Bank (commercial and Central)

1.      Bank is an institution which

1. Deals in shares and other assets
2. Deals in money
3. Not only deals in money but also creates money
4. Sells goods

2.      A commercial bank is that bank which

1. Purchases shares
2. advances loan for short period
3. Issues currency notes
4. Controls money supply

3.      Which is principle asset of bank

1. cash
2. Investment
3. Bank building
4. All of the above

4.      Which is not the main liability of bank

1. Capital
2. Reserve fund
3. Advances and loans
4. Bills payable

5.       Which term is not related to the banking system

1. Bank rate
2. Credit exaction
3. Fiscal Deficit
4. Cash reserve ratio

6.       A cheque can be drawn against the following account

1. Debenture account
2. Share account
3. Current account
4. Time deposit account

7.      While sanctioning over draft facilities the bank allow his customers

1. To withdraw money from their account up to any limit
2.  To withdraw time deposits
3. To withdraw money from their account
4. None of above

8.      If the required ratio is 100% multiple expansion of bank deposits would be

1. 200 %
2. zero
3. 500 %
4. 50 %

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Phillips Curve

This theory of inflation was presented by A.M.Phillips,known as the Phillips Curve Hypothesis.The P.C. shows an inverse relationship between rate of unemployment and annual rate of change of money wages or prices.
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The Paradox of Thrift

The paradox of thrift arises  when all people in a society try to save more but infact they are unable to do so.The multiplier theory of Keynes helps a good deal in explaining this paradox.
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Types of public investment expenditure

There are two types of public expenditure-Pump priming &Compensatory expenditure.
Pump priming expenditure-It refers to an investment ,specially by a govt,in order to encourage growth in a business or an industry.The  policy should be adopted temporarily and should be depressed off when the need is over
Compensatory expenditure-This technique means heavy govt expenditure in a period of depression and a gradual reduction of such expenditure when we gradually recover from a depression,and negative spending when a period of boom is reached.
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What is Value Added Tax?

Value Added Tax

By definition, VAT is a tax levied on the value added at each stage of production and distribution process. It is an ideal form of consumption taxation since the value added by a firm represents the difference between its receipts and cost of purchased inputs

Value Added Tax (VAT) is a general tax on commodities to replace sales tax, surcharge and other entry level taxes levied by the states and Union Territories

VAT is levied on sale of all taxable goods. VAT is not levied if sales of goods are not made in the course of furtherance of business

VAT is collected in stages: tax paid on purchases (input tax) is rebated against tax payable on sales (output tax). The concept of second sale or resale tax is done away with

VAT can be computed using one of three techniques

Subtraction method: tax rate is applied to the difference between the value of the output and the cost of the input

Addition method: the value added is computed by adding all payments that is payable to the factors of products (wages, interest payments etc)

Tax credit method: this entails the set off of the tax paid on inputs from tax collected on sales

India uses the tax credit method for VAT computation

Advantages of VAT include

1. Tax evasion becomes difficult. Businesses compelled to keep proper record of purchases and sales, and keep a trail of invoices
2. Avoids problem of undervaluing
3. Increase in revenue as tax net widens
4. Uniformity in tax regime avoids confusion
5. Permits easy and effective targeting of tax rates, as a result of which exports can be zero-rated
6. Parity with tax structures in other countries

mcq for Money

1.      Which of the following is an adequate definition of money?

a.       Anything which is accepted for tax payments.

b.      Anything which is exchanged of fixed rate of gold.

c.       Anything which banks are willing to accept.

d.      Anything which is generally accepted in exchange for goods and services.

2.      Which of these qualities of money is essential before it can perform any of its functions.

a.       Acceptability

b.      Stability in value

c.       Durability

d.      Cognizibility

3.      Which of the following is not the necessary condition of money?

a.       It is a unit of account

b.      It is a store of value

c.       It has intrinsic value

d.      It is medium of exchange

4.      Which of the following is not the indirect importance of money in the field of economics?

a.       Freedom from inconvenience of barter system

b.      Index of economics development.

c.       Basis of laws of equi-marginal utility.

d.      Measure of social welfare.

5.      Which one of the following does not cover the economics evils of money?

a.       Instability of value

b.      Reduction in consumption

c.       Trade cycle

d.      Problem of black money.

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Economic Effects of Tsunami

After Tsunami Japan has faced the loss of 170 billion dollar approx.Consequentely the sensex has rolled down to 6.5 percent.

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