what is difference between Positive economics and normative economics?

Positive economics tries to explain the way the economy actually operates only explains/describes what it is and it does not tell what is right or wrong http://en.wikipedia.org/wiki/Positive_economics Nrmative economics explains the way economy actually should operate evaluates and tells what ought to be http://en.wikipedia.org/wiki/Normative_economics

What is inflation? situation in which there is sustained , excessive, and general increase in price levels. that means"too much money chasing after too few goods" Types Wage/Demand Pull: supply of products goes down . this causes demand of products to go up. this cause DP inflatio Cost Push: cost of production goes up. this causes final prices of goods to go up too. this cause CP inflation Oligopolistic/administered: when companies decide to increase price to get more profit margin sectorial: it is like. if price of oil increases the aviation and transport sector will also be affected. this inflation is cause dby increase of prices for any particular sector. Fiscal: when there is excessive govt: spending Causes: 1- govt spending excess of money 2- rise in production cost (when labor become expensive) 3- federal taxes put on consumer products 4- international lending and national debts 5- faster economics growth in other countries 6- depreciation of exchange rate http://en.wikipedia.org/wiki/Depreciation_(currency) Effects: effects on time value of money (interst rates affected) impact on treasury of nation decrease in purchasing power of rupee

change allocation of income (between lenders and borrowers) making of speculation by some and getting advantage. just typed my notes. there is lot available about inflation on net. next time i shall tel you difference between monetary and fiscal policy

Monetary policy it attempts to stabilize the economy by controlling the interest rates and money supply. Expansionary: when govt decrease interest rates. as a result money supply in the market is increased . this helps to combat unemployment Contractionary:when govt increase interest rates. as a result money supply in the market is decreased . this helps to combat inflation Tools: open market operations (selling buying bonds etc) reserve requirement (FOR BANKS) discount window

Fiscal policy use of govt spending and revenue collection to influence economy expansionary: when spending more than taxation (larger budget deficit) contractionary: when spending less than taxation (larger budget surplus) neutral: when spending equal to taxation instruments/tools: govt spending and taxation Govt spending or Expenditure is funded by

taxation seignorage borrowing money from population consumption of fiscal reserves sale of assets

taxation: it transfer of assets from people to govt. monetarization of deficit: to finance deficit by borrowing from central bank.
Role of SBP (this question was asked in my interview) (short tips)

guardian of monetary system. it sets short term interest rates and oversees health of financial system, including, by acting as lender of last resort to commercial banks. independent central bank should reduce the risk of inflation. SBP issues bank notes to regulate mnetary and credit system of Pakistan. main functions: conduct monetary policy management of public debt management of foreign exchange (balance of payment) advise s govt on policy matters maintain close relations with international institutions regulate liquidity in market (by controlling interest rates) what is diffrence between credit and money credit it is asset for banks it shows borrowing capacity money it is liability for banks determine purchasing power what are govt's six important concerns? inflation rate unemployment rate interest rate productivity budget deficit and trade deficit what are factors of production? there are generally three factors of production ie land labour and capital. but fourth one ie entrepreneurship/organistaion/enterprise is also important. this is life factor which help above three factors to coordinate and work better. classification of production: primary---production and extraction of natural resources plus agriculture secondary---manufacturing and construction sectors tertiary--- services sector

SIC(Standard Industrial Classification) what is difference betwen firm and industry? firm is unit of production industry is group of all firms please refer to internet if you dont know any economic term next time i shall tell you difference between socialism, communism and capitalism

what is economics? study of wealth (but remember study of money is called finance) in books there are three main definitions of economics 1- Adam Smith (1723-1790)(father of economics) says "it is concerned with an enquiry into the nature and causes of wealth of nations." https://en.wikipedia.org/wiki/Adam_Smith https://en.wikipedia.org/wiki/The_Wealth_of_Nations Early economists Cairnes, JB Say , FA Walker supported this definition of economics (according to them eco is mean and sordid science as it dealt with wealth, they called it dismal science) 2-Marshall (welfare definition of eco) http://www.guesspapers.net/1194/mars...-of-economics/ it gives emphasis on 4 points 1-eco is not concerned with economic man but ordinary emotional man 2-eco does not study isolated individual as it is social science 3-wealth has secondary position and it is not be-all and end all of all economic activities 4-eco studies only material requisites of well being and ignores non material aspects 3 Robbins definition of eco: http://www.guesspapers.net/1197/robb...-of-economics/ this definitios lays down 3 fundamental propositions 1- Ends are unlimited 2- Means are limited/scarce 3-Scarce means are capable of alternative uses - He takes in account both material and non material welfare -Accoding to him eco is positive science. Ity is not its funtions to say what is wrong or right. It is neutral science Criticism -Does not cover economic growth/development -Does not explain unemployment problem (as it tells us about scarcity not abundance) -Human touch is entirely missing.

Economic System: it is the social institution through which goods and services are produced distributed and consumed. Socialism: - Govt ownership and operation of major industry - Provide variety of services as generous unemployment benefits, comprehensive health care for all citizens and public transit. - It contains both features of capitalism and communism. It is transitional stage on way to communism Capitalism: -means of production are owned and controlled privately -there is free and open market economy Communism: - Father of communism is Karl Marx. https://en.wikipedia.org/wiki/Karl_Marx https://en.wikipedia.org/wiki/Das_Kapital - There is common opwnership of the means of production (by state) - It works towards classless stateless ie egalitarian society. It is not allowed to possess private property. - Distribution of resources based on need. - Fewer people have a say how economy should operate/work. - Restricted individual freedom and state coercion . and there is forec to meet unmet demands on individuals. price floor vs price ceiling: for graphs refer http://ingrimayne.com/econ/Allocatin...sRationer.html ceiling Qd >Qs)shortage

max price announced by govt for consumer. higher price charging become illegal. so in this setup black market pops up. producer cant have monopoly. govt controls rents and rationing because of ceiling. price is fixed below equilibrium price this setup is usually used during wartime or femine ,so govt uses buffer stock utility stores work in this setup

floor: (Qd<Qs)surplus minimum price set by govt. it makes lower price illegal

it is used to protect labor prices/wages. surplus is created , so govt usually fill its buffer stock. wheat prices are fixed usually through this setup. Economic growth: refers to incraese in total National Income Economic Progress: refers to increase in per capita income economic development: it is process wherby an economy 's real national income increases over in long period of time

Functions of banks accepting deposits

demand deposits (on current accounts no interest paid) fixed deposits , time deposits (hihger interest paid) saving deposits (between demand and fixed)

giving loans remitting funds agency function investment purchase and sale of securities creation of credit transfer of money cheap medium of exchange letter of credit

how do banks create credit? through deposits what are banks' assets? cash cash at central bank money at call bills discounted investment liabilities of customers for acceptance furniture and fittings what are banks' liabilities

capital reserve fund deposits acceptance for customers liabilities of other banks and financial institutions

advantages of nationalization of banks abolition od concentration of wealth more security to deposits financial benefits to govt abolition of unnecessary competition stable money market disadvantages of nationalization of banks deterioration in standard of services bad debts and written - off debts restriction on recruitment low salaries credit dispersal have a look on IMF and worl bank http://en.wikipedia.org/wiki/Interna..._Monetary_Fund http://en.wikipedia.org/wiki/Interna...nd_Development
economic wealth: stock of net assets owned by households, firms and state. backward bending supply curve: http://en.wikipedia.org/wiki/Backwar...urve_of_labour Labour Supply Curve is "backward-bending" - as wage rate reduces, the workers work more to earn the same total wage. But as per-hour wages reduce further, they actually work less since they value an hour's leisure more than the wage they receive by working. Bilateral monopoly: one buyer and one seller cartel: http://en.wikipedia.org/wiki/Cartel

a group of firms acting together to cordinate output decisions and control prices as if they were single monopoly tariff: a tax on imported goods tax shifting: occurs when a tax levied on sellers of a good causes the market price of good to increase. secondary reserves: govt securities held by banks stagflation: http://en.wikipedia.org/wiki/Stagflation overheated economy: an economy in which the actual unemployment rate is less than the natural rate of unemployment. these are two important topics. i have notes on them but these articles on net have better scope and are really to the point 1- vicious circle of poverty. http://www.eduinn.pk/2009/11/vicious...f-poverty.html http://www.preservearticles.com/2012...f-poverty.html http://answers.yahoo.com/question/in...4034322AAn0s4q 2- rostows five stages of development: http://en.wikipedia.org/wiki/Rostow's_stages_of_growth for graph---- https://www.e-education.psu.edu/geog030/node/194 what is difference between Balance of payment and balance of trade? BoP: refers to difference in money value of total exports and imports including goods and services items. BoT: same but, only goods BOP: it involves transfer of ownership of money BoT: same but, only of goods BoP: between one country and the world BoT: between two countries BoP: it exhibits the total financial strength and economic potential of a country BoT: it shows the effect of transfer of goods to and from a country to another.

what are the sources of revenue for the Govt two sources 1-revenue receipts

tax revenue non tax revenue

tax revenue

direct tax indirect tax

direct tax

income tax property tax wealth tax

indirect tax

corporate tax sales tax excise tax customs

non revenue tax : aid , rents, fine , fees etc 2-capital receipts: external borrowings
Please have some information on following curves. Philips curve: a curve showing the hypothesized inverse relation ship between annual unemployment and anuual inflation in a nation. for graph see. http://www.bized.co.uk/virtual/bank/.../theories4.htm

lorenz curve: http://en.wikipedia.org/wiki/Lorenz_curve engel curve: http://en.wikipedia.org/wiki/Engel_curve