Important Lecturer Economics Notes

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

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.
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

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 difference 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

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.