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Black Money: Taxable money not include in tax or money earned through illegal
activities (it is not taxed)
Idle Money: It is defined as inactive money that does not contribute to productive
efforts in an economy.
It results from what Keynes called Liquidity preference i.e. the desire to hold money
rather than risk it on interest-earning assets.
Bill of Sight: Declaration made by importer to the custom. In situation when the
importer wants to inspect the good before paying duties.
Bill of Exchange: A non-interest order that one party agrees to pay to the other on a
fixed date.
Bill of Lading: It is a documentary evidence giving details of goods shipped, the ship
on which the goods are consigned and the name of the consigner and the consignee.
BOP: Tabulation of credit and debit with foreign countries and international
institutions.
Counter Trade Policy: In this trade goods are purchased from the seller only
when the seller is ready to buy something from the purchaser also.
Dumping: The sale of any commodity in a foreign market at a price below host
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country & also at times such quantity that can not be explained in a fair competition.
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Autarky: Self dependence of an economy.
Entrepot Trade: Import of goods with intention of exporting them without rendering NOTES…
them liable for duty.
Free on Board (FOB) & CIF: This is a term applied to the valuation of goods up to the
point of embarkation. It compares with C.I.F. (charged in full or cost-insurance
freight), which is valuation including all transport coasts and insurance up to the
Dismemberment.
Parallel Import: Importing without intellectual property consideration (Grey market)
Commodity Shunting: This term signifies the practice of buying a commodity with
one currency and selling if for another in order to circumvent exchange control
regulations, which may prevent direct foreign exchange convertibility.
Circular flow of Income: It is the process of flow of income from firms to house hold
and a flow of expenditure from house hold to firm.
Disposable income: Disposable income is personal income minus personal taxes.
Average Propensity to consume: This is the total value of expenditure on
consumptions.
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C = Amount spent
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Y = Pre tax income, T = Taxes
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Average Propensity to Save (A.P.S.): This is defined as the proportion of income,
which is not spent on consumption goods and services. (Also known as saving ratio).
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changing the direction of the company in order to meet changing consumer needs
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Nominal Income: It is that income which is not being adjusted for the effects of
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inflation or deflation.
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Real Income: It is different from money income as it looks into the purchasing power
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of the money i.e. taking into account the effect of inflation or deflation in calculating
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Inflation: The process rising prices leading to erosion of purchasing power.
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Deflation: Contraction of supply of Money – Money supply given below the need of
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Disinflation: Process of bringing down prices moderately without adverse impact on
production and employment.
Deficit Financing: Prof. J. M. Keynes
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Deficit financing is the policy of bridging the government's expenditure and revenue
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gap.
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and the curved line is the amount of inequality of wealth distribution, a figure
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described by the Gini coefficient.
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Gini Coefficient: Area between the Lorentz curve and the line of perfect equality
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Giffen Good: Sir Robert Giffen (1837 - 1910)
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Here law of demand does not operate as consumption goes up as the price rises. eo
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Bank Rate: Bank rate is the rate at which the central bank of a country gives loan to
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Interbank rate: The rate of interest charged by a bank on a loan to another bank. For
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Example LIBOR (London Inter Bank Offer rate), MIBOR (Mumbai Inter Bank offer
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Rate).
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RTGs: A payment and settlement System for inter bank transactions on a gross basis
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CRR: The proportion of total deposits that banks have to deposits with the Central
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Bank of a country.
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SLR: The proportion of total deposits that banks have to maintains with itself in the
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Floating currency: Currency which has a floating exchange rate (exchange rate
determined by market forces of demand and supply). NOTES…
Intervention Currency: A currency that is commonly used by central
banks for exchange market intervention. For example, RBI uses US$ as intervention
currency in India.
Canons of Taxation:
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Amount collected to be rational
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Time of payment as per the convenience of tax payer
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• Cost incurred on collection should be less than amount collected through
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taxation.
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Phillips Curve: It shows an inverse relationship between the rate of inflation and the
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rate of unemployment. eo
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Price Support: Govt. purchases commodities for storage and distribution to maintain
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Organization and Method (O&M): Examination of office work to make them more
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efficient.
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product which could be produced with the same quantities of factors of production.
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Liquidity: It means the ease with which an asset can be exchanged for money value.
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Gresham Law: This originally came with the idea that the people would hold the
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coins with higher metal value and only keep old ones in circulation.
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Letter of Credit: A letter from a bank to another bank authorizing payment in the
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process.
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Euro Dollar: US dollar or right to US dollar held by the people outside USA.
Grant in aid: Payment made by the govt. to local agencies for covering the cost of
certain developmental activities.
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Zero Net Aid: When loan received by a country equals repayment for the same year.
Convertibility: Currency which can be exchanged for another currency or gold. (Ref.
Class)
Crawling Peg: System of exchange value adjustment in which international value is NOTES…
changed marginally from time to time.
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Credit Squeeze: Increasing the interest rate limiting the supply of money.
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Dis-saving: It is the excess of consumption expenditure] over disposable income.
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Islamic Banking: It is banking or banking activity that is consistent with the principles
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of sharia and its practical application through the development of Islamic economics.
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As such, a more correct term for 'Islamic banking' is 'Sharia compliant finance' eo
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Narrow Banking: It means that weak banks should confine their business to no risk
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assignments.
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Credit Rationing: It takes place when a bank discriminates amongst the borrowers.
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Bridge Loan: Loan by bank or individual for short period for attending shortage of
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Green Shoots: Green shoots is a term used colloquially to indicate signs of economic
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Sleeping Partner, Dormant Partner: A person who invests but does not take part in
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Venture Capital: A capital invested in an activity with high degree risk but with
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perceived long term growth potential, also known as risk capital. Though, it typically
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entails high risk for the investor but probably has the potential for above-average
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returns.
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Mutual Fund: A mutual fund is a company that brings together money from many
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people and invests it in stock market, bonds or other assets. The combined holdings
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of stocks, bonds or other assets the fund owns are known as its portfolio.
Hedge Fund: A fund which is usually managed by wealthy individuals to make
returns out of it by way of using strategies like short selling, swaps, arbitrage, etc.
They are generally exempt from various rules and regulations to manage other funds
like mutual fund.
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Right Issue: It is a method of raising further capital from existing share holders.
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Gilt-edged Securities: High-grade bonds that are issued by a government or firm.
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This type of security originally boasted gilded edges, thus the name. In the case of a
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firm, a gilt-edged security is a stock or bond issued by a company that has a strong
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record of consistent earnings and can be relied on to cover dividends and interest.
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Under-subscription: Taking of fewer shares by the investors then are offered for sale
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Initial Public Offering (IPO): A company’s first stock offering to the public.
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Buy-Back of shares: Companies buy back a certain % of its shares from its share
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holders.
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Subprime lending: It means making loans to people who may have difficulty
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Crowding out: For example, the higher taxes required for government to fund social
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welfare programs leaves less discretionary income for individuals and businesses to
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make charitable donations. Further, when government funds certain activities there
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is little incentive for businesses and individuals to spend on those same things.
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