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DEFINITION of 'Negative Income Tax - NIT'

A guaranteed minimum income plan advocated by economist Milton Friedman in 1962 where federal income subsidies are provided to persons or families whose income falls below a certain level. Negative income tax (NIT) would allow claimants to receive income through the simple filing of tax returns rather than through the claiming of welfare benefits, ideally eliminating the need for a complex welfare bureaucracy.

BREAKING DOWN 'Negative Income Tax - NIT'

The primary criticism of the negative income tax is that it discourages some low-income individuals from working. If one can receive $2,500 from the government for not working at all versus $5,000 for dozens of hours of work, some people will choose to not work because they would rather have more leisure time even if it means less money and an inability to meet basic living expenses.

Another criticism is that a negative income tax system cannot eliminate the complexities associated with the welfare system because the taxpayers who fund the subsidies demand accountability from the taxpayers who receive the subsidies. This demand necessitates a complex system of rules and oversight intended to prevent abuse of the system.

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What is "Spillover effect"?  Anyone...

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rishi.2k14
@rishi.2k14  ·  16,463 karma

Spillover effect is action generated due ti some other unrelated action. For example if i smoke the person next to me may face breathing difficulties .it is negative spillover effect. Similarly in economic terms if we suppose that a religious place which had no Connectivity is now connected through all weather roads and as a result is always full of pilgrims which has caused the fruit sellers business to flourish . that's spillover effect . effect of an unrelated action seeping into some other field in eithwr positive or negative way. 

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darshi.
@darshi.  ·  397 karma

@rishi.2k14 Thank you so much.

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DEFINITION of 'Competitive Devaluation'

A series of sudden currency depreciations that nations may resort to in tit-for-tat moves to gain an edge in international export markets. Competitive devaluation refers to a scenario in which an abrupt national currency devaluation by one nation is matched by a currency devaluation of another, especially if they both have managed exchange-rate regimes rather than floating exchange rates determined by market forces. Competitive devaluation is considered a "beggar-thy-neighbour" type of economic policy, since it amounts to a nation trying to gain an economic advantage without consideration for the ill-effects it may have on other countries.

BREAKING DOWN 'Competitive Devaluation'

The act of currency devaluation or depreciation improves a nation's export competitiveness because it lowers the cost of goods exported from that nation for overseas buyers. For example, when the exchange rate is EUR 1 = $1.40, assume a European exporter sells a product in the U.S. at $10, which is equivalent to about EUR 7.14. If the EUR subsequently falls to 1.25, the exporter can slash the price of the product to $9 and still receive the equivalent of EUR 7.20 because each dollar now fetches more euros.

Currency devaluation also has a positive impact on a nation's trade deficit because it makes imports more expensive. This forces domestic consumers to look for local alternatives to imported products, which provides a boost to domestic industry. This combination of export-led growth and increased domestic demand usually contributes to higher employment and faster economic growth.

The negative aspect of currency devaluation is that it may lower productivity, since imports of capital equipment and machinery may become too expensive. As well, devaluation significantly reduces the overseas purchasing power of a nation's citizens.

Competitive devaluation is viewed as being harmful or deleterious to the global economy, because it may set off a round of currency wars that may have unforeseen adverse consequences, such as increased protectionism and trade barriers. At the very least, competitive devaluation may lead to greater currency volatility and higher hedging costs for importers and exporters, which may impede a higher level of international trade.

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DEFINITION of 'Strike Price'

The price at which a specific derivative contract can be exercised. Strike prices is mostly used to describe stock and index options, in which strike prices are fixed in the contract. For call options, the strike price is where the security can be bought (up to the expiration date), while for put options the strike price is the price at which shares can be sold.

The difference between the underlying security's current market price and the option's strike price represents the amount of profit per share gained upon the exercise or the sale of the option. This is true for options that are in the money; the maximum amount that can be lost is the premium paid.

Strike prices are one of the key determinants of the premium, which represents the market value of an options contract. Other determinants include the time until expiration, the volatility of the underlying security and prevailing interest rates. Strike prices are established when a contract is first written. Most strike prices are in increments of $2.50 and $5.

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*Deccan* grameena bank name changed to

Nizamabad
telangana
adilabad
34 answers
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CII president's award 2015 won by??

Azim premji
sachin bhansal
Cyrus Mistry
26 answers
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Eligibility criteria for claiming compensation for crop damage??

50%
25%
22%
33%
23 answers
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Suvo Sarkar(IIM,calcutta)- Retail Banker of the Yr in Middle East(Emirates NBD GM){{{Asian Banker Excellence in Retail financial services awards 2015  held in Singapore.}}}

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RIDF has been constituted under??

RRBs
RBI
Nabard
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At present number of RRBs in India??

25
55
56
78
2 comments32 answers
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