1. Balance
of Trade:
The value of a
country’s exports minus the value of its imports. Unless specified as the balance
of merchandise trade, it normally incorporates trade in services, including
earnings (interest, dividends, etc.) on financial assets.
2. Balanced
Trade:
3. Balance
of Payments:
A list of all
of a country’s international transactions for a given time period, usually one
year. Payments into the country (receipts) are entered as positive numbers,
called credits; Payments out of the
country (payments) are entered as negative numbers called debits. A single numbers summarize all of a country’s international
transactions: the balance of payments surplus.
4. MFN
(Most Favoured Nation):
The principle,
fundamental to the GATT, of treating imports from a country on the same basis
as that given to the most favoured other nation. That is, and with some
exceptions, every country gets the lowest tariff that any country gets, and
reductions in tariffs to one country are provided also to others.
5. Balanced
Budget:
A government
budget surplus that is zero, thus with net tax revenue equaling expenditure. A
balanced budget changes in policy or behavior is one which a component of the government
budget, usually taxes, is adjusted as necessary to maintain a balanced budget.
6. Balanced
Growth of an Economy:
Growth of an economy
in which all aspects of it, especially factors of production, grow at the same
rate.
7. Bank
Rate:
The interest
rate charges by a central bank to commercial banks for very short term loans.
8. Repo:
Repo is “Repurchase
Agreement”. An agreement to sell a security for a specified price and to buy it
back later at another specified price. A repo is essentially a secured loan.
9. Repo
Rate:
Whenever the
banks have any shortage of funds they can borrow it form RBI. Repo rate is the
rate at which commercial banks borrows rupees from RBI. A reduction in the repo
rate will help banks to get money at cheaper rate. When the repo rate increases
borrowing form RBI becomes more expensive.
10. Reverse
Repo Rate:
Reverse Reporate is the rate at which RBI borrows money from commercial banks. Banks are
always happy to lend money to RBI since their money is in the safe hands with a
good interest. An increase in reverse repo rate can cause the banks to transfer
more funds to RBI due to this attractive interest rates.
11. CRR (Cash Reverse Ratio):
CRR is the
amount of funds that the banks have to keep with RBI. If RBI increases CRR, the
available amount with the banks comes down. RBI is using this method (increase
of CRR), to drain out the excessive money from the banks.
12. SLR
(Statutory Liquidity Ratio):
SLR is the amount
a commercial banks needs to maintain in the form of cash, or gold, or govt.
approved securities (Bonds) before providing credit to its customers. SLR rate
is determined and maintained by RBI in order to control the expansion of the
bank credit.
13. Need
of SLR:
With the SLR,
the RBI can ensure the solvency of a commercial banks. It is also helpful to control
the expansion of the Bank credits. By changing SLR rates, RBI can increase or
decrease bank credit expansion. Also through SLR, RBI compels the commercial banks
to invest in the government securities like govt. bonds.
14. Main
use of SLR:
SLR is used to
control inflation and propel growth. Through SLR rate the money supply in the system
can be controlled effectively.
15. Fiscal
Deficit:
A deficit in
the government budget of a country and represents the excess of expenditure
over income. So this is the amount of borrowed funds require by the government
to meet its expenditures completely.
16. Direct
Tax:
A direct tax is
that which is paid directly by someone to taxing authority. Income tax and
property tax are an examples of direct tax. They are not shifted to somebody
else.
17. Indirect
Tax:
This type of
tax is not paid by someone to the authorities and it is actually passed on to
the other in the form of increased cost. They are levied on goods and services
produced or purchased. Excise Tax, Sales Tax, Vat, Entertainment tax are
indirect taxes.
18. NOSTRO
Account:
A Nostro
account is maintained by an Indian Bank in the foreign countries.
19. VOSTRO
Account:
A Vostro
account is maintained by a foreign bank in India with their corresponding bank.
20. SDR
(Special Drawing Rights):
SDR are new
form of International reserve assets, created by the International Monetary
Fund in 1967. The value of SDR is based on the portfolio of widely used
countries and they are maintained as accounting entries and not as hard
currency or physical assets like Gold.
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