Category: Banking Terms

Economic Terms in Brief for Bank Promotion Exams, JAIIB, CAIIB 1. Gross Domestic Product (GDP): It is the money value of all final goods and services produced in the domestic territory of the country in a year. 2. Net Domestic Product: obtained by reducing consumption of fixed capital (depreciation) from the GDP. 3. Gross National Product (GNP): It is calculated by adding net factor income from abroad (NFIA) to GDP. 4. Law of Demand: It states that other things being equal, more of a commodity is demanded at a lower price and less of it at a higher price. 5. Elasticity of Demand: It is the responsiveness of demand to a change in any factor of demand. 6. Factors affecting elasticity of Demand: (a) Nature of Commodity (b)Availability of substitute goods (c) Share in the total expenditure (d) Diverse uses of the commodity (e) Consumer’s behavior etc. 7. Supply curve: A graph of the relationship between the price of a good and the amount supplied at different prices 8. Consumer surplus: The difference between what a consumer would be willing to pay for a good or service and what that consumer actually has to pay. 9. Sunk costs: When what is done cannot be undone. Sunk costs are costs that have been incurred and cannot be reversed. 10. Marginal Cost: It is the addition to the total cost as a result of a unit increase in production. 11. Propensity to Consume: The relationship between change in income and the resultant change in consumption. 12. Fiscal Measures: Measures to correct excess /deficient demand through budget proposals of government are called fiscal measures. These include tax changes, increases/reductions in government expenditure, etc.Part 4: TYPES OF CHARGES, SECURITIES & DOCUMENTATION with Multiple Choice Questions (MCQs) and answers 13. Fiscal Policy: Fiscal policy is that part of government economic policy which deals with taxation, expenditure, borrowing, and the management of public debt in the economy. 14. Fiscal deficit is the gap between the government's total spending and the sum of its revenue receipts and non-debt capital receipts. It represents the total amount of borrowed funds required by the government to completely meet its expenditure 15. Budget Deficit: Budget may take a shape of a deficit when the public revenue falls short of public expenditure. A budget deficit is a difference between the estimated public expenditure and public revenue. The government meets this deficit by way of printing net currency or by borrowing. 16. Primary Deficit: Fiscal Deficit minus Interest on Borrowings. 17. Inflation: A situation of a steady and sustained rise in general prices is usually known as inflation. Inflation is a state in which the value of money is falling i.e. prices are rising. 18. Cost-push Inflation: It arises due to an increase in production cost. Such type of inflation is caused by three factors: (i) an increase in wages, (ii) an increase in the profit margin, and (iii) the imposition of heavy taxation. 19. Deflation: Deflation is the reverse case of inflation. Deflation is a state of falling prices that occurs at a time when the output of goods and services increases more rapidly than the volume of money in the economy. In deflation, the general price level falls and the value of money rises. 20. Recession: A period of slow or negative economic growth, usually accompanied by rising unemployment. 21. Stagnation: A prolonged recession, but not as severe as depression. 22. Disinflation: A fall in the rate of inflation. This means a slower increase in prices but not a fall in prices. 23. Depression: A prolonged recession in economic activity. The textbook definition of a recession is two consecutive quarters of declining output. Depression is an even deeper and more prolonged slump. 24. Duopoly: A market structure in which two producers of a commodity compete with each other. 25. Monopoly A market situation in which a product that does not have close substitutes is being produced and sold by a single seller. 26. Perfect competition A market situation characterized by the existence of very many buyers and sellers of homogeneous goods or services with perfect knowledge and free entry so that no single buyer or seller can influence the price of the good or service. 27. Buyer's market: A market in which supply seems plentiful and prices seem low; the opposite of a seller's market. 28. Tax haven: A country or designated zone that has low or no taxes, 29. Tax avoidance: A legal action designed to reduce or eliminate the taxes that one owes. 30. Tax evasion: An illegal strategy to decrease tax burden by underreporting income, overstating deductions, or using illegal tax shelters. 31. Ad valorem Tax: Ad valorem tax is a kind of indirect tax in which goods are taxed by their values. In the case of ad Valorem tax, the tax amount is calculated as the proportion of the price of the goods. Value-added Tax (VAT) is an ad Valorem Tax. 32. Regressive Tax: It is a tax in which rates of taxation fall with an increase in income. In regressive taxation, the incidence falls more on people having lower incomes than that on those having higher incomes. 33. Progressive taxation: Taxation that takes a larger proportion of a taxpayer’s income the higher the income is. 34. Monetary policy: The regulation of the money supply and interest rates by a central bank in order to control inflation and stabilize the currency. 35. HDI: HDI (Human Development Index) is a composite index measuring average achievement in three basic dimensions of human life-a long and healthy life, knowledge, and a decent standard of living. 36. Engel’s Law: This law was formulated by Ernst Engel. This law states that, with a given taste and preference, the portion of income spend on food diminishes as income increases. According to this law, the smaller a person’s income, the greater the proportion of it that he will spend on food, and vice versa. 37. Giffin Goods: Giffin goods have a positive relationship between price and quantity demanded and as a result demand curve of Giffin goods slopes upward from left to right. 38. Gresham’s Law: Bad money (if not limited in quantity) drives good money out of circulation 39. Laffer Curve: It represents the relationship between total tax revenue and corresponding tax rates. 40. Lorenz Curve: The Lorenz curve is a graphical representation of the cumulative distribution function of a probability distribution. This curve shows the degree of inequalities of a frequency distribution in a graphical manner.One-liner Questions and Answers for Bank Promotion Exams (Set 3) 41. Pareto efficiency: A situation in which nobody can be made better off without making somebody else worse off. 42. Pigou effect: A fall in the price level increases the real value of people’s savings making them feel wealthier and thus causing them to spend more. This increase in demand can lead to higher employment 43. Okun’s Law: A relationship between an economy's GDP gap and the actual unemployment rate. The relationship is represented by a ratio of 1 to 2.5. Okun found that an annual 2.5% increase in the rate of real growth above the trend growth results in a 1% decrease in the rate of unemployment. 44. Philips Curve: Inflation and unemployment have a stable and inverse relationship. The theory states that with economic growth comes inflation, which in turn should lead to more jobs and less unemployment. 45. Say’s Law: Supply creates its own demand. 46. Real exchange rate: An exchange rate that has been adjusted to take account of any difference in the rate of inflation in the two countries whose currency is being exchanged. 47. Real interest rate: The interest rate less the rate of inflation. 48. Tiger economies: The fast-growing developing economies of Asia. 49. Tobin tax: A proposal to reduce speculative cross-border flows of capital by levying a small tax on foreign exchange transactions. 50. Predatory pricing: Charging low prices now so you can charge much higher prices later. 51. PPP: Purchase Power Parity is the exchange rate that equates the price of a basket of identical traded goods and services in two countries. 52. Bubble: When the price of an asset rises far higher than can be explained by fundamentals. 53. Bull: An investor who expects the price of a particular security to rise; the opposite of a bear. 54. Contagion: The domino effect, such as when economic problems in one country spread to another 55. Crowding out: When the state does something it may discourage, or crowd out, private-sector attempts to do the same thing. At times, excessive Government borrowing has been blamed for low private-sector borrowing. 56. Dumping: Selling something for less than the cost of producing it. 57. Fiscal drag: is the tendency of revenue from taxation to rise as a share of GDP in a growing economy. 58. Fiscal neutrality: When the net effect of taxation and public spending is neutral, neither stimulating nor dampening demand. 59. Hard currency: A hard currency is expected to retain its value, or even benefit from appreciation, against softer currencies. 60. Hot money: money that is held in one currency but is liable to switch to another currency at a moment’s notice in search of the highest available returns, thereby causing the first currency’s exchange rate to plummet.

Category: Banking Terms

Economic Terms in Brief for Bank Promotion Exams, JAIIB, CAIIB

MCQs on TYPES OF CUSTOMERS AND THEIR ACCOUNTS FOR BANK PROMOTION EXAM

Endorsement

Commercial Paper : An Introduction

Consumer Protection Act, 1986 (COPRA)

BALANCE SHEET

RBI ACT, 1934

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