Daily Quiz: UPSC Prelims Marathon(Economy) October 6, 2020

A concept developed by Irving Fisher (1867–1947) which shows relationship between inflation and the interest rate, expressed by an equation popular as the fisher equation, i.e., the nominal interest rate on a loan is the sum of the real interest rate and the rate of inflation expected over the duration of the loan: R = r + F; where R = nominal interest rate, r = real interest rate and F = rate of annual inflation.
Source: Ramesh Singh

The eight core industries, including coal, crude oil, natural gas, refinery products, fertilizers, steel, cement and electricity, comprise 40.27 per cent of the weight of items included in the Index of Industrial Production (IIP).
Source: The Hindu

Quantitative easing (QE) is a form of unconventional monetary policy of a central bank.
•In Quantitative Easing central bank purchases longer-term securities from the open market in order to increase the money supply and encourage lending and investment.
•Buying these securities adds new money to the economy, and also serves to lower interest rates by bidding up fixed-income securities.
Source: The Hindu

: An IDR is a mechanism that allows investors in India to invest in listed foreign companies, including multinational companies, in Indian rupees.
•IDRs give the holder the opportunity to hold an interest in equity shares in an overseas company.
•IDRs are denominated in Indian Rupees and issued by a Domestic Depository in India.
•They can be listed on any Indian stock exchange. Anybody who can invest in an IPO (Initial Public Offer) is/are eligible to invest in IDRs.
Source: The Hindu

: The External Sector Report, produced annually since 2012, is a key part of the IMF’s surveillance.
External assessments are arrived at by integrating multilateral and country-specific perspectives, while ensuring individual economy assessments add up to a coherent, multilaterally consistent view.
Source: IMF

There are multi-dimensional effects of inflation on an economy both at the micro and macro levels.
•It redistributes income, distorts relative prices, destabilizes employment, tax, saving and investment policies, and finally it may bring in recession and depression in an economy.
•Inflation redistributes wealth from creditors to debtors, i.e., lenders suffer and borrowers benefit out of inflation.
•Rising inflation indicates rising aggregate demand and indicates comparatively lower supply and higher purchasing capacity among the consumers.
Source: Ramesh Singh

Small finance banks.
Differentiated Banks (niche banks) are banks that serve the needs of a certain demographic segment of the population.
•Small Finance Banks and Payment Banks are examples of differentiated banks in India.
•Small Finance Banks was recommended by the Nachiket Mor committee on financial inclusion.
Source: Live Mint

: Internal debt of India consists of:
•Dated government securities or G-secs.
•Treasury Bills or T-bills
•External Assistance
•Short term borrowings
•Public Debt definition by Union Government
Source: Economic Survey

The idea of self-sufficiency and ‘no’ international trade by a country.
None of the countries of the world has been able to produce all the goods and services required by its population at competitive prices, however, some tried to live it up at the cost of inefficiency and comparative poverty.
Source: Ramesh Singh

The Financial Stability and Development Council (FSDC) were set up by the Government as the apex level forum in December 2010.

• The Chairman of the Council is the Finance Minister and its members include Minister of State, in charge of Department of Economic Affairs (DEA), the heads of all Financial Sector Regulators [Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Pension Fund Regulatory and Development Authority (PFRDA), Insurance Regulatory and Development Authority of India (IRDAI) and Insolvency and Bankruptcy Board of India (IBBI)], Finance Secretary and/or Secretary, Department of Economic Affairs (DEA), Secretary, Department of Revenue (DoR), Secretary, Department of Financial Services (DFS), Secretary, Ministry of Corporate Affairs (MCA), Secretary, Ministry of Electronics and Information Technology (MeitY) and Chief Economic Adviser. Adviser, Ministry of Finance, Department of Economic Affairs, in-charge-of Financial Stability & Development Council, is the Secretary of the Council.
• Without prejudice to the autonomy of Regulators, the Council monitors macro prudential supervision of the economy, including functioning of large financial conglomerates, and addresses inter-regulatory coordination and financial sector development issues.
• It also focuses on financial literacy and financial inclusion.

Source: Department of Economic Affairs