Economica

       Effects of Inflation & Measures  To Control It 1) Effects of Inflation on Business Community:  Inflation is welcomed by entrepreneurs and businessmen because they stand to profit by rising prices. They find that the value of their inventories and stock of goods is rising in money terms. They also find that prices are rising faster than the costs of production, so that their profit is greatly enhanced. 2) Fixed Income Groups: Inflation hits wage-earners and salaried people very hard. Although wage- earners, by the grace of trade unions, can chase galloping prices, they seldom win the race. Since wages do not rise at the same rate and at the same time as the general price level, the cost of living index rises, and the real income of the wage earner decreases. 3) Farmers: Farmers usually gain during inflation, because they can get better prices for their harvest during inflation. 4) Investors: Those who invest in debentures and fixed-interest bearin...

          Inflation Inflation is commonly understood as a situation of substantial and rapid general increase in the price level and consequent fall the value of money over a period of time. Inflation means persistent rise in the general level of prices. Inflation is a long term operating dynamic process. By and large, inflation is also a monetary phenomenon. It is usually characterized by an overflow of money and credit. In fact, the root cause of inflation is the expansion of money supply beyond the normal absorbing capacity of the economy. The behaviour of general prices is measured through price indices.The trend of price indices reveals the course of inflation or deflation in the economy. Crowther defines inflation as “a state in which the value of money is falling,ie., prices are rising”. Professor Samuelson defines “Inflation occurs when the general level of prices and costs is rising”.   Types of Inflation. On different grounds, economists have...

Contingent Functions of Money With the period of time, the functions of money got diversified. Besides, the primary and I secondary functions, professor D. Kinley lays stress on the contingent functions of money. Contingent functions of money include distribution of income, measurement and maximisation of utility, basis of credit, liquidity to wealth etc. A) Measurement and Division of income, national income - The contribution of all factors of Production like Land, Labour, Capital and Organization constitutes our national product. This product is the result of their joint efforts. So this product belongs to all of them.This national product is also known as national income. So, this national income is to be distributed among the above stated factors of production. Money makes the distribution of this joint production among the various factors of production easy. The relative shares of factors are also calculated through money.It means the share of labour in the national income, the s...

              Money Money is a concept which we all understand but which is difficult to define in exact terms.Money is anything serving as a medium of exchange. Most definitions of money take ‘functions of money’ as their starting point. ‘Money is that which money does.’ According to Prof. Walker, ‘Money is as money does.’ This means that the term money should be used to include anything which performs the functions of money, viz., medium of exchange, measure of value, unit of account, etc. Since general acceptability is the fundamental characteristic of money, therefore, money may be defined as ‘anything which is generally acceptable by the people in exchange of goods and services or in repayment of debts.’ In general terms, the main function of money in an economic system is “to facilitate the exchange of goods and services and help in carrying out trade smoothly.” Its basic characteristic is general acceptability. Functions of money are reflected i...

     Basic Concepts in Economics Part II  The Sectors of the Economy The economic activities of an economy is classified mainly into three primary sector economic activities (agriculture and allied), secondary sector (manufacturing, construction etc) and service sector or tertiary sector activities (transport and communication etc).The Ministry of Statistics and Programme Implementation (MOSP), Government of India has been publishing National Accounts Statistics annually classifying the Indian economy into three sectors and re-classifying the sectors into various sub sectors. In this classification primary sector includes agriculture, forestry and logging and fishing. The secondary sector includes manufacturing (registered and un-registered manufacturing), construction, electricity, gas and water supply. Tertiary sector or service sector includes transport, storage and communication, railway, trade, hotels and restaurants, banking and insurance, real estate, ownershi...

   Basic Concepts in Economics Part I 1) Production: Any economic activity directed towards the satisfaction of human wants is known as production. The production of goods and services is necessary for the existence of an economy. The level of production in any economy is the best measure of its performance, living standards of its people and the extent of technological development and growth. It includes both the manufacturing of material goods as well as the provision of services. The production of electrical and electronic goods, automobiles etc and the work of teachers, doctors, lawyers etc are all production in the economic sense. 2) Consumption: The act of satisfying one’s wants is called consumption. Goods and services are produced only because human wants need to be satisfied. No one will produce if there is no consumption. The quality and quantity of consumption reflects the levels of income and employment in an economy. 3) Investment: Investment is the addition made ...

                  Budget Policy According to Paul A. Samuelson, a budget shows, for a given year, the planned  expenditures of government programmes and the expected revenues from tax systems.  The budget typically contains a list of specific programmes (i.e. education, welfare, defence, etc.), as well as tax sources (i.e., individual income tax, social-insurance taxes, etc.). Introduction: According to John F. Due, a budget may be defined as a financial plan that serves as  the basis for expenditure decision-making and for subsequent control. A 'budget surplus' occurs when all taxes and other revenues exceed government  expenditures for a year. A 'budget deficit' is incurred when expenditures exceed taxes.  When revenues and expenditures are equal during a given period, the government has  a 'balanced budget'. When the government incurs a budget deficit, it must borrow from the public to pay its bills. To borrow...

Causes of Market Failure / Reasons of   Government's Intervention in  Market Economy: The market economic system operates under Price Mechanism. Consumers show their  will or desire to buy a commodity at a given price in order to maximise their utility. On  the other hand, the producers are aimed at maximising their profit for what they  produce. In market economy, there is no justification for state intervention but there are  some reasons that necessitate the government's intervention in the economy as  discussed below:  (a) To avoid Monopoly:  Monopoly is a situation in which one seller rules over the whole industry. The buyers are compelled to purchase commodity at the price fixed by  the monopolist. Therefore, the government interferes for the benefits of the consumers.  The government interferes in pricing of the commodity, and/or encourages new firms to  enter into the market/industry. (b) To maintain Price Mechanis...

        Introduction to Public Finance:  Before we begin with the public finance, we would like to point out the major functions of  a modern government:  (a) Improving economic efficiency  (b) Making the distribution of income less unequal  (c) Stabilising the economy through macro-economic policies  (d) Representing the country internationally   It is duty of the government to bring economic and social justice in the country. And this  can only be done by properly utilising the funds raised through taxes and other sources  of public finance.  The famous American Economist J.M. Keynes has revolutionised and changed the meaning of public finance. According to Keynes, public finance should be used as an  instrument for achievement of certain economic and social objectives. Before Keynes,  the concept of public finance was to raise sufficient revenues for meeting public expenditure. In other words, before...

       New Development Bank  The New Development Bank (NDB), formerly referred to as the BRICS Development Bank, is a multilateral development bank established by the BRICS states (Brazil, Russia, India, China and South Africa).[1] According to the Agreement on the NDB, "the Bank shall support public or private projects through loans, guarantees, equity participation and other financial instruments." Moreover, the NDB "shall cooperate with international organizations and other financial entities, and provide technical assistance for projects to be supported by the Bank."[1]  The initial authorized capital of the bank is $100 bln divided into 1 mln shares having a par value of $100,000 each. The initial subscribed capital of the NDB is $50 bln divided into paid-in shares ($10 bln) and callable shares ($40 bln). The initial subscribed capital of the bank was equally distributed among the founding members. The Agreement on the NDB specifies that the voting pow...