Economic Concept

Investment ↑ ===Takes 4 year---> GDP ↑ ====2 year---> Consumption
Example:
Investment decreased till 2012

Monetory policy = increase or decreases intrest rate-------thus affecting demand of currency........hence cannot affect supply side.

CPI(current headline inflation) has volatile component, which are affected mainly by supply side paramtere; Ex= Food inflation in CPI is more then WPI.......and food inflation are function of Supply side.

Thus Monetory policy deals with core inflation(CPI without volatile component= ie. Food + fuel= these are majorly impected by supply side).

REER= [Price of bucket in Rupee] / [Exchange rate * Price of  same bucket in foreign currency]

Exchange rate= 70 .......... 70Rupee =  1$

Therefore...if inflation in India ↑.....price of bucket in numerator will increase.......which will decrease the fraction...............which is equivalent to increase in Exchange rate’s decrease (as if numerator remains same dec rease in exchange rate will produce same impact.............hence appreciation of rupee.

REER ↑ = ER ↓ = appreciation of rupee = inflation ↑


CAD(Current Account deficit )
CAD= BOT (Balance of Trade) + BOI (Balance of invisible)
BOT=Manufacturing
BOI=Services

BOP(Balance of payment)
BOP=Current Account Deficit + Capital Account Deficit
Capital Account Deficit= foreign transaction thar are liablities...like loan + borrowings +changes in foreign exchange reserve + Foreign investment etc

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GDP deflator and how its different from CPI........click here to know in detail

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Structural inflation
 Structural inflation arises when producers can not adapt their production structure in an
efficient manner in response to changes in the structure of the economy. These changes may
concern:
--demand for the product,
--its production technology,
--competition for which producers stand.




Structural Vs Cyclical unemployment
Cyclical unemployment deals with an economy's business cycle. Cyclical unemployment
occurs when there are job losses during downturns and contractions in the business cycle. A lack of
demand is one of the main factors that cause cyclical unemployment

Structural unemployment occurs because of an absence of demand for a certain type of worker.
This typically happens when there are mismatches between the skills employers want and the skills
workers have.

Lafer curve:

































Schumpeterian Theory of Development:
--Innovation is most important factor of development.
--Capitalist economies like USA relies on this principal.



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 FCNR - B
Foreign currency non-resident deposits, usually abbreviated as FCNR(B) – the B
stands for banks, are term deposits that non-resident Indians (NRIs) can open with banks in India.

These deposits are denominated in foreign currencies permitted by the Reserve Bank of India.

These accounts are exempt from TDS in India.
--FCNR deposits can be opened for tenures of 1 year upto 5 years.
--Foreign exchange reserves received through FCNR-B are used by a country to finance its current
account deficit (CAD).
--FCNR-B is not the only way an NRI can invest in India.
--There are two more options: the non-resident (external) rupee account (NRERA) and nonresident

ordinary (NRO) account.
--These are similar to normal bank accounts and differ in the fact that the former is term
account with a maximum period of three years. Unlike FCNR(B) they are denominated in
rupees.
--NRERA accounted for the highest portion NRI deposits at $71 billion in and around 2016.

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	Revenue	Expenditure
Current Account	Visibles (Goods/ Merchandise)	Visibles
	Invisible(Services)	Invisibles
Capital Account

Trade difecit =Expenditure(Visibles) – Current(Visibles)

Current Account defecit= Current account(Expenditure) – Current Account (Revenue)

BOP= Net Exp –Net Revenue

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Public Account

Definition: Public Account of India accounts for flows for those transactions where the government is merely acting as a banker.

Description: This fund was constituted under Article 266 (2) of the Constitution. It accounts for flows for those transactions where the government is merely acting as a banker.

Examples of those are provident funds, small savings and so on. These funds do not belong to the government. They have to be paid back at some time to their rightful owners. Because of this nature of the fund, expenditures from it are not required to be approved by the Parliament.