Gross Domestic Product (GDP)

Definition: The term GDP stands for Gross Domestic Product, is a measure of market value of all finished goods and services which are newly produced, during a particular period and that too within the domestic territory of the country. The term domestic territory signifies a different meaning, concerning national income accounting, it includes: The area…

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Capitalism

Definition: Capitalism refers to an economic and political system, wherein the private individuals own and control the country’s factors of production (land, labour, capital) for making a profit. In finer terms, private property is the essence of a capitalist economy and profit works as a motivation here. Under this system, the government does not intervene…

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Fiscal Policy

Definition: The Fiscal Policy implies the decisions taken by the government with respect to its revenue collection (through taxation), expenditure and other financial operations to accomplish certain national goals. The government uses its expenditure and taxation programmes to generate the desirable effects or eliminate the undesirable effects on the production, employment and national income of…

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Moral Suasion

Definition: Moral Suasion refers to a method adopted by the central bank to persuade or convince the commercial banks to advance credit in accordance with the directives of the central bank in the economic interest of the country. Simply, the process in which the central bank requests or persuade the commercial banks to comply with…

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Lending Margin

Definition: The Lending Margin refers to the gap between the value of the property mortgaged, against which the loan is borrowed, and the actual amount advanced to the borrower. In the above definition, Margin denotes the collateral that the investor has to deposit with a bank so as to cover some or all the credit…

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Credit Rationing

Definition: The Credit Rationing is a measure undertaken by the central bank to limit or deny the supply of credit based on the investorā€™s creditworthiness and an increased loan demand. In other words, a situation where the central bank denies credit to the borrowers who want funds and are willing to pay a higher interest…

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Statutory Liquidity Ratio

Definition: The Statutory Liquidity Ratio (SLR) refers to the proportion of deposits the commercial bank is required to maintain with them in the form of liquid assets in addition to the cash reserve ratio. In the definition, the liquid assets are the assets readily convertible into cash, includes government bonds, or government approved securities, gold,…

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Cash Reserve Ratio

Definition: The Cash Reserve Ratio refers to a certain percentage of total deposits the commercial banks are required to maintain in the form of cash reserve with the central bank. The objective of maintaining the cash reserve is to prevent the shortage of funds in meeting the demand by the depositor. The amount of reserve…

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Bank Rate

Definition: The Bank Rate also called as a Discount Rate is the rate at which the commercial bank rediscounts their bills of exchange from the central bank. As per the RBI Act, 1935 the bank rate is the standard rate at which the bank buy or rediscounts the bills of exchange and other commercial papers…

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Open Market Operations

Definition: The Open Market Operations refers to the sale and purchaseĀ  of government securities and treasury bills by the central bank of the country with a view to regulate the supply of money in the economy. When the central bank wants to increase the money supply in the economy, it purchases the government securities, i.e.,…

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