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Banking Awareness (Part III)

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What is meant by Fiscal Policy?

Fiscal Policy is a part of a Government’s economic policy which deals with taxation, expenditure, borrowing, and the management of public debt in the economy. It primarily concerns itself with the flow of funds in the economy.

What is a Hot Money?

Hot Money‘ is the flow of funds (or capital) from one country to another in order to earn a short-term profit on interest rate differences and/or anticipated exchange rate shifts. Hot Money can move very quickly in and out of markets, potentially leading to market instability.

What is Soft Currency?

A currency with a value that fluctuates as a result of the country’s political or economic uncertainty is called Soft Currency. As a result of the of this currency’s instability, foreign exchange dealers tend to avoid it.

What is Hard Currency?

A currency, usually from a highly industrialized country, that is widely accepted around the world as a form of payment for goods and services is called Hard Currency.

A hard currency is expected to remain relatively stable through a short period of time, and to be highly liquid in the FOREX market.

What is meant by Security?

Security refers to a share, bond or Government stock that can be bought and sold, usually on the stock exchange or on a secondary market. The company or entity that issues the security is known as the issuer.

Security is divided into two types.

  •  Debt Security
  •  Equity

A debt security is a type of security that represents money that is borrowed that must be repaid, with terms that define the amount borrowed, interest rate and maturity/renewal date.

Equities represent ownership interest held by shareholders in a corporation, such as a stock. Unlike holders of debt securities who generally receive only interest and the repayment of the principal, holders of equity securities are able to profit from capital gains.

 What is meant by Prime Lending Rate (PLR)?

Prime Lending Rate is the rate of interest at which bank gives loan to its most reliable customers. Generally a bank’s best customers consist of large corporations. It is also known as Prime Interest Rate.

What is Monopoly?

Monopoly refers to a market structure where there is only one seller who controls the entire market and no substitute of that product is available in the market.

What is Monopsony?

Monopsony is also termed as ‘Buyer’s Monopoly‘. It means there is only one buyer of the product in the market.

What is meant by Autarchy?

Autarchy refers to a country which is self sufficient and does not require any kind of imports from other countries to meet the needs of the people.

What is meant by Buoyancy?

When the Government fails to check inflation, it raises the income tax as well as corporate tax to generate revenue. Such a tax is called as Buoyancy. It concerns with the revenue from taxation in the period of inflation.