Question on Banking Policies and Controls
1. What is Fiscal Policy?
Fiscal policy is the use of government spending and revenue collection to influence the economy. These policies affect tax rates, interest rates and government spending, in an effort to control the economy. Fiscal policy is an additional method to determine public revenue and public expenditure.
2. What is Fiscal Deficit?
It is the difference between the government’s total receipts (excluding borrowings) and total expenditure.
3. What is National Income?
National Income is the money value of all goods and services produced in a Country during the year.
4. What is GDP?
The Gross Domestic Product or GDP is a measure of all of the services and goods produced in a country over a specific period; classically a year.
5. What is GNP?
Gross National Product is measured as GDP plus income of residents from investments made abroad minus income earned by foreigners in domestic market.
6. What is Revenue deficit?
It defines that, where the net amount received (by taxes & other forms) fails to meet the predicted net amount to be received by the government.
7. What is Inflation?
Inflation is as an increase in the price of bunch of Goods and services that projects the Indian economy. An increase in inflation figures occurs when the price level of goods and services rises, the value of currency reduces. This means now each unit of currency buys fewer goods and services. Inflation happens when there are fewer Goods and more buyers; this will result in increase in the price of Goods, since there is more demand and less supply of the goods.
8. What is Deflation?
Deflation is the continuous decrease in prices of goods and services. Deflation occurs when the inflation rate becomes negative (below zero) and stays there for a longer period.
Deflation is different from disinflation as the latter implies decrease in the level of inflation whereas on the other hand deflation implies negative inflation.
10. What is Recession?
A true economic recession can only be confirmed if GDP (Gross Domestic Product) growth is negative for a period of two or more consecutive quarters. In such a situation, economic indicators such as GDP, corporate profits, employments, etc., all fall.
This creates a mess in the entire economy. To tackle the menace, economies generally react by loosening their monetary policies by infusing more money into the system, i.e., by increasing the money supply.
11. What is LAF ?
Liquidity adjustment facility (LAF) is a monetary policy tool which allows banks to borrow money through repurchase agreements. LAF is used to aid banks in adjusting the day to day mismatches in liquidity.
12. What is Marginal Standing Facility?
Marginal Standing Facility is the rate at which scheduled banks could borrow funds overnight from Reserve Bank of India (RBI) against government securities.