Some Important Economic Terms

Active Market : It is a stock exchange term. It is used for a particular stock or share in which there are regular and frequent dealings. This is a term used by stock exchange which specifies the particular stock or share which deals in frequent and regular transactions. It helps the buyers to obtain reasonably large amounts any time.

Administered Prices: When the prices of an item or a commodity are decided by the central power, generally the government or any other agency and not on the basis of demand and supply, such types of prices are called Administered Prices.

Ad-valorem Tax : Advalorem tax is a kind of indirect tax in which goods are taxed by their values. In the case of advalorem tax, the tax amount is calculated as the proportion of the price of the goods. Value Added Tax (VAT) is an advalorem tax. In other words when the tax is determined on the basis of value of a commodity, it is known as Ad-valorem tax.

Amalgamation: It means ‘merger’. As and when necessity arises two or more companies are merged into a large organization. The old firms completely lose their identity when the merger takes place.

Appreciation : Appreciation means an increase in the value of something e.g. stock of raw materials or manufactured goods. It also includes an increase in the traded value of currency. It is an increase in the value of assets over a particular time period. Example : land, building, paintings etc. Appreciation is just opposite to depreciation. When the prices rise due to inflation, appreciation may occur.

Arbitration: Where there is an industrial dispute, the Arbitration comes to the force. The judgement is given by the Arbitrator. Both the parties have to accept and honor the Arbitration. Arbitration is the settlement of labor disputes that takes place between employer and the employees.

Auction : When a commodity is sold by auction, the bids are made by the buyers. Who so ever makes the highest bid, gets the commodity which is being sold. The buyers make the bid taking into consideration the quality and quantity of the commodity.

Autarchy: It means self-sufficiency and self-reliance of an economy. Autarchy is an indicator of self-sufficiency. It means that the country itself can satisfy the needs of its population without making imports from other countries.

Balance of Payment: It is the difference between country’s payments and receipts from other countries during a year. In other words the balance of payment shows the relationship between the one country’s total payment to all other countries and its total receipts from them. Balance of payment not only includes visible export and imports but also invisible trade like shipping, banking, insurance, tourism, royalty, payments of interest on foreign debts.

Balance of Trade : It refers to the relationship between the values of country’s imports and its export, i.e. the visible balance. Balance of trade refers to the total of country’s export commodities and total value of imports commodities. Thus balance of trade includes Only visible trade i. e. movement of goods (exports and imports of goods). Balance of trade is part of Balance of Payment statement.

Balance Sheet : Balance sheet is a statement showing the assets and liabilities of a business at certain date. Balance sheet helps in estimating the real financial situation of a firm.

Bank : Bank is a financial institution. It accepts funds on current account and savings accounts. It also lends money. The bank pays the cheques drawn by customers against current or savings bank account. The bank is a trader that deals in money and credit.

Bank Draft: Banker’s draft (Demand Draft) is a negotiable claim drawn upon a bank. Drafts are as good as cash. The drafts cannot be returned unpaid. Draft is issued when a customer shows his unwillingness to accept cheque in payment for his services or mercantile goods. Bank Draft is safer than a cheque.

Bank Rate : It is official rate of interest charged by Reserved Bank of India on loans to other banks. It is the rate at which R.B.I. discounts first class securities including bills of exchange. Thus, it is also known as discount rate.

Bankruptcy : It is a situation in which a person is unable to discharge his debt obligations.

Basket of Currency: In this system the exchange value of a country’s currency is fixed in terms of some major international currencies. Indian rupee is valued against US Dollar British Pound, Japanese Yen, French Franc and German Deutschmark. India opted for this system in 1975.

Bear and Bull : These terms are used in stock exchange. ‘Bears’ is an individual who sells shares in a hope that the stock’s price would fall. ‘Bull’ is an individual who buys shares in a hope that the stock’s price would rise.