Monday, May 25, 2009

SHORT NOTES- ECONOMY

1>Merit goods: The concept of a merit goods was introduced by Richard Musgrave (1957, 1959) and it denotes a commodity which is judged that an individual or society should have on the basis of some concept of need, rather than ability and willingness to pay. Examples include the provision of food stamps to support nutrition, the delivery of health services to improve quality of life and reduce morbidity, subsidized housing and arguably education.A merit good can be defined as a good which would be under-consumed (and under-produced) in the free market economy
2>Cheap Money: The money which is available at lower interest rates, softer terms and easy conditions.Cheap money causes inflation in an economy.
3>Countervailing Duty: It is the duty against dumping and aimed at increasing the prices of the products being dumped so as to protect the interest of the domestic industries and farmers.
4>Hot Money:The money which is highly volatile and flees from one country to another swiftly to take advantage of better short term interest rates.
5>Trickle Down Theory: The basis of the theory emphasizes on heavy industries and it is assumed that the benefits of such industries will trickle downwards and will eventually benefit the consumer goods industries
6>Engel's law: This suggests that the lower income group spends larger part of their income on food and other similar items and with increase in income proportion of expenditure over such items decreases.
7>Stagflation: It is a state of the economy where economic activity continues to slow down but wages and prices continue to rise.The term is a blend of stagflation and inflation.
8>Ad Valorem Tax: A tax that is specified as a percentage of value. Sales, income, and property taxes are three of the more popular ad valorem taxes devised by government. The total ad valorem tax paid increases with the value of what's being taxed.
9>Administered price:It is the price fixed by the government to keep control over rise or fall of prices of particular commodities sos that the vulnerable groups do not suffer.
10>Cash Reserve Ratio:Every scheduled bank has to keep a percentage of total assets and deposits as deposits with the RBI.Presently it is 5% in India.

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