Economy & Financial Terms
Some very useful terms for General Awareness & Banking Interviews Balance of Payment is the summation of imports and exports made between one countries and the other countries that it trades with.
Balance of trade: The difference in value over a period of time between a country's imports and exports.
Base year: In the construction of an index, the year from which the weights assigned to the different components of the index is drawn. It is conventional to set the value of an index in its base year equal to 100.
Bill of exchange: A written, dated, and signed three-party instrument containing an unconditional order by a drawer that directs a drawee to pay a definite sum of money to a payee on demand or at a specified future date. Also known as a draft. It is the most commonly used financial instrument in international trade.
Bretton Woods: An international monetary system operating from 1946-1973. The value of the dollar was fixed in terms of gold, and every other country held its currency at a fixed exchange rate against the dollar; when trade deficits occurred, the central bank of the deficit country financed the deficit with its reserves of international currencies. The Bretton Woods system collapsed in 1971 when the US abandoned the gold standard.
Call money: Price paid by an investor for a call option. There is no fixed rate for call money. It
and land. wherever the owners of the resources live. The sum of the capital and current accounts is the overall balance of payments. It is an interest bearing band deposits that can be withdrawn on 24 hours notice.Economy & Financial Terms
depends on the type of stock.
Currency appreciation: An increase in the value of one currency relative to another currency. because of a change in exchange rates.
Current account: Part of a nation's balance of payments which includes the value of all goods and services imported and exported.
Gross domestic product (GDP): Gross Domestic Product: The total of goods and services produced by a nation over a given period.
Capital account. bonds.
Fiscal deficit is the gap between the government's total spending and the sum of its revenue receipts and non-debt capital receipts. Reserves are invested in low-risk and liquid assets. a unit of one currency buys more units of another currency. The fiscal deficit represents the total amount of borrowed funds required by the government to completely meet its expenditure
Foreign exchange reserves: The stock of liquid assets denominated in foreign currencies held by a government's monetary authorities (typically. and the period of the contract. often in foreign government securities.
. A nation has a current account surplus if exports exceed imports plus net transfers to foreigners. as well as the payment and receipt of dividends and interest. A nation has a capital account surplus when receipts from asset sales exceed payments for the country's purchases of foreign assets. Appreciation occurs when. the finance ministry or central bank). usually 1 year. Reserves enable the monetary authorities to intervene in foreign exchange markets to affect the exchange value of their domestic currency in the market. The sum of the current and capital accounts is the overall balance of payments. Part of a nation's balance of payments that includes purchases and sales of assets. its performance prior to the purchase of the call option. such as stocks. Opposite is the case with currency depreciation. Gross Domestic Product measures the total output from all the resources located in a country.
inflation is also erosion in the purchasing power of money a loss of real value in the internal medium of exchange and unit of account in the economy. In particular. The Fact book. which also stems from that conference but has since been modified. and farm subsidies to encourage expansion of farm production and achieve self-reliance in food production. especially in urban areas. When the price level rises. the user must realize that in certain countries net remittances from citizens working abroad may be important to national well being. uses GDP rather than GNP to measure national production. minus income earned by foreigners from domestic production..Economy & Financial Terms
Gross national product (GNP) is the value of all final goods and services produced within a nation in a given year. raise the reserve requirement or raise the discount rate to make it cool down.increase the money supply.
Subsidy: A payment by the government to producers or distributors in an industry to prevent the decline of that industry (e. as a result of continuous unprofitable operations) or an increase in the prices of its products or simply to encourage it to hire more labor (as in the case of a wage subsidy). Its main purpose is to regulate the international monetary exchange system.
International Monetary Fund (IMF) An autonomous international financial institution that originated in the Bretton Woods Conference of 1944.
Monetary policy: The regulation of the money supply and interest rates by a central bank in order to control inflation and stabilize currency. subsidies on some foodstuffs to keep down the cost of living.g. consequently. The monetary policy influences interest rates and money supply. one of the central tasks of the IMF is to control fluctuations in exchange rates of world currencies in a bid to alleviate severe balance of payments problems. Examples are export subsidies to encourage the sale of exports. the central bank (such as RBI in India) can withdraw money from the banking system. If growth is slowing. following current practice.
Treasury bill: A short-term debt issued by a national government with a maximum maturity of
. each unit of currency buys fewer goods and services.
Inflation: In economics. inflation is a rise in the general level of prices of goods and services in an economy over a period of time. plus income earned by its citizens abroad. However. If the economy is heating up. GNP equals GDP plus net property income from abroad. lower the reserve requirement and decrease the discount rate. it can reverse the process .
Treasury bills are sold at discount. It was set up in 1995 at the conclusion of GATT negotiations for administering multilateral trade negotiations.Economy & Financial Terms
. such that the difference between purchase price and the value at maturity is the amount of interest.
WTO: The World Trade Organization is a global international organization dealing with the rules of trade between nations.