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Yogita Ingle 5 years, 11 months ago
Money multiplier or credit multiplier indicates the maximum amount of additional money that can be legally created by the commercial banks.
The value of money multiplier = 1/LRR
Where
LRR is Legal Reserve Ratio
Legal Reserve Ratio (LRR) is the reserve required to be maintained by the commercial banks as a percentage of their demand deposits.
There are two more ratios which play an important role in the determination of the value of money multiplier, they are cash reserve ratio and cash deposit ratio.
•The higher will be the CRR, the lower will be the volume of credit creation and vice-versa
•CDR is the ratio between additional money released by RBI and received by public is actually deposited into banks.
Posted by Afreen Parween 5 years, 11 months ago
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Yogita Ingle 5 years, 11 months ago
Financing the deficit by selling assets or by borrowing from abroad by monetary authorities of a domestic country is known as official transactions or balancing the surplus by lending to abroad or purchasing assets from abroad by monetary authorities is called official reserves.
The decrease in official reserves is known as overall Balance of Payments deficit and the increase in official reserves is known as overall Balance of Payments surplus.
Posted by Tikanshu Kumawat 5 years, 11 months ago
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Yogita Ingle 5 years, 11 months ago
Intermediate goods: These goods are mostly used as raw material for the production of other goods during the accounting year. These goods may be used for further sale to earn profit during the accounting year. These goods are within the boundary line of production process. These goods are still in the process of value addition and are not available for use by their final users. These goods are not included in the estimation of national income.
Final goods: These goods are not used as raw material for the production of other goods during the accounting year. These goods are not used for further sale to earn profit during the accounting year. These goods are outside the boundary line of production process. A value addition is not required to these goods and is available for use by their final users. These goods are included in the estimation of national income.
Priti Kumari 5 years, 11 months ago
Posted by Dabit Norah 5 years, 11 months ago
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Yogita Ingle 5 years, 11 months ago
Demand Deposits also known as Current Account deposits refer to those deposits that provide the depositor the liberty to withdraw money at any point of time. That is, the account holder of the demand deposits can demand these deposits at any point of time as per their discretion and convenience. Such deposits do not offer any rate of interest.
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Yogita Ingle 5 years, 11 months ago
|
Tariff barriers |
Non-tariff barriers |
|
These are taxes imposed on the import of goods by a country to protect domestically produced goods. |
These are restrictions imposed on the import of goods by a country to protect domestically produced goods. |
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They are imposed at reasonable prices by member countries of the World Trade Organization. |
They are completely abolished (import quotas and voluntary export restraints) by the World Trade Organization. |
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More explicit in nature. |
Not so explicit (such as sanitary facilities and labour issues). |
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Nominal GDP. When goods and services included in GDP are valued at current prices, i.e., prices prevailing in the year for which GDP is being measured, it is called nominal GDP. For example, Nominal GDP of 2010 is the value of output produced in 2010 calculated at the market prices prevailing in 2010. In short Nominal GDP values current year's output in an economy at current year prices.
Ayushi Malik 5 years, 11 months ago
Posted by Mukesh Sharma 5 years, 11 months ago
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Ayushi Malik 5 years, 11 months ago
Yogita Ingle 5 years, 11 months ago
Commercial banks create money in the economy by providing loans.
Loans are lent to consumers by commercial banks in the form of various loans - car loans, mortgages, business loans, home equity loans and personal loans. The money allocated for these loans comes from the deposits of other clients of the bank. As the bank is aware that these funds are most likely to remain stagnant for a given period, a definite amount of funds is lent to others, who are then expected to repay their loans with interest. Thus, the bank collects interest on the money of its depositors without risking any actual money of its own. In this manner, the funds of one depositor are used to finance the loans of several customers of the bank. Moreover, the bank gets money from the interest collected from the individual to whom the loan was lent.
Let us understand it better with the help of an example.
Let Rs 100 be deposited into the bank by a depositor. The bank is aware that this depositor is unlikely to withdraw more than Rs 10 in the near future. It therefore puts Rs 10 in reserve and gives a loan of Rs 90 to X and enters the sum in his/her account. Because the bank knows that X will not use Rs 90 soon, it gives a loan of Rs 81 to Y by creating a deposit in Y's name and keeps aside Rs 9 in reserve. Theoretically, this process is carried out until no more excess reserves are left in the bank.
Thus, now the bank has three account holders with Rs 100, Rs 90 and Rs 81 in their accounts which is equal to Rs 271. This shows that the bank with the initial Rs 100 has now created a new deposit of Rs 271. This is the way banks create money.
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Ayushi Malik 5 years, 11 months ago
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Yogita Ingle 5 years, 11 months ago
Goods which are within the boundary line of production it value yet to be added and are unavailable for uses by their final users are called intermediate goods.
These goods are consumed by another firm and are used as intermediate goods in the production process or for further sale. For example, papers purchased by newspaper agency for printing news are intermediate goods.
Value of intermediate goods is merged with the value of final goods. Here the value of intermediate good is not included in the estimation of national income.
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