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7/27/2019 Economics and Business Viva
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Fiscal Policy: Govt. spending policy that influences macroeconomic conditions. Two main
instruments are income (tax) and expenditure (national defense, highway construction).
Affect the following variables: Aggregate demand, resource allocation and distribution of
income.
Monetary policy: The action of central bank that determine the size and rate of growth of the
money supply. Tools: interest rate, bank reserve (CRR).
Through monetary policy BB regulates: Supply of money, Interest rate, Exchange rate.
Financial market: Money market and Capital market.
Capital market: 1. Primary market 2. Secondary market
Money market: A segment of financial market in which financial instruments with high liquidity
and very short maturities are traded. Such as short term borrowing and lending.
Call money: Money loaned by a bank that must be paid on demand. Call money doesnt have to
follow fixed payment schedule. Funds can be obtained quickly.
Functions of BB: 1.Maintain price stability through economic and monetary policy 2.Managing
the foreign exchange and gold reserve 3.Regulating banking sector of the country. 4.Issuing bank
notes.
Inflation: Rise in prices caused by an increase in the amount of money in circulation or increase
in the amount of money in spending.
Causes of inflation: 1.Print excess of money 2.Increase in production cost 3.Reduction of supply
of goods 4.Govt. spending 5.Development works of govt.
Controlling inflation: 1. Monetary measures 2. Fiscal measures
Deflation: Fall in the price brought about by a decrease in spending.
Monetary measures: 1. Bank rate policy- raise bank rate 2.CRR- raises CRR 3. Open market
operation bank sell govt. securities and bonds.
Fiscal measures: Govt. can ban export and encourage import by lowering import duties.
CRR: Cash reserve ratio. It is a percentage of bank deposit that banks are supposed to maintain
with central bank (6%).
SLR: Statutory liquidity ratio. It is a percentage of bank deposit that banks are supposed to
maintain with themselves in liquid form such as cash, gold, or govt. bonds (19%).
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PLR: Prime lending rate. Interest rate that commercial banks charge their most credit-worthy
customers on short term loans (Prime rate).
REPO rate: Repurchase. The discount rate at which a central bank repurchases govt. securities
from the commercial banks depending on the level of money supply it decides to maintain in the
countrys monetary system.
Currency policy: Total supply of money = Amount of gold reserve in the central bank.
Devaluation: Lowering the exchange value of a currency with respect to another.
Paid up capital: The amount of a companys capital that has been funded by shareholders is
called paid up capital. Paid up capital can be less than a companys total capital.
Bond: A long term debt instrument issued by a corporation or govt.
Banking: It involves acceptance of deposit repayable in demand and lending money at a interest
to customers who are creditworthy.
Economic policy: Economic policy refers to the actions that govt. take in the economic field. It
covers the systems for setting interest rate and govt. budget as well as the labor market, national
ownership and many other areas of govt. intervention into the economy.
Business: The exchange of goods, services or money for mutual benefit of profit. It is also an
economic activity.
Economics: The study of how a society chooses to use scarce resources to produce goods and
services and to distribute them for consumption. Four factors: Land, labor, capital andorganization.
Cartel: Syndicate made by producers (OPEC)
Pool: Syndicate made by traders.
Ethics: A principles of behavior that distinguish between right and wrong.
Management: The application of planning, organizing, leading and controlling functions in a
efficient manner to accomplish objectives.
Utility: Ability of a product to satisfy customers need. Form, time, place and possession utility.
Marketing research: The systematic gathering, recording and analyzing information for taking
marketing decisions.
Marketing mix: The combination of four elements- product, price, place, promotion- used to
satisfy the need of the target market.
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Marketing plan: It involves deciding on marketing strategies that will helps the company to attain
its overall strategic objectives.
Money: Anything commonly accepted as a means of paying for goods or services.
Trust: A legal entity set up to hold and manage assets for a designated beneficiary.
Finance: Finance is the study of money within the firm with the responsibility of finding funds,
managing those funds and determining their best uses.
Accounting: The process of identifying, measuring and communicating economic information to
permit informed decisions by the users of the information.
Financial statement analysis: The art of transforming data from financial statements into
information that is useful for informed decision making.
SBU: A separately managed division or unit of an enterprise with strategic objectives that is both
distinct from the parent unit and integral to the overall performance of the enterprise. It is created
to target a specific market.
Strategic marketing: Identification of one or more substantial competitive advantages a firm has
in the market it serves and allocation of resources to exploit them.
Service marketing: It is the form of marketing that focuses on selling services.
Business plan: A business plan is a formal or informal document that serves as a road map for a
business. It defines business and its goals.
Micro economics: It concerns with the behavior of individual entities such as markets, firms etc.
Macro economics: It concerns with the overall performance of the economy.
GDP: C+I+G+X (consumption, gross investment, govt. purchase of goods and services, net
export within a given year).
Corporate culture: The beliefs and behavior that determine how a companys employees and
management interact and handle outside business transaction. It reflects on dress code, business
hour, employee benefit, turnover, client satisfaction etc.
7/27/2019 Economics and Business Viva
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Basis of Difference Trade CommerceMeaning Trade refers to the
exchange of goods and
services by the intendedparties.
Commerce involves the
exchange of goods and
services with a motive toearn higher profits on them.
Scope Trade has a narrow scope
of exchange.
Commerce has a wider
scope of exchange as it
involves transportation andshipment of goods and
services.
Distance The sale of goods and
services under trade, takesplace only within shorter
distances.
The sale of goods and
services under commercecovers longer distances.