Understanding Money Supply, Inflation, and Economic Policy
Money Supply Aggregates
Old Aggregates (1977)
- M1: Currency with public + Demand Deposits + Other deposits with RBI.
- M2: M1 + Post office savings.
- M3: M1 + Time deposits (Broad Money).
- M4: M3 + Total post office deposits.
New Aggregates (1998)
- M0: Reserve money (Monetary base).
- NM1: Currency + Current deposits + Demand liabilities of savings + Other deposits with RBI.
- NM2: NM1 + CDs + Short-term term deposits (up to 1 year).
- NM3: NM2 + Long-term deposits (Broad Money).
Wholesale Price Index (WPI)
WPI is an indicator
Read MoreInternational Trade: Core Concepts and Global Dynamics
Understanding International Trade
International trade is the exchange of goods, services, and capital across national borders. It allows nations to obtain goods and services they cannot produce efficiently domestically and to sell surplus production to the global market.
Balance of Trade (BOT)
The Balance of Trade (BOT), or Trade Balance, is the difference between the monetary value of a country’s exports and imports of physical merchandise over a specific period.
Types of Trade Balance
- Trade Surplus
International Trade and Exchange Rate Economics
1. Terms of Trade (ToT)
Meaning: Terms of Trade refers to the rate at which a country’s exports exchange for imports; it indicates the purchasing power of exports in terms of imports.
Formula: ToT = (Export Price Index / Import Price Index) × 100
- ToT > 100: Favorable (more imports for same exports)
- ToT < 100: Unfavorable
Types of ToT
- Net Barter ToT: Ratio of export prices to import prices (Px/Pm)
- Gross Barter ToT: Ratio of quantity of imports to exports (Qm/Qx)
- Income ToT: Net ToT × Volume of
Keynesian Economics: Consumption, Investment, and Employment
Unit 1: Keynes’ Psychological Law of Consumption
Introduction
John Maynard Keynes introduced the Psychological Law of Consumption in his seminal 1936 work, The General Theory of Employment, Interest and Money. This law forms the bedrock of Keynesian macroeconomic analysis, shifting the focus of economics from classical supply-side theories toward aggregate demand. It explains the relationship between human psychology, spending habits, and aggregate income, clarifying why economies experience unemployment
Read MoreInternational Trade Dynamics and Indian Export Systems
Methods of Economic Protection
Protectionism involves government policies that restrict international trade to help domestic industries.
- Tariff Barriers: These are taxes or duties imposed on imported goods to make them more expensive and less competitive against local products.
- Quotas: A direct restriction on the quantity of a specific good that can be imported during a given period.
- Subsidies: Financial assistance provided by the government to domestic producers, allowing them to lower their prices
Essential GST Concepts and Definitions for Businesses
Aggregate Turnover
Aggregate turnover refers to the total value of all taxable supplies, exempt supplies, exports of goods or services, and inter-state supplies of persons having the same PAN, computed on an all-India basis, excluding GST taxes.
Includes
- Value of taxable supplies
- Exempt supplies
- Exports of goods and services
- Inter-state supplies made by the taxpayer
Excludes
It does not include GST taxes such as CGST, SGST, IGST, and UTGST, and excludes inward supplies on which tax is payable under reverse
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