THE BASICS OF ECONOMICS

THE BASICS OF ECONOMICS

# What is Economics ?

The branch of social science that deals with the allocation of resources, production, distribution and consumption of goods and services and their management.

Economics is also defined as the study of wealth.

THE BASICS OF ECONOMICS

# What is Need, Want & Demand ?

Need is a state of felt depravation.

Want is a need for a specific satisfier

Demand is want backed by willingness and capacity to buy.

THE BASICS OF ECONOMICS

# What is GDP & GNP ?

GDP (Gross Domestic Product) is the total market value of all the goods and services produced within the borders of a nation during a specified period.

GNP (Gross National Product) is the total market value of all the goods and services produced by the citizens of a nation during a specified period.

THE BASICS OF ECONOMICS

# What is Invisible Earning ?

It is an element in the balance of payments which includes: (a) services in the field of commerce and finance; and (b) earnings of government holdings of property and enterprises abroad.

THE BASICS OF ECONOMICS

# What is Inflation, Deflation & Stagflation ?
Inflation is a condition in which the volume of purchasing power is constantly running ahead of the output of goods and services, with the result that as incomes and prices rise the value of money falls. Inflation happens when too much money chases too few goods.

Deflation (Recession) is a persistent decrease in the level of consumer prices or a persistent increase in the purchasing power of money because of a reduction in available currency and credit. It is a situation in which prices and money incomes are falling, accompanied by an increase in the value of the monetary unit.
Deflation happens when too less money chases too much goods. Stagflation is sluggish economic growth coupled with a high rate of inflation and unemployment.

THE BASICS OF ECONOMICS

# What are the types of Inflation ?

Modest Inflation (3% - 5%)

Creeping Inflation (5% - 10%)

Running Inflation (Over 10%)

THE BASICS OF ECONOMICS

# What are the three major factors causing inflation ?

Primary Articles (Foodgrains)

Secondary Articles
(Manufactured items)

Fuel (Petrol, Diesel, Cooking Gas)

THE BASICS OF ECONOMICS

# What Are The Ways Of Measuring Inflation?

Consumer Price Index (CPI) This measures the consumer prices of a basket of commodities in different cities. Wholesale Price Index (WPI) This measures the different prices of a basket of commodities in the wholesale markets.

THE BASICS OF ECONOMICS

# What is Balance of Trade and Balance of Payments?

Balance of Trade is the relationship between the values of a countrys imports and its exports.

Balance of Payments is the relation between the payments of all kinds made from one country to the rest of the world and its receipts from all other countries.

THE BASICS OF ECONOMICS

# What is Foreign Exchange Reserves ?

Forex is the basket of foreign currencies (including bank deposits), gold, and Special Drawing Rights held by a nation to pay its debts to foreigners.

THE BASICS OF ECONOMICS

# What is Special Drawing Rights (SDR) ?

It is an international reserve currency system created by the International Monetary Fund in October, 1969.
It provides for a new type of money (known as paper gold) to serve by agreement of the free world nations as the first international legal tender. S.D.Rs. are used along with gold and dollars as monetary reserves; they are not held by individuals or private businesses but used in transactions between governments and central banks.

THE BASICS OF ECONOMICS

# What is Soft Loan & Hard Loan?

Soft Loan in international trade, means a loan that may be repaid in the borrowers currency, as opposed to a Hard Loan, which must be repaid in the lenders currency or in gold or a reserve currency.

THE BASICS OF ECONOMICS

# What is FDI & FII ?

Foreign Direct Investment is the setting up or acquisition abroad of physical assets such as plant and equipment, with operating control residing in the parent corporation.

Foreign Institutional Investor means an institution established or incorporated outside India, which proposes to make investment in India in securities.

DIFFERENT ECONOMIC SYSTEMS

Feudalism You have two cows. Your lord takes some of the milk. You have two cows. The government takes them and puts them in a barn with everyone else's cows. You have to take care of all the cows. The government gives you as much milk as you need. You have two cows. The government takes both, hires you to take care of them, and sells you the milk.

Socialism

Fascism

Dictatorship

You have two cows. The government takes both and shoots you.
You have two cows. The government fines you for keeping two unlicensed animals in an apartment.

Singapore Democracy

DIFFERENT ECONOMIC SYSTEMS

Pure Democracy Representative Democracy You have two cows. Your neighbors decide who gets the milk. You have two cows. Your neighbors pick someone to tell you who gets the milk. The government promises to give you two cows if you vote for it. After the election, the president is impeached for speculating in cow futures. The press dubs the affair "Cowgate". You have two cows. At first the government regulates what you can feed them and when you can milk them. Then it pays you not to milk them. After that it takes both, shoots one, milks the other and pours the milk down the drain. Then it requires you to fill out forms accounting for the missing cows.

American Democracy

Bureaucracy

DIFFERENT ECONOMIC SYSTEMS

Capitalism You have two cows. You sell one and buy a bull
You have two cows. You sell three of them to your publicly listed company, using letters of credit opened by your brother-inlaw at the bank, then execute a debt/equity swap with associated general offer so that you get all four cows back, with a tax deduction for keeping five cows. The milk rights of six cows are transferred via a Panamanian intermediary to a Cayman Islands company secretly owned by the majority shareholder, who sells the rights to all seven cows' milk back to the listed company. The annual report says that the company owns eight cows, with an option on one more. Meanwhile, you kill the two cows because the Feng Shui is bad.

Hong Kong Capitalism

Environmentalism

You have two cows. The government bans you from milking or killing them.

ANY QUESTIONS ???