level
higher than its real or shadow value--for example, 7 Kenyan shillings per dollar
instead of, say, 10 shillings per dollar. Overvalued rates cheapen the real
cost of imports while raising the real cost of exports. They often lead to a
need for exchange control.
130. Perfect competition A market situation characterized by the
existence of very many buyers and sellers of homogeneous goods or services with
perfect knowledge and free entry so that no single buyer or seller can
influence the price of the good or service.
131. Performance budget is a budget format that relates the input
of resources and the output of services for each organizational unit
individually. Sometimes used synonymously with program budget. It is a budget
wherein expenditures are based primarily upon measurable performance of
activities.
132. Political economy The attempt to merge economic analysis with
practical politics--to view economic activity in its political context. Much of
classical economics was political economy, and today political economy is
increasingly being recognized as necessary for any realistic examination of development
problems.
133. Portfolio investment Financial investments by private
individuals, corporations, pension funds, and mutual funds in stocks, bonds,
certificates of deposit, and notes issued by private companies and the public
agencies of LDCs. See also private foreign investment.
134. Poverty gap: The sum of the difference between the poverty line and
actual income levels of all people living below that line.
135. Poverty line: A level of income below, which people are deemed poor.
A global poverty line of $1 per person per day was suggested in 1990 (World
Bank 1990). This line facilitates comparison of how many poor people there are
in different countries. But, it is only a crude estimate because the line does
not recognize differences in the buying power of money in different countries,
and, more significantly, because it does not recognize other aspects of poverty
than the material, or income poverty.
136. Price: The monetary or real value of a resource, commodity,
or service. The role of prices in a market economy is to ration or allocate
resources in accordance with supply and demand; relative prices should reflect
the relative scarcity of different resources, goods, or services.
137. Price elasticity of demand: The responsiveness of the quantity of a
commodity demanded to a change in its price, expressed as the percentage change
in quantity demanded divided by the percentage change in price.
138. Price elasticity of supply: The responsiveness of the quantity of a
commodity supplied to a change in its price, expressed as the percentage change
in quantity supplied divided by the percentage change in price.
139. Quota: A physical limitation on the quantity of any item that
can be imported into a country, such as so many automobiles per year. Also a
method for allocating limited school places by noncompetitive means--for
example, by income or ethnicity.
140. Repo rate: This is one of the credit management tools used by the
Reserve Bank to regulate liquidity in South Africa
141. Revenue expenditure: This is expenditure on recurring items,
including the running of services and financing capital spending that is paid
for by borrowing. This is meant for normal running of governments' maintenance
expenditures, interest payments, subsidies and transfers etc. It is current
expenditure which does not result in the creation of assets. Grants given to
State governments or other parties are also treated as revenue expenditure even
if some of the grants may be meant for creating assets. Subsidy : Financial
assistance (often from the government) to a specific group of producers or
consumers.
142. Revenue receipts: Additions to assets that do not incur an
obligation that must be met at some future date and do not represent exchanges
of property for money. Assets must be available for expenditures. These include
proceeds of taxes and duties levied by the government, interest and dividend on
investments made by the government, fees and other receipts for services
rendered by the government.
143. Stabilization policies: A coordinated set of mostly restrictive
fiscal and monetary policies aimed at reducing inflation, cutting budget
deficits, and improving the balance of payments. See conditionality and International
Monetary Fund (IMF).
144. Subsidy: A payment by the government to producers or
distributors in an industry to prevent the decline of that industry (e.g., as a
result of continuous unprofitable operations) or an increase in the prices of
its products or simply to encourage it to hire more labor (as in the case of a
wage subsidy). Examples are export subsidies to encourage the sale of exports;
subsidies on some foodstuffs to keep down the cost of living, especially in
urban areas; and farm subsidies to encourage expansion of farm production and
achieve self-reliance in food production.
146. Tax evasion: An illegal strategy to decrease tax burden by
underreporting income, overstating deductions, or using illegal tax shelters.
147. Terms of trade The ratio of a country's average export price to its
average import price; also known as the commodity terms of trade. A country's
terms of trade are said to improve when this ratio increases and to worsen when
it decreases, that is, when import prices rise at a relatively faster rate than
export prices (the experience of most LDCs in recent decades).
148. Treasury bill: A short-term debt issued by a national government with
a maximum maturity of one year. Treasury bills are sold at discount, such that
the difference between purchase price and the value at maturity is the amount
of interest.
149. VAT: A form of indirect sales tax paid on products and
services at each stage of production or distribution, based on the value added
at that stage and included in the cost to the ultimate customer.
150. World Bank: An international financial institution owned by its
181 member countries and based in Washington ,
D.C. Third World
nations in the form of interest-bearing loans and technical assistance. The
World Bank operates with borrowed funds.
151. WTO: The World Trade Organization is a global international
organization dealing with the rules of trade between nations. It was set up in
1995 at the conclusion of GATT negotiations for administering multilateral
trade negotiations.
NEW ONES:
1. Arbitration- Reference of a dispute,
generally of industrial concern between the employer and his employees, to a
disinterested party in order to arrive at some form of settlement.
2. Annuity- Annual payment of fixed amount or
payment at an interval of a stipulated period.
3. Appreciation (of money)- When the
purchasing power of money or its value rises by the fall prices.
4. Balance of trade- The difference between
exports and imports of a country. It is considered as favourable when exports
exceed imports and unfavourable when imports exceed exports.
5. Bandh- A form of protest, stoppage of all
economic, business and office work to exert pressure on the government to
concede demands.
6. Barter- Trade by exchange of one commodity
for another.
7. Bilateralism- When two countries agree to a
special trade and payment between them
8. Bill of exchange- It is unconditioned order
signed by the maker, directing a certain person, to pay a certain sum of money
only to, or to the order of, a certain person or to the bearer of the bill.
9. Bond- Additional payment of dividend to
shareholders to extra gratuity to employees
10. Budget- Estimated income and expenditure
for the ensuing year
11. Buyer’s Market- Where and when buyers are
in excess of sellers?
12. Carat- Measure of weight of precious stones
about 4 grams; gold is purest when it is 24 carat.
13. Ceiling on Land Holding- Maximum limit of
land one hold in one’s possession. The present Congress government has
recommended a ceiling of 12 to 18 acres
per family.
14. Clearing
House- Daily meeting place of the clerks from banks where they deal
with bills to exchange them and clear
off outstanding differences.
15. Co-operative Farming- Farming lands pooled
in one unit by the farmers owning them and divide the harvest in proportion to
their land in the pool without loss of proprietary right.
16. Collective Farming- In this form of farming
the land does not belong to the individual farmer; the land belongs to the
state; the farmer is only an employee on land.
17. Death Duty or Estate Duty- tax on property
inherited at the death of its former owner; levied in India
18. Devaluation- Deliberate reduction in the
value of home currency in its relation
to foreign currency to reduce imports and promote exports. India U.S.A.
19. Dumping- To capture new markets generally,
when unsaleable goods at high price in some market are sent to some other
market at low price obviously to avoid lowering home price.
20. Gherao- A device of harassment pressed on
employer by his employees, the employer being kept confined in his office or
residence for unlimited time.
21. Gift Tax- Taxes on inheritance, succession
as well as gifts in order to limit individual’s freedom to pass on his property
intact to his successors.
22. Hard currency and soft currency- A term
used for a currency which is in short supply in relation to the demand for it
by other countries. The term was applied particularly to the U.S. dollars. Soft
currency is a currency in plentiful supply
on the foreign exchange market as a result of the country concerned
being inclined to import more than its exports
23. Lock out- As opposed to workers’ strike it
is the employers’ closing the factory to force the strikers to their terms of
settlement
24. National debt- This is the debt owned by a
government to people and institutions within its own borders (international
debt) and/or to foreign creditors (external debt).
25. Preference Shares- Holders are entitled to
a fixed divided before any distribution of profits can be made among ordinary
share holders
26. Public Sector-
State
27. Rebate- It is the refunded part of payment
made, or commission, say, towards an insurance policy for example.
28. Royalty- A lump sum payment for certain
kind of ownership or privilege e.g. a share of the sale price of book paid
by the publisher
29. State Trading- When a state undertakes, the
purchase and sale of certain commodities in order to control market prices and
to assure a fair deal both to the producer and consumer.
30. Sterling Balances- Accumulated debt of England London
31. Tariff- A protective device of a country
for safeguarding its industry against trade competition from outside.
32. Wealth Tax- It applies to individual’s
wealth exceeding Rs. 2 lakhs in value and to Hindu undivided families having
more than Rs. 3 lakhs. The tax is
intended to bring about the socialistic pattern of society.
33. Ad Valorem- Taxes in commodities are
calculated in two ways, either according to quantity or according to value. In
the case of an ad valorem tax the amount to be paid is proportionate to the value of the commodity.
34. Advice Note- A note to a person to inform
him that a certina transaction ha been carried out.
35. Bad Debt- A debt that is difficult or
impossible to collect
36. Balance Sheet- A statement showing the
assets and liabilities of a business at a certain date.
37. Bankruptcy- If a debtor is unable to meet
his commitments his creditors may file a bankruptcy petition.
38. Bearer- A term applied to cheques and
bonds, the possession of which gives a right to payment without formality.
39. Black Market- When the price of a commodity
is controlled by the State and rationing introduced, demand for the commodity
at the controlled price will be greater than the available supply. As a result
some people will be prepared to offer a much higher price than the controlled
price in order to try to obtain greater amounts of the commodity than they are
permitted to have as their rations.
40. Bounce- A colloquial term applied to
dishonoured cheque.
41. Broker- Generally an agent acting on behalf
of principal, except in the case of the bill broker who usually acts on his own
account
42. Buffer Stocks- Stocks built up to iron out
fluctuations of supply, and therefore of price, in industries producing primary
products capable of being stored, stocks are accumulated when supply is plentiful usually
43. Ceiling price- Maximum prices imposed under
a system of price control.
44. Cheap Money- A term used to describe a situation where
bank rate and other rates of interest are low
45. Copyright- The sole right to reproduce a
literary work or a musical composition. It gives the owner a monopoly of a
particular piece of property, which like other property can be assigned in
return for payment to another person or persons.
46. Currency Depreciation- A rise to the value
of currency in terms of others on the foreign exchange market.
47. Cybernetics- The study of human relations
in Industry, one of the subject of study in courses of Management studies.
48. Deflation- A policy aiming at reducing the
quantity of money in order to check inflation
49. Deficit Financing- Deliberately budgeting
for a deficit
50. Demonetisation- This occurs when a metal
such as silver used as a monetary standard ceases to be so used.
51. Double Cropping- An intensive type of
farming where the climate and nature of the soil enable two crops of a product
to be obtained in a single season, or where two different crops can be grown on
the same piece of land in one season.
52. Double Entry- The system in book keeping
whereby every transaction that has to be recorded gives rise to two entries,
the one a credit and the other a debit, so that total credits always equal
total debits.
53. Economic Man- A person motivated in all his
actions by purely economic considerations
54. Economic Planning- Deciding how the factors
of production of a country shall be allocated among different industries, there
by deciding how much of all kinds of goods and services shall be produced in
the ensuing period.
55. Exchange Rate- The rate at which one currency can be
exchanged for another
56. Extensive Cultivation- This occurs where
small amounts of labour and capital are employed on a large area of land,
usually where land is cheap and population small.
57. Extensive Cultivation- This occurs where
small amounts of labour and capital are employed on a large area of land,
usually where land is cheap and population small.
58. Face Value- An alternative term for the
nominal value of stocks and shares
59. Floating Debt- That part of the National
Debt which consists of short term borrowing by the Government
60. Free Market- In an economic sense a market
where the price of a commodity is determined by the free play of the forces of
supply and demand, the market price then being the equilibrium price.
61. Free Trade- A condition of international
trade where nations do not impose customs duties or others taxes on the imports
of goods from other countries.
62. Grants-in-aid- Grants made by the
Government to local authorities to supplement their revenue from the levying of
rates
63. Intensive Cultivation- This occurs when the
output per acre is very high as a result of the employment of large amounts of
labour and capital with relatively small amounts of land
64. Laissez-faire- the doctrine that State
interference should be kept to a minimum.
65. Mixed Economy- A term used to describe an
economic system, such as that of Great Britain
66. Monopoly- In the strictest sense of the
term a monopoly occurs when there is only one producer of commodity for which
there is no substitute.
67. Not Negotiable- The markings of these words
on a cheque or postal order is a safeguard in case it is stolen. It given the
holder of its no better right to it than the previous holder.
68. Open Market- A market in which there are no
restrictions on buyers and sellers, and where prices are determined by supply
and demand.
69. Optimum Population- This is that population
which provides a labour force which the other factors of production, yields the
maximum output per worker.
70. Population Explosion- A term used for the
rapid increase in the population that has occurred since 1950 in Latin America,
but especially in those parts of the world such as North America and Western
Europe when it had been previously expected that the population was expected to
decline.
71. Private Enterprise- An economic system
under which property of all kind can be privately owned and in which
individuals alone or in association with one another, can own productive
resources and undertake production.
72. Recession- A temporary failing off in
business activity, this term being employed both in Great Britain and the US to describe the temporary
lapses from full employment that have occurred since 1945.
73. Reflation- The easing of credit
restrictions to encourage an expansion of production, it is the milder sort of
inflation that accompanies the upward
swing of a trade cycle.
74. Scan- A confidence trick, swindle (Recently
Indian banks have been swindled to the tune to nearly 3000 cr by in setup of
scrupulous exchange brokers and others.
75. Social Security- Provision by the State for
assistance to people in need as a result of sickness unemployment, or old age.
76. Slump- A period of high unemployment
77. Special Drawing Right (S.D.R.s)- A device
for increasing international liquidity, S.D.R. are to be issued by the
International Monetary fund. They are not to be regarded in any way as
borrowings from the Funds, but instead
they are intended to supplement gold and convertible currencies and so form
part of each member’s reserves.
78. Standardisation- If a commodity is to be
produced on a large scale by mass production methods, to secure the greatest
economies of scale it will have to be standardised, since the extent to which
variety is required is a limiting factor on the scale of production
79. Standard of living- With reference to a
person, a family, or a body of people, it means the extent to which they can
satisfy their wants.
80. Territorial Waters- The off shore sea area
of a country with a seaboard over which it claims sovereignty and exclusive rights, for example for
fishing, prospective for oil, etc.
81. Welfare State- A term used of a
comprehensive State System of social insurance against unemployment sickness,
old age, and other similar contingencies and with other schemes, such as a
National Health Service family allowances, national assistance, etc.
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