Micro Economics (Useful tool for Registered Valuer and other professionals) [CS Tanuj Saxena]



Sr No

Particulars

Remarks

1

Circular Flow of Money

 - Refers to flow of money, income or the flow of goods and services across different sectors of the economy in a circular form

2

Two type of circular form

 - Real Flow / Product flow / Physical Flow

 - Money Flow

3

Real Flow 

 - It refers to the flow of factor of services from the household sector to the produsing sector and corrosponding flow of goods and services from the producing sector to the houshold sector

4

Money Flow

 - Refers to the flow of factor income as rent, interest, profit, and wages from the producing sector to the household sector as monetary rewards for their factor services as shown in the flow chart

5

Factor Income

 - Income earned by factor of production by rendering their productive services in the production process is known as Factor Income

6

Transfer Income

 - Income received without rendering productive services is known as transfer income

 - It is not included in National Income

7

Gross / Net

 - Gross means the value of product including depreciation

 - Net Means the value of product excluding depreciation

8

National Income

 - It refers to net money value of all the final goods and services produced by the normal resident of a country during an accounting year

9

Domestic Income

 - Refers to a total factor incomes earned by the factor of production within the domestic territory of country during an accounting year

10

Difference between National Income and Domestic income

 - Net factor Income from Abroad (NFIA) which is included in national income and excluded from domestic income

11

NFIA

 - NFIA = Income earned by residents from rest of the world - Payments to Non Residents within Domestic Territory

12

Factor Cost

 - Amount paid to the factors of production for their contribution in the production process

13

Market Price

 - Price at which product is actually sold in the market

 - MP = Factor Cost + Indirect taxes - Subsidies

14

GDP at Market Price

 - Gross market value of the final goods and services produced within the domestic territory of a country during an accounting year by all production units

15

GDP at Factor Cost

 - GDP at factor cost = GDP at Market Price - Net Indirect Taxes

16

Net Domestic Product at Market Price

 - Net Domestic Product at Market Price = GDP at market Price - Depreciation

17

Net Domestic Product at factor Cost

 - Net Domestic Product at factor Cost - Net Domestic Product at Market Cost - Net Indirect taxes

18

Gross National Product at Market Price

 - Gross National Product at Market Price = GDP at market Price - Net Factor Income from abroad

19

Gross National Product at Factor Cost

 - Gross National Product at Factor Cost = GNP at Market Price - Net indirect taxes

20

Net National Product at Market Price

 - Net National Product at Market Price = GNP at MP  - Depreciation

21

Net National Product at Factor Cost

 - NNP at Factor Cost = GNP at MP - Depreciation - Net Indirect taxes

22

GNP deflator

 - Index of price changes of goods and services included in the GDP

 - GNP Deflator = Nominal GNP * 100

                                      Real GNP

23

Activities excluded from GDP mp

Purely financial transaction

 - Buying and selling of securities

 - Government transfer payment

 - Private Transfer Payment

Transfer of used goods

Non Marketed goods and services

Illegal Activities

Leisure Time Activities

24

Methods of National income 

 - Income Method

 - Expenditure Method

 - Value added method / product method / output method

25

Types of Fiscal Policy

 - Expansionary Fiscal Policy

 - Contractinary Fiscal Policy

26

Expansionary Fiscal Policy

 - Designed to stimulate the economy during the contractionary phase of a business cycle or where there is an anticipation of business cycle contraction

27

Contractionary Fiscal Policy

 - Opposite of Expansionary Fiscal Policy

 - Design to retrain the levels of economic activity of the economy during an inflationary phase or when there is anticipation of business cycle expansion which is likely to induce inflation

28

Revenue Deficit

 - Revenue Deficit = Total Revenue Expenditures - Total Revenue Receipts

29

The difference between fiscal deficit and interest payment during the year is called:

 - Primary Deficit

30

The difference between total expenditure and total receipts except loans and other liabilities is called……:

 - Fiscal Deficit

31

The difference between total expenditure and total receipts is called

 - Budget Deficit

32

Difference between revenue deficit and grants for creation of capital assets is called

 - Effective revenue deficit

33

Household Sector

 - Measurement of domestic saving

 - Largest Contributor to Gross Domestic Product

34

Which sector has maximum share in National Income in India?

 - Local Sector

35

What will be the impact on National Income if savings exceed investments?

 - Remain Constant

36

The rate of growth of per capita income is equal to

 - Rate of growth of national income minus the rate of growth of population

37

To know the potential purchasing power of the household sector, we make use of the concept of:

 - Disposable Income

37

The sum of the marginal propensity to consume and the marginal propensity to save must be equal to

1

38

Coincident indicators tend to reach their peaks and troughs at about the same time as:

 - Real GDP

39

Types of Budget

 - Balanced Budget

 - Surplus Budget

 - Deficit Budget

40

Budgetary Deficit

 - Revenue Account Deficit + capital Account Deficit

41

Revenue Deficit

 - Revenue Expenditure - Revenue Receipt

42

Effective Revenue Deficit

 - Revenue Deficit - Grant for creation of capital asset

43

Fiscal Deficit

 - Total Expenditure – (Revenue Receipts + Capital Receipts excluding borrowings)

44

Primary Deficit

 - Fiscal Deficit - Interest Payment

45

Cash Reserve Ratios

 - Reserve ratio to be maintained by Scheduled banks with RBI

 - NBFCs are excluded from this requirment

 - No Interest is payable on this reserve by RBI

46

Statutory Liquidity Ratio

 - Scheduled banks are required to maintain a stipulated % of their total demand and time liabilities in one of the following forms :

1. Cash

2. Gold

3. Unencumbered Instruments (Treasury bills, Securities issued by Govt, State Development Loans, other notified by RBI

47

Automatic Stabilizer or Non Discretionary Policy

 - Any govt programe that automatically tends to reduce fluctuations in GDP is called an automatic stabilizer

 - Personal income tax, corporate tax, transfer payments are prominent automatic stabilizers

48

Twin Deficit in Economy means

 - High budget deficit and high fiscal deficit

49

In monetary term, what is term as monetary base or high powered money

 - Total liability of RBI

50

If savings exceeds investment, National Income____

No Impact

51

Final Goods

 - Those goods that are used either for consumption or investment purposes

52

Intermediate Goods

 - Those goods that are used either for resale or for further production in that same year

 - Durable goods purchased by govt for military purposes are included in under intermediate goods as they are used to produce defence services and not for market sale

53

 

 

 

Environmental Analysis

 

1

Steps in  Environmental Analysis

 - Identifying

 - Scanining

 - Analysing

 - Forecasting

2

Michael Porter’s five forces model

 - New Entrants

 - Supplier

 - Buyer

 - Substitutes

 - Existing Competitors

3

SWOT

 - Strength

 - Weakness

 - Opportunity

 - Threat

4

PEST Analysis

 - Political

 - Economical

 - Social

 - Technological

5

PESTLE

 - Political

 - Economical

 - Social

 - Technological

 - Legal

 - Environmental

6

GE Mckinsey Matrix

 

 

Invest / Grow

 - Facilitated by expanding the market or making investment

 

Hold

 - By making careful investment, current market is consolidated

 

Harvest / Sell

 - No extra investments but making focusing on maximisiing returns

7

ADL Matrix

Consist two important dimensions

 - Competitive position

 - Industry maturity

 

Industrial Maturity

 - Embryonic

 - Growth

 - Maturity

 - Ageing

 

Competitive Position

 - Dominant

 - Strong

 - Favourable

 - Tenable

 - Weak

8

How many types of business cycles are there 

 - Five

9

Business cycle completed when economy goes through

 - Single boom and single contraction in a sequence

10

Lagging Indicator

 - Reflect economy's historical performance and changes in these indicators are observable only after economic trend or pattern has already occurred

 - Variable that change after the real output changes are called "Lagging Indicator"

11

Yellow colour in BCG matrix

Selectivity & Earnings (refer the chart)

12

CAMEL stands

Capital adequacy, Asset quality, Management, Earnings, and Liquidity

13

Which of the following represent the three major categories of risks faced by a business organisation?

Project risks, technical risks, business risks

14

Business which has more sensitivity to business cycle, Beta of that will be 

No impact to business cycle

15

BCG Matrix

 

 

Vertical Axis in BCG Matrix - Y Axis

Market Growth Rate

 

Horizontal Axis in BCG Matrix - X Axis

Relative Market Share

 

Red Colour in BCG Matrix

Harvest and Divest

 

Green Colour in BCG Matrix

Invest and Expand

 

Yellow colour in BCG matrix

Select and Earn

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