Page 151 - DMGT401Business Environment

Business Environment

Notes Revenue Deficit: Revenue Expenditure – Revenue Receipts
Revenue Expenditure: Does not result in the creation of assets

6.7 Self Assessment

State whether the following statements are true or false:
1. Economics and politics are closely related in the sense that economic theories are based on
politics of the economy.
2. The inflation rate will escalate even with a slight change in the monetary policy of the
government.
3. New aggregate NM3 is also known as narrow aggregate of money.
4. Supply of money in the economy can be regulated by any nationalized bank.
5. Bank rate is the rate at which RBI lends money to other banks.

6. Fiscal policy is concerned with balanced growth of the economy.
7. Foreign Trade policy of 2002-2007 lays stress on exports of medicinal products from India
and import of seeds.

8. Entertainment tax, which is added in the cost of movie tickets, is a direct tax as individuals
have to pay that.
Fill in the blanks:

9. Savings with the post office is a part of ……………. aggregate of money supply.
10. People trust the stocks of the public sector units. This facilitates the ……………………..for
controlling monetary supply in the economy.

11. ……………………….ratio decides that how much a commercial bank is going to have in
form of cash and other readily convertible assets.
12. Government wants to put a tab on the sale of automobiles in the country. It can effectively
use …………………… to establish this objective.
13. Governments pay heavy interest rates on the equipments they hire from foreign nations.
This type of expense is called………………..
14. Money borrowed from banks increase the aggregate ……………. in the economy thereby
increasing the prices.

15. …………………scheme provides incentives to the exporters if they achieve more than
their set goals.
16. Inflationary pressures show their effect more on ………….. taxes.

6.8 Review Questions

1. "Politics drives economics or does economics influence politics". Discuss.
2. Critically examine the old and new, and broad and narrow divisions of money in India.
3. "The slightest change in money policy can produce large effects". Comment.
4. Suppose RBI over does the expansionary drive to achieve fast economic development.
What will happen in such a situation?

144 LOVELY PROFESSIONAL UNIVERSITY