Terms and Definitions related to Economics
Administered price: A price set not by the forces of demand and supply, but by some authority like the Government or a regulatory authority. Agenda 21: Programme of action adopted at the Earth Summit in 1992. It has 21 chapters dealing with all aspects of sustainable development, conservation, and resource management. Appropriation Bill: A bill introduced in the Parliament together with the budget, seeking the approval of the House to permit expenditure from the Consolidated Fund of India. Arbitrage: The practice of taking advantage of price differences in two markets. Asset-stripping: Selling surplus land or machinery of an industrial undertakings to convert the idle or under-utilized asset into cash. Balance or Payment (BOP): It is the summary record of a country’s economic transactions with the outside world, during a period, usually one year. It has two segments – current account and capital account. Current account consists of exports and imports (visible trade), and receipts and payments in respect and payments in respect of tourism, travel, remittance by non-residents etc. (invisible). Capital account consists of foreign direct investment and sale and purchase of financial assets. Balance of Trade: The difference between visible imports and visible exports. This is one of the components of balance of payment on current account. Bank rate: The official rate of which the RBI will rediscount the bills of commercial banks. It is used as a signal by the RBI to commercial banks on the RBI’s thinking of what of interest rates should be: Bear: In a stock exchange a trader who expects the prices of shares to fall. Bear market is where there are several bear operators and consequently prices fall persistently. Beggar-my-neighbor policy: A policy where a country seeks to benefit at the expense of another country. Competitive devaluation of currency is an illustration. Bull: A trader who expects the price of stocks to rise, as opposed to a bear. Buyer’s market: A market which is favorable to the buyer who may set the price, as opposed to a seller’s market. Capital flight: Sudden movement of capital from one country to due to apprehension of a fall in the value of the currency, international turmoil, political uncertainty, or any other disturbance. Capital-output ratio: The ration of capital used for a given output. Incremental capital-output ratio is adopted as a measure in deciding investment priorities. Carbon tax: A tax proposed to be imposed on users of fossil fuel to compensate for the pollution on the principle, “polluter pays”. Ceteris paribus: “Other things remaining equal”, A statement used while formulating an economic proposition explaining the cause effect relationship. Cheap money: Maintaining low rates of interest to stimulate investment during recession or depression. Command Economy: An economy where decisions such as what to produce and how to distribute the produce are taken by a central authority. Comparative advantage, Theory of: The theory that specializing in the production of goods will benefit all trading parties, including those who may have absolute advantage in producing all goods. Consumer Durables: Items of consumption which have a fairly long life. Cars, refrigerators, washing machines, TVs etc. are included in this category. Consumer Surplus: The excess satisfaction or benefit which a consumer derives from purchasing a commodity or service over the price paid by him. Consumer Sovereignty: The concept that it is ultimately by consumer who decides what will be produced and at what price. Current account convertibility: The holders of domestic currency have the right to convert the currency into foreign exchange for any current account purpose such as travel, tourism, trade. Capital account transaction like transactions in assets are not permissible unless there is capital account convertibility. Cost, insurance, freight (cif): The price of a...
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