Common Economic Terms and Definitions Common Economic Terms and Definitions

Common Economic Terms and DefinitionsCommon Economic Terms and Definitions

Click here to view more Kerala PSC Study notes.

Active Market

This is a term used by the stock exchange which specifies the particular stock or share which deals in frequent and regular transactions. It helps the buyers to obtain reasonably large amounts at any time.

Administered Price

The administrative body e.g., the government a marketing board or a trading group determines this price. The competitive market force is not entitled to determine this price. The government fixes a price in accordance with a demand-supply portion in the market. 

Ad-valorem Tax

Ad-valorem tax is a kind of indirect tax in which goods are taxed by their values. In the case of ad-volorem tax, the tax amount is calculated as the proportion of the price of the goods. Value-added Tax (VAT) is an ad-volorem Tax.

Advanced Countries

Advanced countries are countries which are industrially advanced, having high national and per capita income and ensure a high rate of capital formation. These countries possess highly developed infrastructure and apply most updated and advanced technical know-how in their productive activities. A strong and well organised financial structure is found in these advanced countries.


It means ‘merger’. As and when the necessity arises two or more companies are merged into a large organisation. This merger takes place in order to effect economies, reduce competition and capture market. The old firms completely lose their identity when the merger takes place. 


Appreciation means an increase in the value of something e.g., the stock of raw materials or manufactured goods. It also includes an increase in the traded value of a currency. It is the antonym of Depreciation. When the prices rise due to inflation, appreciation may occur. It causes scarcity or increase in earning power. 


When a person performs functions of middleman and buys and sells goods at a particular time to cash the price differences of two markets, this action is termed as arbitrage. Purchases are made in the market where price is low and at the same time, goods are sold in other markets where the price are high. Thus the middleman earns profit due to price difference in two markets.


Where there is an industrial dispute, the Arbitration comes to the force. The judgement is given by the Arbitrator. Both the parties have to accept and honour the Arbitration. Arbitration is the settlement of labour disputes that take place between the employer and the employees.


When a commodity is sold by auction, the bids are made by the buyers. Whose ever makes the highest bid, gets the commodity which is being sold. The buyers make the bid taking into consideration the quality and quantity of the commodity. 


If a country is self-sufficient, it does not require the imports for the country. Autarchy is an indicator of self-sufficiency. It means that the country itself can satisfy the needs of its population without making imports from other countries.

Balanced Budget

When the total revenue of the government exactly equals the total expenditure incurred by the government, the budget becomes a balanced budget. But it is a conservative viewpoint. In present days, the welfare government has to regulate a number of economic and social activities which increase the expenditure burden on the government and results in a deficit budget.

Balance of Payment

The balance of payment of a country is a systematic record of all economic transactions completed between its residents and the residents of the remaining world during a year. In other words, the balance of payment shows the relationship between the one country's total payment to all other countries and its total receipts from them. The balance of payment is a comprehensive term which includes both visible and invisible items. The balance of payment not only include visible export and imports but also invisible trade like shipping, banking, insurance, tourism, royalty, payments of interest on foreign debts.

Balance of Trade

The balance of trade refers to the total value of a country's export commodities and the total value of imports commodities. Thus the balance of trade includes only visible trade i.e., movement of goods (exports and imports of goods). The balance of trade is a part of Balance of payment statement.

Balance Sheet

The balance sheet is a statement showing the assets and liabilities of a business at a certain date. The balance sheet helps in estimating the real financial situation of a firm.


A bank is a financial institution. It accepts funds on current and deposit accounts. It also lends money. The bank pays the cheques drawn by customers against current and deposits accounts. The bank is a trader that deals in money and credit.

Bank Draft

Banker's draft is a negotiable claim drawn upon a bank. Drafts are as good as cash. The drafts cannot be returned and unpaid. A draft is issued when a customer shows his unwillingness to accept a cheque in payment for his services or mercantile goods. Bank Draft is safer than a cheque.

Bank Rate

Bank Rate is the rate of discount at which the central bank of the country discounts first-class bills. It is the rate of interest at which the central bank lends money to the lower banking institutions. Bank rate is a direct quantitative method of credit control in the economy.


It implies an agreement between two countries to extend to each other specific privileges in their international trade which are not extended to others.

Birth Rate

Birth Rate (or Crude Birth Rate) is a number of the births per thousand of the population during a period, usually a year. Only live births are included in the calculation of the birth rate.

Black Money

It is unaccounted money which is concealed from tax authorities. All illegal economic activities are dealt with this black Money. Hawala market has deep roots with this black money. Black money creates a parallel economy. It puts an adverse pressure on equitable distribution of wealth and income in the economy. 

Blue Chip

It is concerned with such equity shares whose purchase is extremely safe. It is a safe investment. It does not involve any risk. 


It means the drift of intellectuals of a country to another country. Scientists, doctors and technology experts generally go to other prominent countries of the world to better their lot and earn huge sums of money. This Brain-Drain deprives a country of its genius and capabilities.

Bridge Loan

A loan made by a bank for a short period to make up for a temporary shortage of cash. On the part of the borrower, mostly the companies, for example, a business organization wants to install a new company with new types of equipment etc. while his present installed company/types of equipment etc. are not yet disposed of. Bridge loan covers this period between the buying the new and disposing of the old one. 


It is a document containing a preliminary approved plan of public revenue and public expenditure. It is a statement of the estimated receipt and expenses during a fixed period, it is a comparative table giving the accounts of the receipts to be realized and of the expenses to be incurred.

Budget Deficit

A budget may take a shape of deficit when the public revenue falls short to public expenditure. A budget deficit is a difference between the estimated public expenditure and public revenue. The government meets this deficit by way of printing new currency or by borrowing.


Bull is that type of speculator who gains with the rise in prices of shares and stocks. He buys share or commodities in anticipation of rising prices and sells them later at a profit.

Bull Market

It is a market where the speculators buy shares or commodities in anticipation of rising prices. This market enables the speculators to resale such shares and makes a profit.


When the government fails to check inflation, it raises income tax and the corporate tax. Such a tax is called Buoyancy. It concerns with the revenue from taxation in the period of inflation.

Business Cycle

Business cycle (also known as trade cycle) are species of fluctuations in the economic activity of organised communities. It is composed of a period of good trade characterised by rising prices and low unemployment, alternating with period of bad trade characterised by falling prices and high unemployment. Every trade cycle has five different subphases–depression, recovery, full employment, prosperity (boom) and recession.

Call Money

Call money is in the form of loans and advances which are payable on demand or within the number of days specified for the purpose. 

Capital Budgeting

Capital budgeting represents the process of preparing a budget for a period of a year or even for several years allocating capital outlays for the various investment projects. In other words, it is the process of budgeting capital expenditure by means of an annual or longer period capital budget.

Capital-labour Ratio

Latest models of machinery and equipment raise the labour efficiency and the output is maximized. Capital-labour ratio is the amount of capital against the given labours that a firm employs. Capital-labour ratio is the ratio of capital to labour.

Capital Market

The capital market is the market which gives medium term and long-term loans. It is different from money market which deals only in short-term loans.


Capitalism is an economic system in which all means of production are owned by private individuals Selfprofit motive is the guiding feature for all the economic activates under capitalism. Under pure capitalist system, economic conditions are regulated solely by free market forces. This system is based on ‘Laissez-faire system’ i.e., no state intervention. The sovereignty of consumer prevails in this system. Consumer behaves like a king under capitalism. 

Cash Reserve Ratio (CRR)

The commercial banks are required to keep a certain amount of cash reserves at the central bank. This percentage amount is called CRR. It influences the commercial bank’s volume of credit because variation in CRR affects the liquidity position of the banks and hence their ability to lend.


Census gives us estimates of population. Census is of great economic importance for the country. It tells us the rate at which the total population is increasing among different age groups. In India census is done after every 10 years. The latest census in India has been done in 2001.

Central Bank

Central Bank may be defined as the apex barking and monetary institution whose main function is to control, regulate and stabilize the banking and the monetary system of the country in the national interest.


A cheque is an order in writing issued by the drawer to a bank. If the customer has sufficient amount in his account, the cheque is paid by the bank. Cheques are used in place of cash money.

Clearing Bank

Clearing bank is one which settles the debits and credits of the commercial banks. Even of the cash balances are lesser, clearing bank facilitates banking operation of the commercial bank.

Clearing House

A clearinghouse is an institution which helps to settle the mutual indebtedness that occurs among the members of its organisation. 

Closed Economy

Closed economy refers to the economy having no foreign trade (i.e., export and import). Such economies depend exclusively on their own internal domestic resources and have no dependence on outside world. 


Producers of an industry reduce competition among themselves to raise their profits. They fix the price themselves with a clear understanding in this regard. This understanding among different firms is called collusion.


Art and practice of making coins are called coinage. The metal is melted and moulded to shape into a coin. The coinage is a medium of exchange (money).


Collectivism is a belief that nation's interest is superior to individual interest. This is the collective thinking of the society and polity national leaders and also communist opine the theory of collection.

Commercial Bank

Commercial Bank is an institution of finance. It deals with the banking services through its branches in the whole of the country. Operation of current accounts, deposits, granting of loans to individuals and companies etc. are various functions of the commercial bank.

Core Sector

The economy needs basic infrastructure for accelerating development. Development of infrastructure industries like cement, iron and steel, petroleum, heavy machinery etc. can only ensure the development of the economy as a whole. Such industries are core sector industries.

Corporation Tax

It is a tax on company's profit. It is a direct tax which is calculated on profits after interest payments and allowance (i.e., Capital allowance) have been deducted but before dividends are allowed for.

Cost-push Inflation

It arises due to an increase in production cost. Such type of inflation is caused by three factors : (i) an increase in wages, (ii) an increase in the profit margin and (iii) imposition of heavy taxation.

Credit Rationing

Credit rationing takes place when the banks discriminate between the borrowers. Credit rationing empowers the bank to lend to some and to refuse to lend to others. In this way, credit rationing restricts lending on the part of the bank.

Credit Squeeze

Monetary authorities restrict credit as and when required. This credit restriction is called credit squeeze. Monetary authorities adopt the policy of credit squeeze to control inflationary pressure in the economy.

Custom Duty

Customs duty is a duty that is imposed on the products received from exporting nations of the world. It is also called protective duty as it protects the home industries.

Cyclical Unemployment

It is that phase of unemployment which appears due to the occurrence of the downward phase of the trade cycle. Such an employee is reduced or eliminated when the business cycle turns up again.

Dear Money

Dear money is that money which can only be borrowed at a high rate of interest. In dear money policy, bank rate and other rates of interest are high and as a result, borrowing becomes expensive. Dear money policy is a deliberate policy which is adopted by the monetary authorities to check inflation in the economy. 

Death Duty

It is a direct tax which is imposed on the estate of deceased person. Death duty or Death Tax is a form of personal tax on property which is levied when property passes from one person to other at the time of the death of the former.

Death Rate

Death rate signifies the number of deaths in a year per thousand of the population. It is mostly known as crude death rate. Life expectancy is an important determinant of the death rate. A country having high life expectancy will have a high crude death rate. 


Decentralisation means the establishment of a variable unit of the same industry at different places. Large-scale organisation or industry cannot be run at one particular place or territory. In order to increase the efficiency of the industry, various units at different places are located.

Debt Service

The sum of principal repayments and interest actually paid in foreign currency, goods and services on long-term debt (having maturity of more than one year), interest paid on short-term debt and repayments to IMF.

Deficit Financing

It is a practice resorted to by the modern government of spending more money than it receives in revenue. It is a policy of bridging a deficit between governments expenditure and revenue. Deliberately budgeting for a deficit is called deficit financing. This practice was popularised by Prof. J. M. Keynes to deal with the depression and unemployment situations and to stimulate economic activity. Deficit financing, though having inflationary effects, has now become a common practice in all countries.


Deflation is the reverse case of inflation. Deflation is that state of falling prices which occurs at that time when the output of goods and services increases more rapidly than the volume of money in the economy. In the deflation, the general price level falls and the value of money rises.


The loss of value of the currency of a country relative to other foreign currency is known as devaluation. Devaluation is a process in which the government deliberately cheapens the exchange value of its own currency in terms of other currency by giving it a lower exchange value. Devaluation is used for improving, the balance of payment situation in the country.

Direct Tax

A tax is said to be a direct tax when it is not intended to be shifted to anybody else. The person who pays it in the first instance is also excepted to bear it. Thus the impact and incidence of direct tax fall on the same person shifting of direct tax are not possible Income Tax is an example of direct tax.


It refers to a process of bringing down prices moderately from their high level without any adverse impact on production and employment. Thus, disinflation is an anti-inflationary measure.


Dissaving occurs when expenditure exceeds income. Raising of loans or utilization of past accumulated savings takes place in such eventuality. 


The dividend is the amount which the company distributes to shareholders when the profits of the company are calculated by the board of directors. 

Economic Integration

Economic integration appears when two or more nations coordinate themselves and their economies are linked up. It may exhibit itself in the form of free trade area or a full economic union. EEC is an example of economic integration.

Estate Duty

It is a tax which is levied on the estate of a deceased person. It is also known as death duty. The ownership of state changes hands only after the payments of the estate duty. It is a progressive tax in nature.

Excise Duty

It is a tax which is imposed on certain indigenous Click here to search study notes. Click here to view all Kerala PSC Study notes. Click here to read PSC Question Bank by Category wise. Click here to Test your knowledge by atteneding Quiz.

വ്യക്തികളും വിശേഷണങ്ങളും


അഗതികളുടെ അമ്മ മദർ തെരേസ .
ആധുനി ഇന്ത്യയുടെ ശില്പി ഡൽഹൗസി .
ഇന്ത്യയുടെ വാനമ്പാടി സരോജിനി നായ്ഡു .
കവി രാജ സമുദ്ര ഗുപ്തൻ .
കേരള അശോകൻ വിക്രമാദിത്യ വരഗുണൻ .
കേരള പാണിനി എ ആർ രാജരാജവർമ്മ .
കേരള മോപ്പസാങ് തകഴി ശിവശങ്കര പിളള .
കേരള വാല്മീകി വളളത്തോൾ .
കേരള സിംഹം പഴശ്ശി രാജ .
കേരള സ്കോട്ട് സി വി രാമൻപിളള .
കേരള ഹെമിംങവേ എം ടി വാസുദേവൻ നായർ . LI...


Dynasties and founders in ancient India


പുരാതന ഇൻഡ്യയിലെ രാജവംശങ്ങളും സ്ഥാപകരും ഇൻഡ്യയിലെ രാജവംശങ്ങളും സ്ഥാപകരും .
അടിമ വംശം കുത്തബ്ദീൻ ഐബക് .
കണ്വ വംശം വാസുദേവ കണ്വർ .
കുശാന വംശം കജുല കാഡ്ഫിസെസ് .
ഖിൽജി വംശം ജലാലുദ്ദീൻ ഖിൽജി .
ഗുപ്ത രാജവംശം ശ്രീഗുപ്തൻ .
ചാലൂക്യ വംശം പുലികേശി I .
ചോള സാമ്രാജ്യം പരാന്തകൻ I .
തുഗ്ലക് വംശം ഗിയാസുദ്ദീൻ തുഗ്ലക് .
നന്ദവംശം മഹാപത്മനന്ദൻ .


കേരള നവോത്ഥാനം - പ്രധാന വ്യക്തികൾ


അയ്യൻ‌കാളി .

1907-ൽ സാധുജന പരിപാലന യോഗം രൂപവത്കരിച്ചു.
തിരുവിതാംകൂറിൽ കർഷകത്തൊഴിലാളികളുടെ ആദ്യത്തെ പണിമുടക്കു സമരം നയിച്ചു.
കല്ലുമാല സമരം ആഹ്വാനം ചെയ്തു.
കുമാരനാശാൻ .

1903ൽ കുമാരനാശാൻ ആദ്യ ശ്രീനാരായണ ധർമപരിപാലന യോഗം സെക്രട്ടറിയായി.
1904ൽ  എസ്.എൻ.ഡി.പി യോഗത്തിന്റെ മുഖപത്രമായ \'വിവേകോദയം\' മാസിക ആരംഭിച്ചു.
1924 ജനുവരി 16-ന് പല്ലനയാറ്റിലുണ്...