GLOSSARY
OF
SOME BANKING/ECONOMICS TERMS
I am giving some short notes on banking /economics terms as under for banker :
Accounting year :: Fiscal year beginning 1st April
Accounts of the Nation :: Four accounts relating respectively to Production (Gross Domestic Product and Expenditure), consumption (National Disposable Income and it appropriation), accumulation (Capital Finance) and external transactions (External transactions account).
Accumulation :: Acquisition of fixed assets. stocks of non-durable , financial assets, patents, copyrights and other intangible assets during a period of account less the incurrence of liabilities.
Acquisition :: The purchase of controlling interest in a firm generally via a tender offer for the target shares.
Actuary :: Actuary is a person employed by an insurance company or other organization to calculate the risk involved in insurance, and therefore the premium payable by persons taking out insurance.
Assets :: Ownership of machinery, equipment furniture, buildings and other durable reproducible goods, stocks of non-durable goods, land monuments and other non-reproducible tangible assets, copyrights leases, financial claims on other parties and other intangible assets.
Aggregate Demand :: Total value that , firms and Government are willing to pay for the output of the country during a given period.
Aggregate Supply :: Total value of the output available for purchase by economy by a given period.
Allonge :: It is a piece of paper attached to a bill of exchange so that endorsement can be written on it.
Arbitrageur :: He is a person who looks out for arbitrage opportunities (price differences between various markets).
Automatic Income stabilizers :: Non-discretionary or built-in measures which held given stability to the economy by increasing or decreasing the budgetary deficit. Example : progressive income tax,unemployment taxes and subsidies, expenditure on agricultural price stabilization, etc.
Average cost :: Average cost per unit of output, i.e. cost divided by the output.
Average Fixed cost :: Average fixed cost is obtained by dividing total fixed cost by the quantity of output. It can also lbe measured as the difference between the average total cost and average variable cost.
Average Marginal cost relationship:: When an average cost curve is falling, the corresponding marginal cost curve lies below the average cost, when the average cost curve is at its minimum, the corresponding marginal cost curve is equal to it; and when the average cost curve is rising, its corresponding marginal cost curve lies above it.
Average -Marginal Revenue Relationship:: When the average revenue curve is rising the corresponding marginal curve lies above it; when the average revenue curve is falling its corresponding marginal curve flies below it, and when the average revenue curve is at its maximum, the marginal revenue curve is equal to it.
Bond :: A legal agreement to pay a certain sum of money (called principal) at some future date and carrying a fixed rate of interest; issued by the corporations, central, state and local government; a mans of financing long term investments.
Bottom-Fisher :: An investor who buys of the shares of companies which are trading below their face values in the hope of a turnaround of the companies.
Break-even point :: Output at which average revenue equals average total cost. In economies, total cost includes normal profits. The break even point as defined in economies, therefore,does not imply zero profits.
Break forward :: A foreign exchange forward contract where one party has the right but not the obligation to terminate the contract at one or more pre-determined times during the life of the transaction, it is known as cancellable forward. The interest rate version of the break forward is also known as canceable swap.
Bucket Shop :: If a brokerage firm is not a member of a recognized stock exchange, it is called Bucket Shop.
Budget :: An estimate of expected revenues and expenditure for a given period usually a year, item by item.
Budget Surplus :: Budget in which total revenue exceeds total expenditure.
Business Cycle :: Fluctuations in general business and economic activity occuring in advanced industrial market economics that rurn in a cycle.
Cap & Collar Mortgage :: Mortgge with fixed upper and lower limits of the variable interest rates.
Capital :: A man-made factor or production; a produced means of further production (1) also defined as physical real assets that yield an income; (2) as money representing businessmen's fund used to produce capital goods; (3) also net worth or shareholders' equity investment in business.
Capitalism :: Economic system featuring private property in means of production, commodity production and profit as the guiding motivating force of production.
Capital Market :: Places where long-term titles to capital assets such as bonds, debentures, shares and mortgages are bought and sold.
Capital formation,Gross &Net ::Gross capital formation includes gross fixed capital formation and change in stocks, Net capital formation is gross capital formation less consumption of fixed capital.
Capital formation, Domestic :: Domestic capital formation is with reference to the activities ofall the producers in the domestic territory of the country. It includes fixed capital formation which consists of the acquisition of fixed assets by resident industries, general government, private non-profit institutions serving households and new residential buildings by consumer households, within thedomestic ferritory of the country. It also includes changes in stocks of enterprises and general government and households(producer house-hold).
Capital formation, fixed :: Gross fixed capital formation consists the expenditures (purchase and own-account production) od enterprises, general government and house-holds on additions of new durabale goods to their stoks of fixed assets less their net sales of similar second-hand and scrapped goods.
Expenditure of the government on durable goods formilitary purpose is excluded. Expenditure on land improvementand on the developement and extension of timber tracts, plantations, vineyards, etc., which take considerably more then a year to become productive,work-in-progress on construction, projects, acquisition of breeding stock,draught animals, dairy cattle and the like and transfer costs in connection with the purchase and sale of land, mineral deposits timber tracts,etc., are included. Expenditure of the consumer households on residential construction is also included.
Capital formation, fixed, own account :: Value (including imputed cost) ofconstruction of structures, minor irrigation works, roads andsimilar works, etc, and items of machinery andequipment which have an expected life-time of use of one year or more produced for own use by enterprises general government and households.
Capital formation,fixed by type of capital goods :: Comprises gross domestic capital formation under the following categories : (i) New assets- (a) buildings (b) roads and bridges (c) other construction and owrks (d) transport equipment, including transport animals and (e) machinery and other equipment, including breeding stocks, dairy cattle and the like. (ii) Net purchase of second-band physical assets from abroad.
Capital formation, Households :: Acquisition of new capital and increase in stock of producer households and acquisition of new residential buildings by households (consumder households). Hosehold sector is defined to comprise, apart from individual, all non-government non-corporate enterprises like farm and non-farm business, unincorporated establishments like sole proprietorship and parterships and non-profit institutions like charitable trusts, religious endowments, education institutions, etc
Capital fixed.consumption of capial goods :: Current replacement cost of the reproducible fixed assets except roads, dams and other forms of constrution of the government, used up during a period of accounts a result of noemL wear and tear, foreseen, obsolecemce and the normal rate of accidental damage.
All goods produced for use in future productive processes, machinery, equipment, plants, buildings,other construction and works,and stocks of raw materials, semi-finished and finished goods with the propducers.
Capital loss :: Decreases in the value of the assets of institutional and other units which ae due to changes in market, depletion of mineral deposits and other natural resources, unforseen obsolescence, theft, major catastrophies and other except the sale of assets, the normal wear and tear, accidential damages and the writing off of bad debts.
Capital transfers :: Unrequited transferswhich aedesigned to finance the gross-capital formation, other forms of accumulatio, or long term expenditure of the receipient,which are made out of the wealth or saving of the donor, or which are non-recurrent (quite irregular ) foreither party to the transaction.
Cherry Picking :: It is tje process of choosing the sound assets by a credit rating agency in order to give the highest credit rating to its favored client.
Climax :: The sudden, sharp price trend change on stock charts along with great increases in the volume of that signal immeidate concern or opportunity.
Commodity-flow approach :: Commodity-flow approach starts with estimates of the supply of commodities expressed in values of the producers and proceeds to estimate the disposal of the commodities expressd in the prices paid by the purchasers by adding rade and transport margins and similar other expenditures.
Compensation of employees :: All payments by producers of wages and salaries to their employees, in kind and in cash and of contributions paidorimputed, in respect of their employees to social security schemes and to privae pension, family allowance,casually insurance, life insurance and similar schemes.
Consumer durable :: Goods acquired by householdswhich have an expected life time considerably more than one yer and of a relatively high value, such as motor cars, refrigerators, and washing machines.Dwellings are excluded since they are classed as fixed assets.
Contatago Basis :: It is thesituation where the future priceis more than the spot price. Basis is the difference between the future price and the spot price.
Cost of capital :: The minimum rate of return the firm must earn on its investments in order to satisfy the expectations of investors who provide funds to the firm.
Crawling Peg :: The proposal that official intervention in the forex markets should take the form of limiting the rate of change of exchange rates, as opposed to setting any particular level.
Credit derivaties :: These are generally used to describe financial instruments that are specifically designed to allow for the separate trading in and management of credit risk. Credit Credit derivatives are designed to transfer credit risk from a aparty to another. It is done, so that one can offload risk that he already has.The person undertaking to accept the risk is paid for it land hopes that the event does not crystalise.
Crossholding :: It is a situation where two companies hold shares in each other to prevent each from being taken over.
Current repairs and maintenance :: Outlays which make good breakages in fixed assets and keep them in good working order, included outlays on new parts and attachments of fixed assets which have and expected life of luse of one year or somewhat more but which are short-lived relative to the fixed assets, or of relatively of small value.
Current transfers :: Transfers of income between transactions. The transfers made from the current income of the payer and added to the current income of the recipient for such purposes as consumption.
Change in Demand :: Increase or decrease in demand brought about by changes in (1) buyers money incomes; (2) the prices of related goods, (3) buyers lastes and preferences; (4) the number of buyers in market and (5) buyers expectations regarding future prices and income indicated by a shirt of the demand curve to the new positions.
Change in quantity supply :: Expansion or contraction of quantity of a commodity supplied in response tochange in its price, represented by a movement along the demand curve.
Change in supply :: Increase or decrease in supply brought about by - (a) change in technology; (b) price of inputs; (c) price of other goods; (d) number of sellers in the market; (e) sellers' expectations regarding future prices; and (f) goals of firms.
Represented by a shift of the supply curve to a new position.
Cherry Picking :: It is the process of choosing the sound assetsby a credit rating agency in order to give the highest credit rating to its favoured client.
ChineseWall :: Water right compartments in a business housewhich keep the information of each department confidential, so that those inside the company may not take advantage of or abouse such inside information, for example, by inside, trading, Chinese Wall also separatesstock brokingfunctions such as jobbing, portfolio management,etc. in a stockbroker's firm, so that one department cannot influence the decisions of others.
Circular Economics :: A school of economic thought that prevailed in industrial economics from the late 18th century to the last quarter of the 19th century. Its chief exponents were AdamSmith, John Baptiste Say, Thomas Robert Malthus, Devid Ricard andJohn Stuart Mill.
Class struggle :: In the theory of Marl Marx, conflict and clash between antagonistic classes, under capitalism it refers to the struggle between the proletarial or the working class on theonehand, and the bourgeoisie or the capitalist class on the other. It is the class struggle, according to Marc which will lead to overthrow of the bourgeoisie and the establishment of socialism.
Close Shop :: A systemunder which those employees who are not members of the Union can not be employed in the firm.
Club Deal :: When a company goes for borrowing, a group of banks form a consortium to lend that amount so that each bank gets a small portion as its share of the loan. When the borrower specifies which banks have to form the syndicate, it is called Club Deal.
Collective Agreement :: A bargainingcontract worked out between the Union and management in which wages, conditions of employment and similar matters are agreed upon.
Competition :: A market phenomenon indicating revalry amongst buyers and sellers of goods or resources classified as prefect (or pure) competition and where market power is widely diffused and free mobility in and out industry exists.
Complementary goods :: A commodities which are relatred to each other in such a way that increase in demand for one leads to increase in the demand for the other. For example- pen and ink, breadand butter. This is opposite of subsititute goods.
Consumer Sovereignty :: A conception which the consumer in the market is said to be the "King" who through his demand, testes and preferences, decides what is to be produced and in what quantities . Of course, consumer sovereignty is limited by the existing distribution of income, and influence on demand exerted by sellers through advertisement and other measures of sales promotion.
Corporation :: A formof business organization, association of shareholders created under law and recognized byit as artificial person. Its chief characteristics are limited liability of lthe shareholders, a prmanent existence and ability to raise larger amount of capital resources through thesafe of shares.
Cost :: Sacrifice made to acquire something; it may be in terms of money; cost of bygone alternatives.
Cost push inflation :: A situatoin of general rise in prices in which costs (payment made to factor owners) increase faster than productivity or efficiency. Familiar examples; 'wage push and profit-push inflation'.
Crawling peg :: Automatic system for revising the exchange rate that involves establishing a part value around which the exchange rate can vary. The partvalue isrevised regularly according to a formula determined by the authorities.
Credit instrument :: A written document serving as either a promise or order to transfer funds from one person/institution to another.
Creeping inflation :: Slow and persistent rise in general level of prices over a long number of years.
Chowding out :: It is the possibility tht an increase in one form of spending may cause another form to fall. Total crowding out occurs if other spending falls by 100 percent of the rise in public works. Partialcrowding out occurs if other spending falls but by less than public spending rises. It is possible that crowding may occur i.e. other spending is increased through favourable effects of an overall rise in spending on the confidence of the private investors.
Cyclical unemployment :: Unemployment in industrial market economics resulting from down showings of economic activity on account of deficient demand (insufficient to ensure Keynesian full employment) also known as disinflation.
Deflation :: Deflation is reduction in the level of of national income and output usually accompanied by fall in general price level.
Depreciation (currency) :: A fall in the price of a currency in terms of other currencies. This makes the country a imports expensive relative to home-produced goods, which lendds to decrease imports, and it makes exports cheaper abroad, which tends to inccrease exports. Normally currency depreciation is good for a country's balance of trade. However, higher import prices tend to increase inflation, the benefit to the balance of trade may not be permanent.
Derivative :: A derivative (or derivative security) is a financial instrument whose value depends on the valaue of other more basic underlying asset.
Devaluation :: A decreasein the official price of a nation currency as expressed in the currencies of other nation or in terms of gold.
Disposible Income :: Income of the nation from all sources after deduction of all current transfers paid. It is equivalent to lthe national income at market prices adjusted for all current transfer.
Domestic product, gross :: Value of gross output less value of inermediate consumption, within the domestic territory of the country. Also equal the gross expenditure on private final consumption, government final consumption, gross capital, formation (domestic), exports of goods and services less import of goods and services. Also equal the sum of compensation of employees, mixed income of the self-employed operating surplus, consumption of fixed capital, indirect taxes paid (net).
Domestic product net :: Gross domestic product less consumptikon of fixed capital
Domestic product and exp. A/c. :: Standard consolidated production, consumption, expenditure and capital formation account for the nation.
Domestic production :: If the production account of all domestic producers are consoslidated, the resulting total will measure the production taking place in what is called lthe domestic territory of thecountry and defined as domestic production.
Derived Demand :: Demand for product or a factgor of production which isderived from the demand of some other product in the production of which it is ued. For example, the demand for bricks is derived from the demand for housing construction and the demand for steel is partly derived from the demand for cars.
Devaluation :: Official reduction in the foreign value of demestic currency. For example- if the official rate of exchange between rupees and Dollers is Rs.54=1$ and the government reduces the value of rupee by making Rs.60=1$ this will be devaluation. It is done to encourage the country's exports and discourage imports.
Deminishing Returns(variable proportion) law :: When one or more factors are kept constant and the application of variable factor is varied. This may give rise to changing returns to factors. Returns may at first increase but a point will soon be reached when marginal returns per unit of the variabale factor shall deminish.
Demand :: The quantity demanded of a commodity that buyers would be willing to buy at different alternative prices during a given period. All other factors influencing demand remaining unchanged.
Demand price :: Price which the buyer is willing to pay for a given quantity of a commodity.
Demand-pull inflation :: A stage of rising prices brought about by increase in aggregate demand in the face of short supply.
Demand schedule :: Table showing the number of units of a commodity that buyers are willing (and able ) to buy at various alternative prices during a given period of time. All other determinants of demand remaining constant.
Depression :: A phase of the business cycle in which economic activity is at a low end and there is un-employment/under employment of resources; prices, profits, consumption nd rate of capital investment are also at a low level.
Derivative :: A derivative (or derivative security) is a financial instrument whose value depends on the value of other more basic underlying assets.
Direct Tax :: Tax that cannot be shifted; the burden of ldirect tax is borne by the person on whom it is initially fixed. Example- personal income tax, social security tax paid by employees, death tax, etc.
Disequilibrium :: Lack of equlibrium, Example- the quantity supplied and quantity demanded of a commodity at a given price are unequal so that there is a tendency for the market price and/or the quantities supplied to change.
Disposable person income :: Income that remains after payment of personal tax.
Dissaving :: Consumption in excess of income. This may be financed by drawing down past savings, by borrowing or by aid from others.
Division of labour :: Specialization amongst workers, each worker doing a particular job; leading to increased effeciency.
Drip-feed :: It is the process of infusing a small amount of capital into a new company at a number of stages.
Duopoly :: A market situation in obligopoly whree there are only two sellers.
Earnings per share :: A company's profitdivided by its number of shares outstanding.
Economic costs :: Payments made to owners of factor input for supply of their services to as particular use.
Economic goods :: Scarce goods which command a price; opposite of free goods.
Economic (Pure) profit :: Net revenue; receipts of the firm in excess of economic costs including normal profits.
Economic Rent :: Payment receikved by the owner ofa factor of production in excess of the minimum supply price orf the transfer earning of the factor.
Economics :: A social science chiefly concerned with the employment of a society's scarce resources having alternative used to produce goods and services that it wants and in quantites that it wants for its present andfuture consumption.
Economic system :: The system according to which the resources are employed to produce goods and services and reward paid to factors of production; the in instutional frame work of laws in which the components of an economy, individual firms and government operate.
Excise tax :: Tax imposed on the manufacture, sale or the consumption of various commodities, such as taxes on textiles cloth, liquor tobacco and petrol etc.
Explicit cost :: Money expenditure recorded in the firm's account book; contrasted with implicit cost.
Escrow cover :: Account designated to collet certain money by one party whose end use is pre-determined sand is subject to specific conditions. For example, the receivables of SEB's are deposited in escrow account for the purpose of paying inter dependent power producer.
Externalities :: External benefits for which no payment has to be made and which are eternal to houehold or a firm.
Equlibrium :: A state of balance between opposing forces, a state of rest which once reached, theer is no tendency to change from it. Example- equilibrium exists when supply and demand for a commodity are equal to each other at a certain price.
Equilibrium conditions :: Conditions in which equilibrium in an economic organism - a household, a firm, or the entire economy-shall prevail.
Equilibrium price :: Price of a commodity in the market at which supply equals demand; the point of intersection of supply and demand curve, price at which a firm has to produce at a loss.
Equlibrium quantity :: Quantity of a commodity at which demand equals supply; quantity of a commodity at which a firm's profits are maximized.
Ergonomics :: It is a study of workers and choices that confront them in ordinry working situations. Ergonomics has its goal in increase in the efficiency of the workforce and thereby the productivity.
Escrow cover :: Account designated to collect certain money by one party whose end use is predetermined and is subject to specific conditions. For example ; the receivables of SEBs are deposited in escrow account for the purpose of paying the interdependent power producer.
Excise Tax :: Tax impopsed on the manufacture, sale or the consumption of various comodities, such as taxes on textiles cloth, liquor tobacco and petrol etc.
Explicit cost :: Money expenditure recorded in the firm's account book; contrasted with implocit cost.
External Economics(and Diseconomics) of scale :: Economics that are available to a firm on account of concentration of industry atone place economics of localization in the form of cheaper transport. development of labour market, availability of cheap finances, etc. Disseconomics may from opposite tendencies raising the prices of inputs.
Externalities :: External benefits forwhich no payment has to be made and which are enternal to household or a firm.
Factors of production :: Human and non-human productive resources of an economy under four heads; land, labour, capital and enterprise.
Fangs :: They are the financial instruments issued by the subsidiaries (federal agencies) of the US government., The federal agency securities arfe not always guaranteed by the treasury hence they are called Federal Agency Non-pguaranteed (FANGs)
Financial closure :: A general term used in infrastructure funding which indicates time completion of cost of project and tie up of means of finance with financial institution.
Financial sector survey (FSS) :: The survey compiled aggregate assets and liabilities of the financial corporations to capture the dynamic inter linkages between the depository corporation and therest of the organized financial sector.
Financial intermediary :: Business institutions acting as middle-men between lenders, and borrowers. For example; commercial banks, mutual savings banks, savings and loan associations, insurance companies and other financial institutions of wholesalers and retailers of funds.
Financial markets :: The money and capital markets of an economy; the money market deals with short-term credit and capital market deal with lon-term credit, shares and debentures etc.
Fire sale :: It is sale of fire damaged goods or the sale of anyting at a very low price
Fiscal policy :: Government's expenditure and tax policy an important means of moderating the upswings and downswings of the business cycle.
Fixd cost :: Costs that do not vary with the output; costs which remain fixed even when output change. Example ; interest on capital borrowed, property ntax, rental payment, salaries of permanent staff, etc.
Fixed exchange rate :: The rate of the price forwhich the currency of one country is exchanged for the currency of another country. A country has a fixed exchange rate of its pags its currency with another currency at a given exchange rate and stands ready to defend the rate.
Floating exchange rate :: A system of foreign exchange rates among countries wherein theexchange rates are predominantly determined by market forces ( i.e by supplu and demand)without governments setting and maintaining a particular pattern of exchange rates.
Floating stock :: The amount of securitiers believed to be available for immediate purchase.
Forced saving :: Savings that result from consumers being restrained from spending part of their incomes on consumptikon. Example; (1) inflation causing a decrease in real consumption and forcing savings, prices rising faster than money wages; (2) government imposing taxes on citizens and taking away income which would have been spent on consimption; taxes being used to finance investment by government; also public sectgor enterprises charging high prices from buyers; (3) business firm or corporations retaining part of dividends for financing capital expenditure, preventing shareholders from consuming all thedividends.
Force Majeure :: Any event or circumstances laid down in the PPA (Power purchase lagreement) which are beyond the reasonable control of the affected party and which could not have prevented by the goodf industry practice or by the reasonable slo;; amd care in relation to the construction of any facilities and which, or any consequences of which,have an effect on the performance by either party in fulfilling its obligations of BoPs (Buyer of Power) inability to receive active energy into its system at the delivery point.
Foreclose :: It is taking over by a lender of a mortgaged property because of failure by the borrower to comply with the conditions of the mortgage. This failure usually consists of failure to make interest and amortization payments by the due dates. Foreclosure is usually only resorted to by lenders when considerable.
Foreign direct investment :: (FDI) - Foreign direct investment reflects the objective of obtaining a lasting interest by a resident entity in one economy in an entity resident in an economy other than that of the investor. The lasting interest implies the existence of a long-term relationship between the direct investor and the enterprise and a significant degree of influence on the management of the enterprise.
Foreign Trade Multiplier :: An import surplus or an export surplus has multiplier effect changes in national income; magnified variations in nationalincome as a result of changes in exports or imports.
Forfaiting :: It is providing fiance for exporters, where an agent (the forfeiter) accepts a bill of exchange from an overseas customer, he buys the bill at aq discount and collects the paymentsfrom the customer in due course.
Fourth market :: It is a market where the transactions are made directly betweenlarge institutional buyers and sellers.
Franchise :: It is a license to manufacture or market a product with an established trade name or to operate a service, the equipment or supplies for which are manufactured by a monopoly producer.
Free float :: This is a systeminwhich the lrelative prices of currency are determined purely by forces of demand and supply. No efforet is made on the part of the authorities to influence the current and future evolution of the exchange rate.
Frictional unemployment :: Unemployment in the economic system due to changing one job for another; imperfect labour mobility due to lack of knowledge about job opportunities and other factors which prevent people from finding suitable jobs smoothly.
Full cost price :: Price atwhichall the firm's costs of production are being met.
Full employment :: A situation in which the economy's resources are being used fully; zero deflationary unemploymenti.e. asituation in which all those whowant towork at lthe lcurrent lrate of wages are, in fact employed.
Fuctional financen :: The role of finances in a fiscal policy which aims at achieving full employmednt with price stabilityand economic growth and not balanced budget policy as an end in itself.
Functional Income distribution :: Payment made to the owners of factgors of production in return for the services of these factors; wages for labourrent for land, interest on capitgal and profits for enterpreneurship.
Funny Money :: Funny money is inflated or counterfeit currency.However, the strange types of shares or bonds offered by comnpanies or their brokers, which are not the usual forms of loan stock.
GAAP :: Generally Accepted Accounting Principles mainly comprise the following (i) Money measurement; (ii) Business entity; (iii) Going conern; (v) Duel aspect; (vi) Conservatism; (vii) Accrual; (viii) Realization; (ix) Consistency.
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Accounting year :: Fiscal year beginning 1st April
Accounts of the Nation :: Four accounts relating respectively to Production (Gross Domestic Product and Expenditure), consumption (National Disposable Income and it appropriation), accumulation (Capital Finance) and external transactions (External transactions account).
Accumulation :: Acquisition of fixed assets. stocks of non-durable , financial assets, patents, copyrights and other intangible assets during a period of account less the incurrence of liabilities.
Acquisition :: The purchase of controlling interest in a firm generally via a tender offer for the target shares.
Actuary :: Actuary is a person employed by an insurance company or other organization to calculate the risk involved in insurance, and therefore the premium payable by persons taking out insurance.
Assets :: Ownership of machinery, equipment furniture, buildings and other durable reproducible goods, stocks of non-durable goods, land monuments and other non-reproducible tangible assets, copyrights leases, financial claims on other parties and other intangible assets.
Aggregate Demand :: Total value that , firms and Government are willing to pay for the output of the country during a given period.
Aggregate Supply :: Total value of the output available for purchase by economy by a given period.
Allonge :: It is a piece of paper attached to a bill of exchange so that endorsement can be written on it.
Arbitrageur :: He is a person who looks out for arbitrage opportunities (price differences between various markets).
Automatic Income stabilizers :: Non-discretionary or built-in measures which held given stability to the economy by increasing or decreasing the budgetary deficit. Example : progressive income tax,unemployment taxes and subsidies, expenditure on agricultural price stabilization, etc.
Average cost :: Average cost per unit of output, i.e. cost divided by the output.
Average Fixed cost :: Average fixed cost is obtained by dividing total fixed cost by the quantity of output. It can also lbe measured as the difference between the average total cost and average variable cost.
Average Marginal cost relationship:: When an average cost curve is falling, the corresponding marginal cost curve lies below the average cost, when the average cost curve is at its minimum, the corresponding marginal cost curve is equal to it; and when the average cost curve is rising, its corresponding marginal cost curve lies above it.
Average -Marginal Revenue Relationship:: When the average revenue curve is rising the corresponding marginal curve lies above it; when the average revenue curve is falling its corresponding marginal curve flies below it, and when the average revenue curve is at its maximum, the marginal revenue curve is equal to it.
Bond :: A legal agreement to pay a certain sum of money (called principal) at some future date and carrying a fixed rate of interest; issued by the corporations, central, state and local government; a mans of financing long term investments.
Bottom-Fisher :: An investor who buys of the shares of companies which are trading below their face values in the hope of a turnaround of the companies.
Break-even point :: Output at which average revenue equals average total cost. In economies, total cost includes normal profits. The break even point as defined in economies, therefore,does not imply zero profits.
Break forward :: A foreign exchange forward contract where one party has the right but not the obligation to terminate the contract at one or more pre-determined times during the life of the transaction, it is known as cancellable forward. The interest rate version of the break forward is also known as canceable swap.
Bucket Shop :: If a brokerage firm is not a member of a recognized stock exchange, it is called Bucket Shop.
Budget :: An estimate of expected revenues and expenditure for a given period usually a year, item by item.
Budget Surplus :: Budget in which total revenue exceeds total expenditure.
Business Cycle :: Fluctuations in general business and economic activity occuring in advanced industrial market economics that rurn in a cycle.
Cap & Collar Mortgage :: Mortgge with fixed upper and lower limits of the variable interest rates.
Capital :: A man-made factor or production; a produced means of further production (1) also defined as physical real assets that yield an income; (2) as money representing businessmen's fund used to produce capital goods; (3) also net worth or shareholders' equity investment in business.
Capitalism :: Economic system featuring private property in means of production, commodity production and profit as the guiding motivating force of production.
Capital Market :: Places where long-term titles to capital assets such as bonds, debentures, shares and mortgages are bought and sold.
Capital formation,Gross &Net ::Gross capital formation includes gross fixed capital formation and change in stocks, Net capital formation is gross capital formation less consumption of fixed capital.
Capital formation, Domestic :: Domestic capital formation is with reference to the activities ofall the producers in the domestic territory of the country. It includes fixed capital formation which consists of the acquisition of fixed assets by resident industries, general government, private non-profit institutions serving households and new residential buildings by consumer households, within thedomestic ferritory of the country. It also includes changes in stocks of enterprises and general government and households(producer house-hold).
Capital formation, fixed :: Gross fixed capital formation consists the expenditures (purchase and own-account production) od enterprises, general government and house-holds on additions of new durabale goods to their stoks of fixed assets less their net sales of similar second-hand and scrapped goods.
Expenditure of the government on durable goods formilitary purpose is excluded. Expenditure on land improvementand on the developement and extension of timber tracts, plantations, vineyards, etc., which take considerably more then a year to become productive,work-in-progress on construction, projects, acquisition of breeding stock,draught animals, dairy cattle and the like and transfer costs in connection with the purchase and sale of land, mineral deposits timber tracts,etc., are included. Expenditure of the consumer households on residential construction is also included.
Capital formation, fixed, own account :: Value (including imputed cost) ofconstruction of structures, minor irrigation works, roads andsimilar works, etc, and items of machinery andequipment which have an expected life-time of use of one year or more produced for own use by enterprises general government and households.
Capital formation,fixed by type of capital goods :: Comprises gross domestic capital formation under the following categories : (i) New assets- (a) buildings (b) roads and bridges (c) other construction and owrks (d) transport equipment, including transport animals and (e) machinery and other equipment, including breeding stocks, dairy cattle and the like. (ii) Net purchase of second-band physical assets from abroad.
Capital formation, Households :: Acquisition of new capital and increase in stock of producer households and acquisition of new residential buildings by households (consumder households). Hosehold sector is defined to comprise, apart from individual, all non-government non-corporate enterprises like farm and non-farm business, unincorporated establishments like sole proprietorship and parterships and non-profit institutions like charitable trusts, religious endowments, education institutions, etc
Capital fixed.consumption of capial goods :: Current replacement cost of the reproducible fixed assets except roads, dams and other forms of constrution of the government, used up during a period of accounts a result of noemL wear and tear, foreseen, obsolecemce and the normal rate of accidental damage.
All goods produced for use in future productive processes, machinery, equipment, plants, buildings,other construction and works,and stocks of raw materials, semi-finished and finished goods with the propducers.
Capital loss :: Decreases in the value of the assets of institutional and other units which ae due to changes in market, depletion of mineral deposits and other natural resources, unforseen obsolescence, theft, major catastrophies and other except the sale of assets, the normal wear and tear, accidential damages and the writing off of bad debts.
Capital transfers :: Unrequited transferswhich aedesigned to finance the gross-capital formation, other forms of accumulatio, or long term expenditure of the receipient,which are made out of the wealth or saving of the donor, or which are non-recurrent (quite irregular ) foreither party to the transaction.
Cherry Picking :: It is tje process of choosing the sound assets by a credit rating agency in order to give the highest credit rating to its favored client.
Climax :: The sudden, sharp price trend change on stock charts along with great increases in the volume of that signal immeidate concern or opportunity.
Commodity-flow approach :: Commodity-flow approach starts with estimates of the supply of commodities expressed in values of the producers and proceeds to estimate the disposal of the commodities expressd in the prices paid by the purchasers by adding rade and transport margins and similar other expenditures.
Compensation of employees :: All payments by producers of wages and salaries to their employees, in kind and in cash and of contributions paidorimputed, in respect of their employees to social security schemes and to privae pension, family allowance,casually insurance, life insurance and similar schemes.
Consumer durable :: Goods acquired by householdswhich have an expected life time considerably more than one yer and of a relatively high value, such as motor cars, refrigerators, and washing machines.Dwellings are excluded since they are classed as fixed assets.
Contatago Basis :: It is thesituation where the future priceis more than the spot price. Basis is the difference between the future price and the spot price.
Cost of capital :: The minimum rate of return the firm must earn on its investments in order to satisfy the expectations of investors who provide funds to the firm.
Crawling Peg :: The proposal that official intervention in the forex markets should take the form of limiting the rate of change of exchange rates, as opposed to setting any particular level.
Credit derivaties :: These are generally used to describe financial instruments that are specifically designed to allow for the separate trading in and management of credit risk. Credit Credit derivatives are designed to transfer credit risk from a aparty to another. It is done, so that one can offload risk that he already has.The person undertaking to accept the risk is paid for it land hopes that the event does not crystalise.
Crossholding :: It is a situation where two companies hold shares in each other to prevent each from being taken over.
Current repairs and maintenance :: Outlays which make good breakages in fixed assets and keep them in good working order, included outlays on new parts and attachments of fixed assets which have and expected life of luse of one year or somewhat more but which are short-lived relative to the fixed assets, or of relatively of small value.
Current transfers :: Transfers of income between transactions. The transfers made from the current income of the payer and added to the current income of the recipient for such purposes as consumption.
Change in Demand :: Increase or decrease in demand brought about by changes in (1) buyers money incomes; (2) the prices of related goods, (3) buyers lastes and preferences; (4) the number of buyers in market and (5) buyers expectations regarding future prices and income indicated by a shirt of the demand curve to the new positions.
Change in quantity supply :: Expansion or contraction of quantity of a commodity supplied in response tochange in its price, represented by a movement along the demand curve.
Change in supply :: Increase or decrease in supply brought about by - (a) change in technology; (b) price of inputs; (c) price of other goods; (d) number of sellers in the market; (e) sellers' expectations regarding future prices; and (f) goals of firms.
Represented by a shift of the supply curve to a new position.
Cherry Picking :: It is the process of choosing the sound assetsby a credit rating agency in order to give the highest credit rating to its favoured client.
ChineseWall :: Water right compartments in a business housewhich keep the information of each department confidential, so that those inside the company may not take advantage of or abouse such inside information, for example, by inside, trading, Chinese Wall also separatesstock brokingfunctions such as jobbing, portfolio management,etc. in a stockbroker's firm, so that one department cannot influence the decisions of others.
Circular Economics :: A school of economic thought that prevailed in industrial economics from the late 18th century to the last quarter of the 19th century. Its chief exponents were AdamSmith, John Baptiste Say, Thomas Robert Malthus, Devid Ricard andJohn Stuart Mill.
Class struggle :: In the theory of Marl Marx, conflict and clash between antagonistic classes, under capitalism it refers to the struggle between the proletarial or the working class on theonehand, and the bourgeoisie or the capitalist class on the other. It is the class struggle, according to Marc which will lead to overthrow of the bourgeoisie and the establishment of socialism.
Close Shop :: A systemunder which those employees who are not members of the Union can not be employed in the firm.
Club Deal :: When a company goes for borrowing, a group of banks form a consortium to lend that amount so that each bank gets a small portion as its share of the loan. When the borrower specifies which banks have to form the syndicate, it is called Club Deal.
Collective Agreement :: A bargainingcontract worked out between the Union and management in which wages, conditions of employment and similar matters are agreed upon.
Competition :: A market phenomenon indicating revalry amongst buyers and sellers of goods or resources classified as prefect (or pure) competition and where market power is widely diffused and free mobility in and out industry exists.
Complementary goods :: A commodities which are relatred to each other in such a way that increase in demand for one leads to increase in the demand for the other. For example- pen and ink, breadand butter. This is opposite of subsititute goods.
Consumer Sovereignty :: A conception which the consumer in the market is said to be the "King" who through his demand, testes and preferences, decides what is to be produced and in what quantities . Of course, consumer sovereignty is limited by the existing distribution of income, and influence on demand exerted by sellers through advertisement and other measures of sales promotion.
Corporation :: A formof business organization, association of shareholders created under law and recognized byit as artificial person. Its chief characteristics are limited liability of lthe shareholders, a prmanent existence and ability to raise larger amount of capital resources through thesafe of shares.
Cost :: Sacrifice made to acquire something; it may be in terms of money; cost of bygone alternatives.
Cost push inflation :: A situatoin of general rise in prices in which costs (payment made to factor owners) increase faster than productivity or efficiency. Familiar examples; 'wage push and profit-push inflation'.
Crawling peg :: Automatic system for revising the exchange rate that involves establishing a part value around which the exchange rate can vary. The partvalue isrevised regularly according to a formula determined by the authorities.
Credit instrument :: A written document serving as either a promise or order to transfer funds from one person/institution to another.
Creeping inflation :: Slow and persistent rise in general level of prices over a long number of years.
Chowding out :: It is the possibility tht an increase in one form of spending may cause another form to fall. Total crowding out occurs if other spending falls by 100 percent of the rise in public works. Partialcrowding out occurs if other spending falls but by less than public spending rises. It is possible that crowding may occur i.e. other spending is increased through favourable effects of an overall rise in spending on the confidence of the private investors.
Cyclical unemployment :: Unemployment in industrial market economics resulting from down showings of economic activity on account of deficient demand (insufficient to ensure Keynesian full employment) also known as disinflation.
Deflation :: Deflation is reduction in the level of of national income and output usually accompanied by fall in general price level.
Depreciation (currency) :: A fall in the price of a currency in terms of other currencies. This makes the country a imports expensive relative to home-produced goods, which lendds to decrease imports, and it makes exports cheaper abroad, which tends to inccrease exports. Normally currency depreciation is good for a country's balance of trade. However, higher import prices tend to increase inflation, the benefit to the balance of trade may not be permanent.
Derivative :: A derivative (or derivative security) is a financial instrument whose value depends on the valaue of other more basic underlying asset.
Devaluation :: A decreasein the official price of a nation currency as expressed in the currencies of other nation or in terms of gold.
Disposible Income :: Income of the nation from all sources after deduction of all current transfers paid. It is equivalent to lthe national income at market prices adjusted for all current transfer.
Domestic product, gross :: Value of gross output less value of inermediate consumption, within the domestic territory of the country. Also equal the gross expenditure on private final consumption, government final consumption, gross capital, formation (domestic), exports of goods and services less import of goods and services. Also equal the sum of compensation of employees, mixed income of the self-employed operating surplus, consumption of fixed capital, indirect taxes paid (net).
Domestic product net :: Gross domestic product less consumptikon of fixed capital
Domestic product and exp. A/c. :: Standard consolidated production, consumption, expenditure and capital formation account for the nation.
Domestic production :: If the production account of all domestic producers are consoslidated, the resulting total will measure the production taking place in what is called lthe domestic territory of thecountry and defined as domestic production.
Derived Demand :: Demand for product or a factgor of production which isderived from the demand of some other product in the production of which it is ued. For example, the demand for bricks is derived from the demand for housing construction and the demand for steel is partly derived from the demand for cars.
Devaluation :: Official reduction in the foreign value of demestic currency. For example- if the official rate of exchange between rupees and Dollers is Rs.54=1$ and the government reduces the value of rupee by making Rs.60=1$ this will be devaluation. It is done to encourage the country's exports and discourage imports.
Deminishing Returns(variable proportion) law :: When one or more factors are kept constant and the application of variable factor is varied. This may give rise to changing returns to factors. Returns may at first increase but a point will soon be reached when marginal returns per unit of the variabale factor shall deminish.
Demand :: The quantity demanded of a commodity that buyers would be willing to buy at different alternative prices during a given period. All other factors influencing demand remaining unchanged.
Demand price :: Price which the buyer is willing to pay for a given quantity of a commodity.
Demand-pull inflation :: A stage of rising prices brought about by increase in aggregate demand in the face of short supply.
Demand schedule :: Table showing the number of units of a commodity that buyers are willing (and able ) to buy at various alternative prices during a given period of time. All other determinants of demand remaining constant.
Depression :: A phase of the business cycle in which economic activity is at a low end and there is un-employment/under employment of resources; prices, profits, consumption nd rate of capital investment are also at a low level.
Derivative :: A derivative (or derivative security) is a financial instrument whose value depends on the value of other more basic underlying assets.
Direct Tax :: Tax that cannot be shifted; the burden of ldirect tax is borne by the person on whom it is initially fixed. Example- personal income tax, social security tax paid by employees, death tax, etc.
Disequilibrium :: Lack of equlibrium, Example- the quantity supplied and quantity demanded of a commodity at a given price are unequal so that there is a tendency for the market price and/or the quantities supplied to change.
Disposable person income :: Income that remains after payment of personal tax.
Dissaving :: Consumption in excess of income. This may be financed by drawing down past savings, by borrowing or by aid from others.
Division of labour :: Specialization amongst workers, each worker doing a particular job; leading to increased effeciency.
Drip-feed :: It is the process of infusing a small amount of capital into a new company at a number of stages.
Duopoly :: A market situation in obligopoly whree there are only two sellers.
Earnings per share :: A company's profitdivided by its number of shares outstanding.
Economic costs :: Payments made to owners of factor input for supply of their services to as particular use.
Economic goods :: Scarce goods which command a price; opposite of free goods.
Economic (Pure) profit :: Net revenue; receipts of the firm in excess of economic costs including normal profits.
Economic Rent :: Payment receikved by the owner ofa factor of production in excess of the minimum supply price orf the transfer earning of the factor.
Economics :: A social science chiefly concerned with the employment of a society's scarce resources having alternative used to produce goods and services that it wants and in quantites that it wants for its present andfuture consumption.
Economic system :: The system according to which the resources are employed to produce goods and services and reward paid to factors of production; the in instutional frame work of laws in which the components of an economy, individual firms and government operate.
Excise tax :: Tax imposed on the manufacture, sale or the consumption of various commodities, such as taxes on textiles cloth, liquor tobacco and petrol etc.
Explicit cost :: Money expenditure recorded in the firm's account book; contrasted with implicit cost.
Escrow cover :: Account designated to collet certain money by one party whose end use is pre-determined sand is subject to specific conditions. For example, the receivables of SEB's are deposited in escrow account for the purpose of paying inter dependent power producer.
Externalities :: External benefits for which no payment has to be made and which are eternal to houehold or a firm.
Equlibrium :: A state of balance between opposing forces, a state of rest which once reached, theer is no tendency to change from it. Example- equilibrium exists when supply and demand for a commodity are equal to each other at a certain price.
Equilibrium conditions :: Conditions in which equilibrium in an economic organism - a household, a firm, or the entire economy-shall prevail.
Equilibrium price :: Price of a commodity in the market at which supply equals demand; the point of intersection of supply and demand curve, price at which a firm has to produce at a loss.
Equlibrium quantity :: Quantity of a commodity at which demand equals supply; quantity of a commodity at which a firm's profits are maximized.
Ergonomics :: It is a study of workers and choices that confront them in ordinry working situations. Ergonomics has its goal in increase in the efficiency of the workforce and thereby the productivity.
Escrow cover :: Account designated to collect certain money by one party whose end use is predetermined and is subject to specific conditions. For example ; the receivables of SEBs are deposited in escrow account for the purpose of paying the interdependent power producer.
Excise Tax :: Tax impopsed on the manufacture, sale or the consumption of various comodities, such as taxes on textiles cloth, liquor tobacco and petrol etc.
Explicit cost :: Money expenditure recorded in the firm's account book; contrasted with implocit cost.
External Economics(and Diseconomics) of scale :: Economics that are available to a firm on account of concentration of industry atone place economics of localization in the form of cheaper transport. development of labour market, availability of cheap finances, etc. Disseconomics may from opposite tendencies raising the prices of inputs.
Externalities :: External benefits forwhich no payment has to be made and which are enternal to household or a firm.
Factors of production :: Human and non-human productive resources of an economy under four heads; land, labour, capital and enterprise.
Fangs :: They are the financial instruments issued by the subsidiaries (federal agencies) of the US government., The federal agency securities arfe not always guaranteed by the treasury hence they are called Federal Agency Non-pguaranteed (FANGs)
Financial closure :: A general term used in infrastructure funding which indicates time completion of cost of project and tie up of means of finance with financial institution.
Financial sector survey (FSS) :: The survey compiled aggregate assets and liabilities of the financial corporations to capture the dynamic inter linkages between the depository corporation and therest of the organized financial sector.
Financial intermediary :: Business institutions acting as middle-men between lenders, and borrowers. For example; commercial banks, mutual savings banks, savings and loan associations, insurance companies and other financial institutions of wholesalers and retailers of funds.
Financial markets :: The money and capital markets of an economy; the money market deals with short-term credit and capital market deal with lon-term credit, shares and debentures etc.
Fire sale :: It is sale of fire damaged goods or the sale of anyting at a very low price
Fiscal policy :: Government's expenditure and tax policy an important means of moderating the upswings and downswings of the business cycle.
Fixd cost :: Costs that do not vary with the output; costs which remain fixed even when output change. Example ; interest on capital borrowed, property ntax, rental payment, salaries of permanent staff, etc.
Fixed exchange rate :: The rate of the price forwhich the currency of one country is exchanged for the currency of another country. A country has a fixed exchange rate of its pags its currency with another currency at a given exchange rate and stands ready to defend the rate.
Floating exchange rate :: A system of foreign exchange rates among countries wherein theexchange rates are predominantly determined by market forces ( i.e by supplu and demand)without governments setting and maintaining a particular pattern of exchange rates.
Floating stock :: The amount of securitiers believed to be available for immediate purchase.
Forced saving :: Savings that result from consumers being restrained from spending part of their incomes on consumptikon. Example; (1) inflation causing a decrease in real consumption and forcing savings, prices rising faster than money wages; (2) government imposing taxes on citizens and taking away income which would have been spent on consimption; taxes being used to finance investment by government; also public sectgor enterprises charging high prices from buyers; (3) business firm or corporations retaining part of dividends for financing capital expenditure, preventing shareholders from consuming all thedividends.
Force Majeure :: Any event or circumstances laid down in the PPA (Power purchase lagreement) which are beyond the reasonable control of the affected party and which could not have prevented by the goodf industry practice or by the reasonable slo;; amd care in relation to the construction of any facilities and which, or any consequences of which,have an effect on the performance by either party in fulfilling its obligations of BoPs (Buyer of Power) inability to receive active energy into its system at the delivery point.
Foreclose :: It is taking over by a lender of a mortgaged property because of failure by the borrower to comply with the conditions of the mortgage. This failure usually consists of failure to make interest and amortization payments by the due dates. Foreclosure is usually only resorted to by lenders when considerable.
Foreign direct investment :: (FDI) - Foreign direct investment reflects the objective of obtaining a lasting interest by a resident entity in one economy in an entity resident in an economy other than that of the investor. The lasting interest implies the existence of a long-term relationship between the direct investor and the enterprise and a significant degree of influence on the management of the enterprise.
Foreign Trade Multiplier :: An import surplus or an export surplus has multiplier effect changes in national income; magnified variations in nationalincome as a result of changes in exports or imports.
Forfaiting :: It is providing fiance for exporters, where an agent (the forfeiter) accepts a bill of exchange from an overseas customer, he buys the bill at aq discount and collects the paymentsfrom the customer in due course.
Fourth market :: It is a market where the transactions are made directly betweenlarge institutional buyers and sellers.
Franchise :: It is a license to manufacture or market a product with an established trade name or to operate a service, the equipment or supplies for which are manufactured by a monopoly producer.
Free float :: This is a systeminwhich the lrelative prices of currency are determined purely by forces of demand and supply. No efforet is made on the part of the authorities to influence the current and future evolution of the exchange rate.
Frictional unemployment :: Unemployment in the economic system due to changing one job for another; imperfect labour mobility due to lack of knowledge about job opportunities and other factors which prevent people from finding suitable jobs smoothly.
Full cost price :: Price atwhichall the firm's costs of production are being met.
Full employment :: A situation in which the economy's resources are being used fully; zero deflationary unemploymenti.e. asituation in which all those whowant towork at lthe lcurrent lrate of wages are, in fact employed.
Fuctional financen :: The role of finances in a fiscal policy which aims at achieving full employmednt with price stabilityand economic growth and not balanced budget policy as an end in itself.
Functional Income distribution :: Payment made to the owners of factgors of production in return for the services of these factors; wages for labourrent for land, interest on capitgal and profits for enterpreneurship.
Funny Money :: Funny money is inflated or counterfeit currency.However, the strange types of shares or bonds offered by comnpanies or their brokers, which are not the usual forms of loan stock.
GAAP :: Generally Accepted Accounting Principles mainly comprise the following (i) Money measurement; (ii) Business entity; (iii) Going conern; (v) Duel aspect; (vi) Conservatism; (vii) Accrual; (viii) Realization; (ix) Consistency.
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