A Picture Without parallel

This is the strange history of one of the largest and most beautiful paintings in the world. Believe it or not, a door was cut through it, bullets fired through it, and stones thrown. It was over painted several times and a bomb nearly destroyed it! Through ravaged by time, its exquisite life-likeness survives to this day.

Of course, it is none other than the ‘Last Supper’ by Leonardo da vinci, possibly the greatest genius the world has ever known, and the one of the best artist ever.
The 15x29 ft picture was painted on the refectory of a Dominican monastery in Milan, Known as the covenant of Santa Maria delle Grazie. Leonardo started the painting in 1495 under a contract, and completed it in 1498 – a very long time for painting. This was because of the peculiar way in which he painted. We have an eye-witness account. It is reported that Leonardo would paint for about four days without a break and without food and water. Then he would stop and study his work critically for many days, sometimes adding a single stroke to one of his figures! Then he would leave, and not be back for many days.

On returning he would again throw himself into his work, stop after a few days, hardly adding three stroke! The Dominican friars were at their wit’s end. Many people came to watch this unique artist at work, and stayed spellbound. The floor was mess of paint and stuff. Finally, the friar in charge lost his patience, and when Leonardo appeared after one of his numerous absence, asked him how long he planned to take. Leonardo then told him that he was looking for the right face to model Judas. This, he told the monk, was not an easy thing; but if he failed to find such a model, he would use the face of the man who was troubling him so much, as it perfectly suited the requirement for the face of Judas.

It is true that Leonardo studied the faces of people, dogging their footsteps until he had made the necessary sketches on which he based his painting. (These sketches – thousand of them – have been preserved, along with his notes and scientific diagram.) The depth in his painting of the Last Supper gives the impression that the room, in which Christ and his disciples were dining, was part of the large hall.

People who ate there felt they were in the ‘Upper Room’ with the disciples and their master! 1652 was the year the painting was considered completely spoilt, and a door was enlarge, cutting away a portion where Christ’s feet were. In 1726, six efforts were made to restore the painting which was flaking. They did much harm, making it dark and dull. In 1768, a curtain was hung to protect it. But this rubbed off some more flakes of paint and caused humidity to further ruin it.

In 1770 an artist was engaged to remove the over paintings. A lot more of the original was also lost. In 1796 Napoleon’s troops using the hall as an armory, shot at the figure in the painting, threw stones at them and even climbed up ladder to scratch out their eyes! Can you imagine that? And in 1943, a second world war bomb destroyed the building, but miraculously left the painting alone! (Recently a Dominican remarked that the bomb seemed to have more sense than man!)

Now with modern technology, a scientific restoration (starting in 1970) has taken place, chiefly, with the patient and skilled efforts of Dr Brambilla, she has restored the painting inch by inch with precision instrument over many years. The painting of Leonardo has been revealed, after the dust and grime and over paintings of five centuries has been removed.

Though, sadly, much of the original pigment has been lost, the rich warm colors was used by the artist can now be seen, with exquisite details that have brought out the character of each disciple. The whole concept of the picture has been revealed in all its depth and passion. Through we may never know how exactly the artist visualized the features of Jesus, for example – thanks to ravaged of time – we may stiil feel the powerful emotional impact of that precise moment in a time.

It is the moment that the artist has shown, when Jesus declared that one of the disciples sharing this meal with him would betray him. To this unexpected and shocking statement, the disciples are seen reacting, “Is it I, Lord? Is it I?” They ask, while Peter asks John (seated at the right side of the Jesus) “ Who is it of whom he speak?” John is seen in a listening attitude.

Judas is the one leaning, with elbow on the table, guilt written on his shadowed face. We see Jesus in the middle, a lonely figure. Some say this was a sign of Leonardo’s loneliness. He had no equal with whom he could share his thought, because his ideas were centuries ahead of his time!

Of late, there has been a controversy about the painting. Da Brown in his novel Da Vinci Code has crated doubts about the painter, Leonardo da Vinci as well as his chief subject, the central figure of the Last Supper, Jesus Christ. But truth, as you may have noticed, has a habit of winning.

Today, if you went to Milan and saw this painting, some thing of the passion with which Leonardo da Vinci painted will communicate it self to you. You will also feel uplifted in mind and spirit as thousand have done before.

Friday, June 23, 2006
Manorama Rathnakar
Deccan & Herald
Bangalore - India






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The Story of Writing

Man immortalized his thoughts when he first wrote them down. It was not easy process. He had to devise symbols to fit the sounds that he uttered and then join the symbols together to were words. His first writings were very uncompleted – tallies of sheep, taxes due, and so forth: record devised by the palace scribes of Mesopotamia who dared not to trust their memories. They were not very far removed from scratches in the dust or from the rough picture that little children make when they first learn to hold a pen.

Indian alphabet, the Roman alphabet, comes from the classical world. The world is formed from the first two syllables of Greek alpha and beta. It was long leap to the Greek alphabet from the grooves in the clay beside the river of Mesopotamia, and even longer one to the alphabets of the modern world. For instance, who discovered what the hieroglyphics of Egypt really said? The world would never have known if the archaeologists accompanying Napoleon to Egypt had not discovered the Rosetta stone in the nineteenth century.

The cuneiform writings of Mesopotamia would certainly not have been deciphered if had not been for the discovery of the stale of King Hammurabi bearing both picture symbols and words. Again, this discovery was not made till the late nineteenth and early twentieth centuries, when Flinders Petrie and Leonard Woolley went digging in Ur of the Chaldees.

In India, Among the first writing to be deciphered were the inscriptions of Asoka’ s pillars. Until 1837, no one really knew what they stood for. Effort of men such as Prinsep and Cunningham led to their translation, and opened up a fascinating world of history. The Indus valley civilization was discovered even later, In the 1920s; this script has yet to be deciphered. The Arabic and Chinese script are different from the rest since they do not belong to dead civilization. Therefore, unlike the other script, they can not be said to have been discovered. Their history is one of continual modification from the earliest form, as succeeding generation sought newer and more beautiful ways of writing the script. These modifications are fascinating, and the script hauntingly beautiful.

Until the discovery of printing in the fifteenth century, literature in Europe was handwritten by scribes in monasteries, the language used first was Latin, and then much later, French and English. The scripts used by these scribe were different in their forms. The earliest were very difficult to read. Later, during the reign of Emperor Charlemagne, a new and more legible form was involved which carried his name. Well might one marvel at the beauty that can lie in so simple a thing as a page of writing.

Friday, June 23- 2006
Christine Krishnasami
Deccan and Herald
Bangalore – India.






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Balance of Payment

1. Meaning and Component of Balance of Payment
Balance of Payment is a systematic record of all international economic transactions of that country during the given period. Usually a year. Or is the device for recording all the economic transactions within the given period between the resident of one country and the rest of the world (the resident of the other country). Kind of the transactions entered to the balance of payment are – international transaction, constituting the transfer of asset and liabilities, the creation or the reduction of claim or the receipt and payment of fund, which take place between the resident of one country and those of other country.
And it refer to different between the total receipt and total payment of a country over period. Balance of payment include balance of trade and balance of payment is presented in two part –
- Current account
* Trade account or Merchandise = transaction of entering good.
* Invisible account = service account or transfer payment.
- Capital account
* Private capital account
* International institution capital
* Specie account

2. Equilibrium and Disequilibrium in the Balance of Payment
A. Equilibrium


Balance of Payment represent balance in current account, capital account will always be equal if receipt and payment are equal it is equilibrium state in international trade. If there any surplus or deficit is know as disequilibrium in international trade.
B. Measure to correct the Disequilibrium
- Trade measure
- Monetary measure
- Current devaluation
- Money contraction
- Exchange control
- Foreign loan
- Encouragement to foreign investment
- Incentive to foreign tourist
- Exchange clearing agreements
A causes of the disequilibrium in the balance of payment is –
- Cyclical fluctuation
- Huge development and investment programs in the developing economic
- Due to rapid economic development
- A vast increase in the domestic production of foodstuffs, raw material, substitute good. Etc.
- A huge population and high rate of birth in poor countries.
- demonstration effect
- International borrowing and investment
- Multi-trade transaction



3. Fixed Exchange Rate and Flexible Exchange Rate
- A case for fixed exchange rate are-
- Smooth flow of international trade
- Facilities international investment
- Necessary for currency area bloc
- Remove speculation
- A case against fixed exchange rate –
- Burden on domestic income and price
- No cost price relationship
- Not based on demand and supply force
- Equilibrium in balance of payment not possible
- A case for flexible exchange rate are –
- Its doesn’t hamper the foreign trade
- Natural rate of exchange in course of time
- No hinderance in the fluctuating of currency blocs
- Its protect the domestic economic
- Based on demand and supply forces
- long-term investment are not adversely effected
- A case against flexible exchange rate –
- Serious repercussion on country’s economic
- Unwarranted international capital movement
- Hinders long term foreign investment
- encouragement to speculation

4. Foreign trade multiplier with and without foreign repercussion and determination of national income and output
The concept of foreign trade multiplier seeks to gouge the effect of a change in a country’s in foreign trade on national income and employment. According to
Kindleberger it expresses the change in income caused by a change in exports or in investment in an open economy in which income spills over into imports.
- Foreign Repercussion
There can be foreign repercussion of significant change in income abroad due to the change in export and / or imports of a given home country, which causes a backwash effect on the foreign trade and national income of home country. If, however, home country is small in relation to the outside worlds, the foreign repercussion would be insignificant. For an increase in its imports will not be stimulating income abroad to a considerable extent. Obviously, the foreign repercussion would be very influencing nature in case of large economies. In case foreign repercussion more complex formulae are required to express the foreign trade multiplier and the relationships among saving and import propensities in the countries involved.






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Financial Institution and Market

· Money
Money may be any commodity chosen by common consent as a medium or instrument of exchange of good and services, its widely accepted in a payment of a good and services and in settlement of debts.

· B. Money and near money
- Money in circulation consist”
a. Legal tender money à Notes, Coins.
b. Bank money or deposit withdrawable à Bank Cheque
- Near money is a certain assets which are highly liquid but not perfectly liquid as a money
Viz.”
Bill of exchange, Treasury bill, Debentures, Bond.
- Near money its also call as claim to money

· The pure meaning of finance :
Finance is the practice of manipulating and managing the money.
Finance is the capital involved in a project especially the capital that has to be raised to start a new business.
Finance is a loan of money for particular purpose especially by a finance house.

Financial system is a set of complex and closely inter-mixed financial institution, market, instrument, services, practices, procedures, etc.
Or
A set of institutional arrangement through which financial surplus ( or command over real resources ) in the economy are mobilized from surplus units and transferred to deficit spender’s.


· Main constitutional of financial system
1. Financial Assets à Bill, Bond, equities.
a. Primary/ Direct
b. Secondary/ Indirect
2. Financial Market à Currency, Cheque.
a. Functional
b. Institutional
c. Sectoral
3. Financial Institution à Financial intermediaries
a. Bank : Apex Bank
b. Non Bank : Development Bank, Investment.

· Bhole concept of financial market (1995)
a. Broad and Wide : Attract funds from inside and outside investor
b. Deep : sufficient order for buying and selling.
c. Shallow Market : Under-developed financial market





· Function of financial system
- Its help in production
- Capital Accumulation
And this is generally done through encouraging the saving and allocating fund among various alternative uses and users.
1. To facilitate creation and allocation of credit and liquidity
2. To serve as intermediaries in the process of mobilization of saving in the economy
3. To provide financial convenience to the people
4. To assist the process of economic development through a more balanced regional and sectoral distribution of investiable fund.
5. To establish a regular, smooth, efficient and cost effective link between servers and investor.
6. To improve quality and pace of economic development.

· Constituent of financial system.-
1. Financial institution
2. Financial services
3. Financial market
4. Financial instrument
5. Other.

· Function of Indian financial system
1. Accelerate the rate of economic development
2. Allocation of resources to different investment channel
3. It’s play the role of catalyst
4. Attempt to achieve the target of the plan
5. Lower risk and diversification of funds
6. Expert knowledge and professional guidance
7. Fosters industrial development
8. Investors education
9. Promotion of self –employment
10. Revival of sick units

· Role of finance system
1. Encourage saving
2. Helping hand for producer
3. Mobilization of saving
4. Capital formulation
5. Help in economic planning and development
6. Market borrowing possible
7. Globalize world economic
8. Institution
9. help in stabilizing foreign exchange rate
10. Help in international banking




· Inter-related function of Indian financial system in the modern economy (Chandra – 1997)
1. Payment system
2. Pooling of fund
3. Transfer of resources
4. Risk management
5. Price information for decentralized decision making
6. coping with information asymmetry

· Basic for managing risk
1. Hedging
2. Diversification
3. Insurance

· Measuring financial development
1. Financial ratio
2. Financial inter-relation ratio
3. New issue ratio
4. Inter-mediation ratio

· Type of risk
a. Commercial risk
b. Political risk
c. Risk arising out of foreign laws
d. Cargo risk
e. Credit risk
f. Exchange fluctuation risk

· Money market.-
Money market is a specialized market geared to cater to short term needs, dealing in this market call for specialized skill – or –
Money market is a market for short term financial assets which are near to substitute for money.

· Character of money market.-
1. Money market is basically over the phone-market. The transaction are conducted through oral communication
2. Dealing in money market may conducted with or without the help of broker
3. It’s a market for short term financial assets that are close substitute for money
4. Short term for this purpose is generally taken as a period up to one year
5. Financial assets which can be converted into money with ease
6. Money market consist of money, sub-market such as inter-bank call, money, bill rediscount, treasury bill, etc. collectively they consist the money market


· Objective of money market
1. It is provide an equilibrating mechanism for evening out short term surpluses and deficit.
2. The money market provide a focal point for the central bank intervention for influencing liquidity in the economy
3. It is provide reasonable access to users of short term money to meet their requirement at a realistic price.

· Constituent of money market –
1. Call money market
2. Collateral loan market
3. Acceptance market
4. Bill market

· Money market instruments operated in India.-
1. Monet at call and short notice (call loan)
2. Treasury bill’s
3. Gilt edged securities
4. Municipal bond
5. Commercial bill
6. Debt securitization
7. Certificate of deposit
8. Commercial paper
9. Money market mutual fund
10. Other.

· Institution of money market -
1. Central bank
2. Commercial bank
3. Indigenous financial institution
4. Discount house
5. Acceptance loan

· Structure of Indian money market.-
1. Organized sector
2. Un-organized sector
a. Money – lender
b. Indigenous banker

· Drawback of Indian money market
1. Dichotomy
2. Overall shortage of fund in money market
3. Seasonal shortage of fund
4. Inefficient and inadequate banking facilities
5. lack of co-ordination
6. Divergence of lending rates and policies
7. Inadequate control by the reserve bank
8. Inelasticity and instability
9. Under-developed bill market
10. Improper care of rural finance
11. Non-banker acceptance
12. Blending of lending and trading activities



· Measure for improvement of Indian money market
1. Legislative measure
2. Co-operative movement
3. Agricultural refinance and development co operation
4. Agricultural credit board
5. Rural bank
6. Extension of credit guarantee scheme
7. Link between indigenous banker and commercial banks
8. Bill market scheme
9. Nationalization of bank
10. Lead bank scheme
11. Spread of post office saving bank
12. Uniform chit fund legislation

· Important of money market.-
1. Money market is an important source of financing trade and industry through a bill, commercial paper.
2. Availability of fund in the money in the money market
3. Money market offers an avenue to the commercial bank for investing short term surpluses of fund.
4. Money market facilitates affective implementation of monetary policy of the central bank of a country.
5. Money market serves as an important guide to the government in formulating, revising and implementing it’s monetary policy.
6. Money market offers to the government an important non-inflationary avenue of raising short term fund through bill which are subscribed by commercial bank and the public.

· Financial market consist.-
A. Unorganized market and Organized market
B. Money market and Capital market
C. Primary and Secondary market
D. Broad, Deep and shallow financial market


· Financial institutions are”
A - Money Market
Is concern with the supply and the demand for investiable fund. Its reservoir short-term funds.
Including – Central bank, Commercial bank, Indegenious, Financial institution, Accepting houses.

B - Capital Market
It’s a place where the medium and long term financial need of business and other undertaking are met. By financial institution which supply medium and long term resources to borrowers.
Including – Bank, Merchant bank, Mutual fund, Life insurance companies, development bank.


· Central Bank
The Reserve Bank of India was inaugurated 1st April 1935 and nationalized 1949

· Function of Reserve bank of India according to Sundharam and Dutt :
1. Monetary function
2. Non-Monetary function
3. Promotional and development function
Then Added by Vasant Desai (1996)
1. Issuing currency notes / Currency authority
2. Serving a banker to the government
3. Acting as a banker to the government
4. Monetary regulation and management
5. Exchange management and control
6. Collection of data and their publication
7. Miscallanious development and promotional function and activities
8. Agricultural finance
9. Industrial function
10. Export finance


· Monetary policies is a policy which influence the public’s stock of money substitute or the public demand for such assets or both.
· Monetary policy of the RBI refer to a regulatory policy where by the central bank maintain its control over the supply of money for the realization of general economic goal


· Indian monetary policy important objective are :
(The issue in Chakravarty committee)
a. Price stability
b. Growth
c. Equity and social justice
d. Promoting and nurturing new financial institution

· Credit control by the RBI are:
1. The bank rate policy
2. Open market operation
3. The cash reserve ratio
4. The statutory liquidity ratio
5. Selective credit control

· Feature of monetary policy an important objective by RBI
1. Credit restriction
3. Expantion of money supply and bank credit
4. Price stability
4. Growth equity and social justice
5. Promoting and nurturing new monetary and financial institution



· Deficiencies Indian money market
1. Existence of unorganized money market
2. Absence of integration
3. Diversity in money rate of interest
4. Seasonal stringency of money
5. Absence of the bill market
6. Absence of well organized banking system

· Rate of interest
Rate of Interest it is the rate which commercial bank and money market institution agrees to give discount facilities or advances loan.

· Monetary and money measure by RBI
A. qualitative measures
1. Bank rate
2. Open Market Operation (OMO)
3. Cash Reserve Ratio (CRR)
4. Statutory Liquidity Requirement (SLR)
B. Qualitative measures
1. Credit ceiling
2. Margin requirement
3. Variable interest rate
4. Regulation of consumer credit
5. Moral suasion
6. Licensing







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International Trade and Market

· The pure theory of international trade
The pure theory of international trade deals with equilibrium phenomena or trade. It seeks to analyse and expose the condition of equilibrium in real terms. It probe into the economic couses and consequence of the international trade. The monetary theory of foreign trade is confronted with the monetary mechanism of the international economic transaction. Including financial transaction and capital movement. It primarily deals with the determination of exchange rates and seeks to examine the methods and processes of adjustment in the balance of payments equilibrium.

· The theory of absolute advantage
The classical theory of international trade is known as the theory of comparative cost. This theory is simply an application of the principle of division of labour to the production of good by different countries. The classical theory averred that international trade develops with geographical (countrywise) specialization in the production of various goods which is reflected through the differences in their comparative costs of production between any two countries.

· Comparative Cost Advantage = David Ricardo
This theory is originated as an improvement and development of the eighteenth century criticism of the mercantilist policy. The docrine of this theory continue to command attention because its show analytically the superiority of free trade over protection.
The classical theory of comparative cost was developed by Davis Ricardo, according to this theory the value of any commodity is determined by its labour will produce that determine their present or past relative values.

· Modern international trade (General Equilibrium Theory)
The view on Bertil Ohlin “
1. the immediate couse of inter regional or international trades is the different in relative commodity price in the two region.
2. The different in relative commodity price are due to the scarcity of the factor of production in two region or countries.
3. In international trade implies an exchange of abundant factor for scantely supplied factor. The movement of goods from one region to other region or country take place only because there is scarcity of factor in one region which result in higher price this phenomenon attract the productivity factor from abundant region to the scarcity region.

· Heckscher – Ohlin Theorem
A. Heckscher view of “
That though comparative cost different is the basis of international trade, the root causes is the condition which produces this difference. As a matter of fact, the differences in comparative costs advantage occurs because of “
· The different in relative scarcity (and so relative price ) of factor of production in the two country.
· The input of different factor proportion required in the production function of different commodity .
B. Ohlin view of “
The immediate cause of international trade is the differences in commodity price and differences in factor of endowments cause factor price to differ.(since factor price are the ultimate cost of production costs and thus commodity price will differ in different countries).

· Factor Price Equalization Theorem
It may be stated as “ other thing being equal, free international trade of commodities like factor movement, causes absolute return or price of factor to be identical in each participating countries. When the absolute return becomes equal then relative factor prices must be identical under the homogeneity condition.

· The Rybezynki Theorem
This theory is seeks to examine the effect of change in the factor supplies in one of the two trading countries in their trade relationship.
This theory also show that the change in factor supply in the country comes in the way of factor – price equalization. Further, when the country tends to increase its exportable goods in supply due to increase in the abundant factor supply its term of trade will deteriorate. For instance as in our illustration when the country produce more of cloth and less of wine. Its export supply of cloth will increase and import demand for wine will also increase this would adversely affect its term of trade assuming no change in the condition of its trading partner.

· Factor Causing Intra – Industry Trade
A number of factors can be attributed to the emergence of intra-industry trade such –
1. Trade in homogenous goods for re-export. A country may import goods in bulk in order in electronic good importing from Japan and exporting to Malaysia, Thailand, Indonesia, etc is of this type.
2. They area between the two cost ratios determine the region of mutually beneficial trade for the country.
3. Actual trade will depend on the relative demand factors for the concerned goods in two countries.
4. Agricultural goods are exported in post-harvest and imported in harvest season by a country.
5. Cross border trade.
6. Differentiated products.

· Criteria of measuring the gain from trade
1. Reduction in the cost of production
2. Enhancement of the real income
3. The nature of term of trade

· Term of trade
The rate at which one country goods exchange againt those of another is referred to as the term of trade.
Term of trade depend on the prices of commodity entering into foreign trade.







· Concept of term of trade - Mier
1. Those term of trade which relate to the real – ratio of international exchange between the commodities. And in this group discussed are “
* Net barter term of trade
* Gross barter term of trade
* Income term of trade
2. Which is relate to interchange between the productive resource, and there are “
* Single factoral term of trade
* Double factoral term of trade
3. Those term of trade which interpret the gain from trade in term of utility analysis and there are “
* Real cost term of trade
* Utility term of trade

· “Trade as the engine of the economic growth”
D.H Robertson was profound this statement and the important is that “
1. Trade provide material
2. Trade is the meant and vehicle for the dessimination of technology knowledge
3. Trade is also vehicle for international movement of capital
4. Free international trade is the best anti-monopoly policy and the best guarantee for the maintenance of a healthy degree of free competition.

· Tariff
Tariff in international trade mean or refer to the duties or taxes on international traded commodity when they cross the national border
Classification of tariff
1. On the basis of origin and destination of the goods crossing the national border and there are “
A. Export duties
B. Import duties
C. Transit duties
2. Reference to the basis for quantification of the tariff and there are ‘
A. Ad-Valorem duties
B. Compound duties
3. Which respect to its application between different countries, and the system may classify “
A. Single-column tariff
B. Double-column tariff
C. Triple-column tariff
4. with reference to the perpouse they serve, tariff may classify to
A. Revenue tariff
B. Protective tariff
C. Countervailing and anti-dumping duties







· Effect of tariff à Import Duties
1. Protective effect
2. Consumption effect
3. Redistribution effect
4. Revenue effect
5. Income and employment effect
6. Competitive effect
7. Term of trade effect
8. Balance of payment effect

· Non Tariff Barrier NTB
It also call new protectionism
Non tariff barrier has two categories
A. Include those which are generally used by developed country to prevent foreign exchange outflow, or those which result from their chosen strategy of economic development
B. Those which are mostly used by developed economist to protect domestic industry which have lost international competitive and or which are politically sensitive for government of these country.

Note” NTB is less transparent and difficult to identify.

· Quantitative Restriction (QUOTA)
Quota are an important, it is mean of restricting import and export and also represent a ceiling on the volume of import/export.

· Import Quota
There are five type of import quota, including import licensing”
1. Tariff quota
2. Unilateral quota
3. Bilateral quota
4. Mixing quota
5. Import licensing

· Balance of payment
It is mean an excess of payment over the receipt.
Is systematic and summary record of a country’s economic and financial transaction with the rest of the world and over period of times.

· Component of balance of payment
1. Current account
2. Capital account
3. Unilateral payment
4. Official reserve asset account

· Kind of disequilibrium in balance of payment
1. Cyclical disequilibrium
2. Secular disequilibrium
3. Structural disequilibrium

· Cause of disequilibrium in the balance of payment
1. Cyclical fluctuation
2. Huge development and investment
3. Rapid economic development
4. A high increase in domestic production foodstuff
5. High population and high birth in poor country
6. Demonstration
7. International borrowing
8. Different demand

· World Bank
Purpose of World Bank is to tackle the problem of international investment
And the major function are –
1. To assist in the reconstruction and development of the territories of its member
2. To promote private foreign investment
3. To promote the long term balance growth of international trade
4. To arrange loans and guaranteed by it in relation to international loan





























Ir_ones
Preparing for the final examination of MA Economic at Raja Balwant Singh College (RBS College) Agra University, Agra- India.







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Labor Economic

- Nature and Characteristic of labor market
a. Labor market may be defined as a process by which supplies of particular type of labor and demand, for that type of labor balance or seek to obtain balance. – or –
b. Manufacturing or trading centre plus by the agricultural hinter land directly tributary to it.

- Characteristic of labor market
1. The relation between a buyer and seller in labor market is not temporary and it is to continue for some times.
2. Labor market are essentially local in character
3. Lack of mobility
4. A labor market is essentially an imperfect market where one does not find a normal wage rate to which the market rate naturally tends.
5. Monopoly in labor market
6. Labor market do not do justice to the worker

- Special character labor market in India
1. Existence of under-development in various sector of economy
2. Causal nature
3. A great surplus of all worker over all available jobs
4. Existence of unstable labor force
5. Age structure that most belong to the youngster

- Cause of Un-employment
1. Poverty
2. Excessive increase in population
3. Slow growth of economy
4. backward agriculture
5. Lack of national employment policy
6. Existence of excess capacity in industry
7. Emphasis on capital intensive technique
8. Defective educational system

- Type of Un-employment
1. Frictional
2. Voluntary
3. Involuntary

- Method of recruitment
1. Recruitment of labor through intermediaries
2. Direct recruitment

- Source of recruitment
1. Internal
2. External


- Wage determination
a. Wage are reward for the service of labor that are used during process of production
b. By labor mean –
The effort, both by physical and mental made by the human being

- Concept of wage
1. Money wage or Nominal wages
2. real wages

- The theory of wages
1. The just wage of the middle ages
2. The classical theory of wages
a. Adam Smith contribution to the wage theory
b. The subsistence theory of Ricardo
c. The standard of living theory
d. The wage fund theory
e. Residual claimant theory

3. Neo- Classical modern theory of wages
a. The marginal productivity theory
b. The bargaining theory of wages
c. Taussig’s theory of wages
d. Kalecki’s theory of wages

- The bargaining theory of wages – this theory was started in 1933 due to the weakness of the marginal productivity theory.
And the major assumption are “
1. Wages, hour and working condition a matter of bargaining
2. Without organization and concerted action there will be a tendency toward undesirable
3. No adequate safeguard is found in the operation of the factor at work in the organization trade
4. There is flexible, changeable situation

- Meaning of labor supply –
A. Supply labor to the firm
B. Supply labor to the industry
C. Supply labor to the entire economy

- Determinant of the supply of labor –
1. Other wage rates
2. Non-wage income
3. Preference for work versus leisure
4. Non-wage aspect of the job
5. Number of qualified supplier




- Determinant of the demand of labor –
1. Product demand
2. Productivity
3. Price of other input
4. Number of firm

- The demand of labor generally elastic –
a. The greater the elasticity of the product demand
b. The larger the ratio of labor cost to the total cost
c. The greater the substantialibility other input of labor
d. The greater the elasticity of supply of other inputs

- The concept of wages
1. The statutory minimum wages
2. Basic minimum wages
3. The minimum wages
4. The fair wages
5. The living wages
6. The need-based minimum wages

- The theory of minimum wages –
A theory which could meet the normal need of the average employee regarded as human being living in civilized society

- The theory of living wages –
The living wage should enable the male earner to provide for himself and his family the bare essential of food, but a measure of frugal comfort including education, etc

- The theory of fair wages –
The fair wages is an equal to that received by worker performing work of equal skill, difficulty or unpleasantness

- Bonus –
Bonus is a payment made to worker in addition to his normal wages, it is a gesture paid or something goodwill by employer to employee

- Profit sharing –
Profit sharing is implies employer gives a share in the surplus profit of the business to the worker in addition to the wages.

- Social security –
Social security it refers to the protection provided by the society to its member againt providential mishap over which a person has no control
- The idea of social security is that the state shall make it self responsible for ensuring a minimum standard of material welfare to all it is citizen on a basis wide enough to cover all the main contingency of life.






o Type of insecurity –
1. Income insecurity
a. Inadequate wages
b. Faulty methods of wage payment
c. Lay-off
2. Occupational insecurity
a. Occupational disease
b. Improper condition of work
c. Industrial accident
3. Natural insecurity

o Defination of social security include –
a. Social insurance
b. Social assistance
c. Family benefit
d. Health care and other social justice
e. Related social welfare service

- Trade union –
- Trade union is an organization whose principle purpose include the regulation of relation between employees and employer or employer association, a house or company union is an association of employees all belonging to the same company which will probably have no connection which trade union movement.
- An industrial or general union has a member who work in the same industry it is usually very large.
- A craft union is a small union of skilled worker. Union affair are regulated by the trade union act (1984) and the employment act (1988)
- This provide the secret ballot must be held for election of union executive committee and before any industrial action backed














Ir_ones
Preparing for the final examination of MA Economic at Raja Balwant Singh College (RBS College) Agra University, Agra- India.







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Macro Aspect

· Main characteristic of Trade cycle
1. Formed by two contrary forces of expansion and contraction are follow the other
2. These forces occur at regular interval
3. Crisis are always present in a trade cycle
4. Change from upward to downward is faster
5. Trade cycle occur in organized and money economies
6. Its may be regional, national and international


· National Income
National income is the sum total of money value of all good and services produced in a country during a given period
A view of economist”
Marshall - is a aggregate of a good and services produces during a year.
Piqou - The national income dividend is that part of the objective income of the commodity including income derived from abroad which can measure in money.
Fisher - The national dividend or income consist solely of services as receive by ultimate consumer, weather from the material or from their human environment.
Marshall - The labor and capital of country acting upon it natural resources produced annually a certain net aggregate of commodities.

· A concept of national income
1. Gross National Income / Product and Net National Income
2. National Income at market price and at factor price
3. Net National Income at factor price and Net Domestic Income
4. Personal Income and Disposable Personal Income
- or –
1. GNP / P & NNI
2. NI at market price & factor price
3. NNI at factor cost & NDI
4. PI & DPI

· Measure of National Income
1. Income method or National Income
a. Labor income
b. Mixed income
c. Rental income
d. Cooperate income
e. Income from interest
2. Product method
3. Final expenditure methods
a. Personal consumption expenditure
b. Gross domestic private investment
c. Government expenditure
d. Net foreign investment



· Significant of Multiplier
- It is important theorical concept
- It is explained the different phase of business cycle.

Limitation of Multiplier
1. Sufficient availability of consumption goods
2. Maintainance of investment cycle regularly
3. Multiplier period (there is a time gap between increase in income and increase in investment)
4. Net increase in investment
5. Multiplier will not work at full employment ceiling
6. Existence of closed economy Viz. no import export trade
7. No investment from induced consumption

Leakage of Multiplier are due to –
1. Shaving
2. Debt collection
3. Import
4. Price inflation
5. Liquidity preference
6. Purchase of old stock and security
7. Taxes and corporation saving

Classical theory of Employment
The classical theory is based on the nation that supply always creates its own demand it is know as Say’s law of market

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Micro Economic

Introduction and basic concept
Is may be defined as that branch of economic analysis which studies the economic behaviour of the individual unit, may be a person, a particular household, or a particular firm. It is a study of one particular unit rather than all unit combined together. And In micro-economic also studied the various units of the economic such as thousand of consumer, thousand of producer or firm, thousand of worker and resources supplier and how they function and how they reach the equilibrium.

Scarcity and Choice
Basically human want for good and service are unlimited, well the productivity resources with which to produce goods and services are scarce. With our wants being virtually unlimited, and resource scarce, we cannot satisfy all our wants and desire by producing everything we want. A society has to decide how to use its scarce resource to obtain the maximum possible satisfaction of its member, it is this basic problem of scarcity which give rise to many of the economic problem which have long been the concern of economic.
The scarcity of resource relative to human want gives rise to struggle of man for sustenance and effort by him to promote the well being. That the scarcity of resource in relation to human wants is the fundamental economic problem can be easily understood in the context of poor and developing country like India where quite large number of population live at the bare subsistence level. The struggle for existence due to scarcity of resource is too obvious in them to need any elaborate explanation. Even in developed country like USA where effluence and prosperity have been brought about also confront the scarcity problem raises some doubt.
Since all wants cannot be satisfied due to scarcity of resource we face the problem of choice – choice among multiple want which are to be satisfied. If its decide to use more resource in one line of production, some resource must be withdraw from another commodity, thus the problem of choice from the view point of the society as a whole refers to which goods and in what quantities are to be produce and productive resource allocated for their production accordingly so as to achieve economics in term of this basic economic problem.
The problem of scarcity give rises to some problem generally known as the basic economic problem which s society has to solve so as to promote material of well-being of its people. These basic economic problems related to what commodities are to be produced.
It is with regard to this problem of resource allocation the choice of production methods, distribution and economic growth which have their roots in scarcity of resources, the economist has been asking question from time to time to providing the answer for them. Beside, economist have also been arising the question about efficiency of the resource allocation for the production of goods and their distribution among the people. This question of economic efficiency is aimed at knowing whether or not a particular pattern of production and distribution ensure maximum social welfare.





Deductive and Inductive Methods
The deductive methods is also called abstract, analytical and priori methods and represent an abstract approach to the derivation of economic generalization and theories. The principal steps in the process of deriving economic generalization through deductive logic are –
a. Perception of the problem to be inquire into
b. Defining precisely the technical term and making appropriate assumption often called postulates or premises.
c. Deducing hypotheses that is deriving conclusion from the premises through the process of logical reasoning
d. Testing of hypothesis deduced.
Merit and Demerits of Deductive Methods
1. Useful mathematical technique can be employed to derive generalization of economic.
2. The deductive logic is useful economic theorem can be derived without the tenuous and detailed collection and analysis of data which are required under the alternative methods.
3. In view of limited scope for controlled experimentation in economic, the methods of deduction is extremely useful method of deriving generalization.
4. The use of sophisticated mathematical methods in the deductive methods approach enables the economic to introduce accuracy and exactness in economic principle and theories.
Advantage of the deduction methods –
a. Its lead to correct conclusion provided the premises from which the reasoning proceed are correct.
b. Its only drawn back the conclusion derived through the deductive methods can have only a limited application because economic condition are continually changing.

Inductive Methods
The indicative methods which is also called empirical method derives economic generalizations on the basic of experience and observation. In this method detailed data are collected with regard to certain economic phenomenon and effort is then made to arrive at certain generalizations which follow from the observation collected.
There are three ways which can used for deriving economic principle and theories –
a. Experimentation
b. Observation
c. Statistical or econometric methods
Advantage of the Inductive methods –
a. The method of statistical induction is indispensable for the formation of economic policy
b. The economic laws which are arrived at by process of induction lead to precise exact measurable conclusion.
c. Some of the important theory has been discorrect as a result of use of induction.
d. Its used to check and verify the conclusion of deduction to bring to light deficiencies in their treatment and for amplify their conclusion.
e. The chief merit of inductive methods is to show the complexity of economic phenomena and the impossibility of deriving conclusion and principle which would have numerical application.

Positive economic and Negative/ Normative
Positive economic is concern whit what is
Normative economic is concerned with what ought to be
Positive economic is concerned with the utilization of means or resource for the advancement of economic goods.
Normative science is concerned about what economic consider thing as they ought to be and its discussed the desirability to be achieved.

Elasticity (Price, Cross, Income)
· Price Elasticity
The price elasticity is a measure of the responsive of demand to change in the commodity’s own price. If the changes in price are very small we use as a measure of the responsiveness of demand the point elasticity demand. If the change prices are not small we use the arc elasticity of demand as the relevant measure.
· Income Elasticity
Income elasticity is defined as the proportionate change in the quantity demanded resulting from a proportionate change in income.
The income elasticity is positive for normal goods. Some writers have used income elasticity in order to classify good into ‘luxuries’ and ‘necessities’. A commodity is a considered to be luxuries if its income elasticity is greater than unity. A commodity is a necessity if its income elasticity is small (less than unity).
The main determinants of income elasticity are:
The nature of the need that the commodity covers: the percentage of income spent on food decline as income increase ( this known as Engel’s law and has some time been used as a measure of welfare and of the development stage of a economy).
The initial level of income of a country.
The time period, because consumption pattern adjust with a time-lag to changes in income.
· Cross Elasticity
The cross elasticity is defined as the proportionate change in the quantity demanded of x resulting from proportionate change in the price of y.
The sign of the cross elasticity is negative if x and y are complimentary goods, and positive if x and y are substitutes. The higher the value of the cross elasticity the stronger will be the degree of substitutability or complimentary of x and y.
The main determinant of the cross elasticity is the nature of the commodities relative to their uses. If two commodities can satisfy equally well the same need, the cross elasticity is high, and viva versa.

Distribution
A. Rent
The term of rent is used in the following senses in modern economic theory –
the term of rent refers to the rental made for the use of fixed factors of production whose existence is not dependant on any human effort or sacrifice.
the term of economic rent is employed for the surplus earned by unit of a factor of production over and above the minimum earning necessary to induce it to stay in their present use industry or occupation.
the term of rent cover the earning (net of depreciation and interest charges) of fixed capital equipment like machinery in the short run.

Ricardian theory of rent
Ricardo defined rent as follow: Rent is that portion of the produce of earth which is paid to the landlord for the use of the ‘original and indestructible power of the soil’. Or is a payment for the use of only land and is different from contractual rent which includes the return on capital investment made by the landlord in the form of hedge, drains, well and the like.

B. Interest
The theory of interest is a reward for capital but there are two concept of interest and there are one concept of interest in the real rate of interest which is the rate of return on physical capital such a machine vehicle, tractor created for the purpose of the producing more goods. A capital asset is used for production for several years and yields a stream of return over the years. A rate of return on it is obtained by calculating the present discounted value of the yields earned over the number of years for which capital asset is used for production .
The second concept of interest is the price paid for the use of borrowed funds from other and its often called money rate of interest.

C. Profit
Pure profit of the entrepreneur are found by subtracting from the gross residual income the imputed values of rent and interest on the self owned land and capital employed by the entrepreneur and also the imputed wages firm his work of routine management.
A popular conception of profit is that they arise in dynamic economy, that is, in economy where changes are taking place. In static economy where nothing changes there can be no profit. (J.B. Clark)
The main function of the entrepreneur is to introduce innovations in the economy and profits are reward for his performing this function. What is the innovation stand for?
Any new measure or policy adopted by an entrepreneur to reduce his cost of production or to increase the demand for his product is an innovation.
Two type of innovation is:
Those which reduce cost of production or which change the product function .
Those which increase the demand for product or which change the demand or utility function. ( Joseph Schumpeter )

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