IMPORTANT TOPIC ON ECONOMICS Different Concepts of National Income
National income is an important concept of Macro Economics. There are number of concepts pertaining to national income.
1) Gross National Product (GNP)Gross national product is the total measure of the flow of goods and services, at market value resulting from current production, during a year in a country, including net income from abroad.GNP =C+I+G+(X-M)+(R-P)
2) Gross National Product at Market Price (GNP (MP))It means the gross value of final goods and services produced annually in a country, which is estimated according to the price prevailing in the market. Market price including cost of production + indirect taxes.GNP (MP) = C + I + G + (X-M) + (R-P)C = Private Consumption ExpenditureI = Domestic Private InvestmentG = Government's Consumption & Investment Expenditure.(X-M) = Net Export Value. (Value of exports Value of imports)(R-P) = Receipts from Property abroad - Payments to abroad.MP = Production at Market Price.
3) Gross National Product at Factor Cost: (GNP (FC))Gross national product at factor cost is the sum of the money value of the income, produced by and accruing to the various factors of production in one year in a country.In order to arrive at GNP at factor cost, we deduct indirect taxes from GNP at market prices and add subsidies to GNP at Market. Prices.GNP(FC) = GNP(MP) - Indirect Taxes + Subsidies
4) Gross Domestic Product at Market Price (GDP (MP))Gross domestic product at market price is the gross market value of all final goods and services produced within the domestic territory of a country, during a period of one year.• The term gross implies that it includes depreciation.• GDP at market price includes amount of indirect taxes paid and excludes amount of subsidy received, that is, net indirect taxes are included. GDP(MP) = GNP - Net Income from abroad.\GDP(MP) = C + I + G + (X-M)
5) Gross Domestic Product at Factor Cost (GDP (FC) )Gross domestic product at factor cost is the gross money value of all final goods and services produced within the domestic territory of a country, during a period of one year.GDP at factor cost includes amount of subsidy, but excludes amount of indirect taxes paid.GDP (FC) = GDP (MP) - Indirect Taxes + Subsidies\ GDP(FC)=C+I+G+(X-M)-IT+S
6) Net Domestic Product at Market Price (NDP (MP)):Net domestic product at market price is the net market value of all final goods and services produced, within the territorial boundaries of a country, during a period of one year.NDP (MP) = GDP (MP) - Depreciation
7) Net Domestic Product at Factor Cost (NDP (FC)):Net domestic product at factor cost is the net money value of all final goods and services produced, within the territorial boundaries of a country, during a period of one year.NDP (FC) is also known as domestic income or domestic factor income.NDP (FC) = GDP (MP) - Net Indirect Taxes - Depreciation
8) Net National Product at Market Price (NNP (MP)):Net national product at market price is the net market value of all final goods and services produced, by the residents of a country, during a period of one year. If we deduct depreciation from GNP at market prices we get NNP at market prices.NNP (MP) – GNP (MP) = Depreciation
9) Net National Product at Factor Cost (NNP (FC)):Net national product at factor cost is the net money, value of all final goods and services produced by the residents of a country, during a period of year.It includes income earned by factors of production.NNP (FC) - NNP (MP) - Indirect Taxes + Subsidies
10) National Income at Factor Cost (NI (FC)): National income at factor cost means the sum of all incomes, earned by resource suppliers for their contribution of land, labour, capital and entrepreneurial ability, which go into the year's net production.NI (FC) = NNP (MP) - Indirect Taxes + Subsidies.
Personal Income (PI):Personal income is the sum of all incomes, actually received by all individuals or households from all the sources during a given year. It may be earned or unearned.
Personal Disposable Income:Personal disposable income is that part of personal income which is left behind after payment of personal direct taxes like income tax, personal property taxes, etc.
Mutual Funds and Role Of SEBI
India is going through a phase of Demographic Dividend, where the working population forms nearly 65% of total population, the venture of investments in the Bond market like Mutual Fund (MF) provides for ample opportunities of growth in India’s financial sector.However, due to the recent Franklin Templeton Crisis, the Mutual Fund industry is currently experiencing a state of flux. This incident could well trigger a systemic crisis of confidence for investors and there are concerns over its possible ripple effects on the overall financial market.
Franklin Templeton Mutual Fund Crisis
§ Franklin Templeton Mutual Fund has decided to wind up six debt schemes that held more than Rs 27,000 crore.§ The fund house held that investors will not be able to redeem their investments for the time being as the fund§ house has barred both purchases and redemptions.§ This decision was taken as the value of Mutual funds was getting eroded following the lack of liquidity on account of the Covid-19 impact on markets.§ The Reserve Bank of India’s decision to open a special facility to ensure the availability of adequate liquidity for the mutual fund industry is a timely move in signalling to investors that the central bank is alert to the need to preserve financial stability in these challenging times.§
RBI has assigned ₹50,000 crore exclusively for commercial banks to lend to mutual funds. With this step, RBI wants to contain any liquidity crunch in the mutual fund market.
§ SEBI should revise rules to crack down on mis-labelling and mis-selling, and segregate debt funds run for institutional and retail investors.§ Regulatory reforms, such as a simplified KYC to make onboarding hassle-free; making Aadhar interchangeable with PAN; and allowing investments on the basis of Bank KYC, should be taken.§ Technology will be the biggest enabler for growth as mutual funds are already noticing increasing traction from online channels like fintech platforms, mobile apps and websites.§ There is a need to fix the accountability of credit-rating companies and fund companies.o This can be done by linking their income to returns and/or certain outcomes.There is a need to engage domestic investment in India’s financial market. This will reduce dependence on the foregin investment (hot money), which in turn, will curb volatility and provide stability to Indian financial market.
Accounting as a Financial Information System:
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ECONOMICS NOTES Types of Market Structures
There are quite a few different market structures that can characterize an economy. However, if you are just getting started with this topic, you may want to look at the four basic types of market structures first: perfect competition, monopolistic competition, oligopoly, and monopoly. Each of them has its own set of characteristics and assumptions, which in turn affect the decision making of firms and the profits they can make.It is important to note that not all of these market structures exist in reality; some of them are just theoretical constructs. Nevertheless, they are critical because they help us understand how competing firms make decisions.1. PERFECT COMPETITION
Perfect competition describes a market structure, where a large number of small firms compete against each other. In this scenario, a single firm does not have any significant market power. As a result, the industry as a whole produces the socially optimal level of output, because none of the firms can influence market prices.The idea of perfect competition builds on several assumptions: (1) all firms maximize profits (2) there is free entry and exit to the market, (3) all firms sell completely identical (i.e., homogenous) goods, (4) there are no consumer preferences. By looking at those assumptions, it becomes quite obvious that we will hardly ever find perfect competition in reality. That is an essential aspect because it is the only market structure that can (theoretically) result in a socially optimal level of output.Probably the best example of a market with an almost perfect competition we can find in reality is the stock market. If you are looking for more information on perfect competition, you can also check our post on perfect competition vs. imperfect competition.2. MONOPOLISTIC COMPETITION
Monopolistic competition also refers to a market structure, where a large number of small firms compete against each other. However, unlike in perfect competition, the firms in monopolistic competition sell similar, but slightly differentiated products. That gives them a certain degree of market power, which allows them to charge higher prices within a certain range.Monopolistic competition builds on the following assumptions: (1) all firms maximize profits (2) there is free entry, and exit to the market, (3) firms sell differentiated products (4) consumers may prefer one product over the other. Now, those assumptions are a bit closer to reality than the ones we looked at in perfect competition. However, this market structure no longer results in a socially optimal level of output because the firms have more power and can influence market prices to a certain degree.An example of monopolistic competition is the market for cereals. There is a huge number of different brands (e.g., Cap’n Crunch, Lucky Charms, Froot Loops, Apple Jacks). Most of them probably taste slightly different, but at the end of the day, they are all breakfast cereals.3. OLIGOPOLY
An oligopoly describes a market structure that is dominated by only a small number of firms. That results in a state of limited competition. The firms can either compete against each other or collaborate (see also Cournot vs. Bertrand Competition). By doing so, they can use their collective market power to drive up prices and earn more profit.The oligopolistic market structure builds on the following assumptions: (1) all firms maximize profits, (2) oligopolies can set prices, (3) there are barriers to entry and exit in the market, (4) products may be homogenous or differentiated, and (5) there is only a few firms that dominate the market. Unfortunately, it is not clearly defined what a “few firms“ means precisely. As a rule of thumb, we say that an oligopoly typically consists of about 3-5 dominant firms.To give an example of an oligopoly, let’s look at the market for gaming consoles. This market is dominated by three powerful companies: Microsoft, Sony, and Nintendo. That leaves all of them with a significant amount of market power.4. MONOPOLY
A monopoly refers to a market structure where a single firm controls the entire market. In this scenario, the firm has the highest level of market power, as consumers do not have any alternatives. As a result, monopolies often reduce output to increase prices and earn more profit.The following assumptions are made when we talk about monopolies: (1) the monopolist maximizes profit, (2) it can set the price, (3) there are high barriers to entry and exit, (4) there is only one firm that dominates the entire market.From the perspective of society, most monopolies are usually not desirable, because they result in lower outputs and higher prices compared to competitive markets. Therefore, they are often regulated by the government. An example of a real-life monopoly could be Monsanto. This company trademarks about 80% of all corn harvested in the US, which gives it a high level of market power. You can find additional information about monopolies in our post on monopoly power.
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HOW TO PREPARE & CRACK SEBI GR A 2020?
SEBI Assistant Manager’s post is one of the most prestigious and lucrative job options available for the government job aspirants. In recent times, it has become one of the toughest examination to crack as well.
Being a very sought after job, the competition is tough and an aspirant needs to be well aware about whens and hows of the examination and prepare in advance for the examination. Let us lay some background in order to prepare aspiring Assistant Manager candidates for such a grueling challenge.
SEBI Recruitment 2020 Cut Off – Phase I examination
(ii) There shall be a cut-off of minimum 30% for Paper 1 (no sectional cut-off shall be there) and a cut-off of minimum 40% for Paper 2 in Phase I
(iii) Candidates would need to secure separate cut-off in each paper as mentioned at (ii) above as well as aggregate cut-off marks of 40% in Phase I exam to be shortlisted for Phase II. Marks obtained in Phase I shall be used only for shortlisting the candidates for Phase II examination process and will not be counted for final selection of the candidates.
(iv) Subject to the criteria mentioned at (iii) above, all the candidates who clear Phase I shall be shortlisted for Phase II. List of candidates shortlisted for Phase II will be made available on SEBI website.
SEBI Grade ‘A’ 2020 Phase II Online Exam Pattern
Candidates who qualify the Phase I online examination for Grade A officer will be called upon to take the Phase II online examination.
The marks from Phase I exam will not be accounted for in subsequent rounds. This will be used only for qualifying for phase II.
The Phase II examination is also held online.
An on-line examination consisting of two papers of 100 marks each will be held on May 03, 2020 for Phase II.
There will be negative marking (1/4th marks deducted for wrong answer) for Papers 1 & 2 in Phase II (except IT stream for which details shall be informed in due course).
Again, there is cut-off of minimum 30% for Paper 1 and a cut-off of minimum 40% for Paper 2 in Phase II.
Candidates would need to secure separate cut-off in each paper as mentioned at above as well as aggregate cut-off marks of 40% in Phase II exam (weightage of 1/3rd for Paper 1 and 2/3rd for Paper 2) to be shortlisted for Phase III.
Subject to the criteria mentioned at (v) above, candidates equaling 3 times the number of vacancies shall be shortlisted, in order of merit, for Phase III i.e. the Interview.
As against SEBI Recruitment 2018 there’ll be no Essay, Precis & Comprehension this time around.
All question papers (in both the Phases, except the test of English) will be set bilingually in Hindi and English.
SEBI Grade ‘A’ INTERVIEW
Candidates equaling 3 times the number of vacancies, who qualify the cut-off criteria for and Phase II of the online examination will be called for the interview.
The interview maximum marks have not been disclosed. However, historically Interview has been of 50 marks and is generally based on the knowledge of the candidate with regards to the subject matter (general or specialization) and securities market.
The candidate must be well prepared about the personal and educational background and shall follow the basic conventions of interview like:
- Being neatly and formally dressed;
- Being confident;
- No or minimal make-up;
- Being polite and cordial towards the panel;
- Being honest and answering in brief accurate, to the point answers;
The candidate must note that, it is not necessary to answer the questions/communicate with the interview panel in English only. The candidate may answer/communicate in Hindi also. The main point of the interview is to test the knowledge of the candidate and not how well versed he is in English language. The candidate must keep that in mind and answer in a language that he feels comfortable in.
Eligibility for Taking the Test
An aspirant has to be of certain age and have specific qualifications to make him eligible to take the test. The eligibility for test is given below:
SEBI Grade A officer 2020 Age Limit (as on 29/02/2020):
a. A candidate must not have exceeded the age of 30 years as on February 29, 2020 i.e., candidate must have been born on or after March 01, 1990. Age relaxation of 5 years for SC/ST and 3 years for eligible candidates from OBC category is also provided.
Syllabus for SEBI Grade A entrance 2020
SEBI has once again done the unexpected and changed the syllabus.
You have to familiarize oneself with the what, when, how and where of the upcoming examination
Following syllabus has been provided in advance for previous recruitment
Syllabus for Paper 2 of Phase I & Phase II in General Stream
This consists of new topics Commerce and Accountancy, Management, Finance, Costing, Companies Act and Economics
Specialized Subjects (Legal / Information Technology / Engineering/ Research Streams/Official Language Stream):
Syllabus for Paper 2 of Phase I & Phase II in Legal Stream consists of Constitution of India, Contract, Criminal law, Evidence Act, Transfer of property Act etc.
Syllabus for Paper 2 of Phase I in Information Technology, Engineering and Research stream consists of specialized topic as per the streams
Preparation For General Awareness:
If you are well prepared for this section, you won’t have to spend much time on it. The questions are based on facts and events. You either know or don’t know the answers and thus, answering this paper will take comparatively lesser time. In this section, you don’t have to solve problems like in other papers. All you need to do is to prepare efficiently by covering all the relevant topics and revising them regularly in order to recall the facts when required. As the composite time duration for Phase 1 – Online Test is 120 minutes, saving time in General Awareness paper will give you sufficient time to solve questions in Reasoning and Quantitative Aptitude sections.
This paper basically has three types of questions – Static GK, Current Affairs and Banking Awareness.
- Static GK: The topics here are based on the facts which do not change. You need to refer to previous year papers or sample papers to know the type of questions asked. Refer to standard books which will provide you with all the relevant information required.
- Current Affairs: These questions are based on current events. Usually, past 6-9 months of current affairs can be asked. Reading newspapers on a regular basis will help you a lot in your preparation. Make note of the key points while reading newspapers and current affair magazines. This will help you to revise the events quickly.
- Banking Awareness: These questions are from banking terms, the history of banking, SEBI functions, etc. Refer to banking awareness books to know the static banking terms and facts. Also, keep an eye on the current happening in the banking and finance sector.
Most importantly, take daily online quizzes and online mock tests to strengthen your knowledge related to General Awareness section. Go through the facts regularly.
Preparation For English Language:
This section tests your knowledge of English language and your ability to use it. English Grammar, Vocabulary and Reading Comprehension are the three basic parts which you need to focus on.
- English Grammar: Refer to standard books and brush up your knowledge of English grammar. Learn to apply and practice by taking sample papers. Thorough knowledge and application of English grammar will enable you to score well in much lesser time.
- Vocabulary: Improve your vocabulary by reading English newspapers, magazines, books etc. Cultivating a habit of reading will help you a lot. Whenever you read, focus on the new words you encounter and know their meaning. Learning new words and knowing how and where to use them will help you score higher. You can also use online platforms to learn a few new words every day.
- Reading Comprehension: The habit of reading on a regular basis will improve your English reading and understanding skills. Reading habit will help you to read and understand quickly and save your time. The questions which are based on a passage can be solved easily and quickly, in turn, boosting your score.
Altogether, be thorough with your basics, read regularly and practice by taking mock tests.
Preparation For Quantitative Aptitude:
In this section, you will be tested for your mathematical knowledge and problem-solving skills.
- Be clear with your basics. Brush up the theoretical concepts of Elementary Mathematics.
- Memorize all the essential formulae and learn when and how to use them.
- Few questions in this section are direct formula based so, don’t miss out such questions in your preparation.
- Problems based on Permutations and Combinations, Time-Speed-Distance, etc., need a deeper understanding and visualization. Hence, go through example problems and understand the problems thoroughly.
- Solve different types of problems with varying difficulty level.
- Take mock tests and work on your mistakes.
Preparation For Reasoning:
This section tests your analytical and reasoning abilities. Various types of questions with different difficulty level will be asked.
- Understand the theory and logic behind every concept thoroughly.
- Go through the basic data available in the questions carefully, be clear with the terms used and their relations.
- Follow the sample problems and understand the procedure to solve them.
- Try and practice puzzles on a regular basis to develop your logical and analytical skills.
There also has been a change in the exam pattern and to catch up with it you need to look up for Mock tests which are based on latest patterns because that will help you prepare well if you have a clear idea of the questions and the type that make up the paper. So it is better if you look at them before hand.
SEBI Officer Grade A Preparation For Phase 2
SEBI Officer Grade A Preparation For Financial Management:
- In Financial Management you need to have a very good conceptual knowledge of the subject.
- Refer to previous year papers to understand the type of questions asked
- Make a habit of taking notes while studying.
- Refer to books and online study material to learn the selected important topics within the short time available.
Best Books & Study Material For SEBI Officer Grade A Preparation
Best Books For General Awareness
- Lucent’s General Knowledge
- Newspapers – Hindu, Live Mint, Business Standard
Best Books For General English
- Objective General English by SP Bakshi
- Word Power Made Easy by Norman Lewis
- Corrective English by AK Singh
Best Books For Quantitative Aptitude
- Quantitative Aptitude by RS Agrawal
- Quantitative Aptitude Chapter-Wise Solved Papers by Kiran’s Publication
SEBI Officer Grade A Best Books For Reasoning
- verbal and Non- erbal Reasoning by RS Agrawal
- Analytical Reasoning by M K Pandey
- How To Crack Test Of Reasoning – In all Competitive Exams by Arihant Publications
Best Books For Financial Management
- Indian Economy by Mishra Puri
- RBI Bulletins
- Economic Survey of India
- Annual Budget
Best Books For English Descriptive
- Descriptive English by S.P Bakshi
- handbook for letter writing by S C Gupta
- 151 Essays by S C Gupta
- Newspapers- The Hindu, The Mint, etc
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MANAGEMENT: Corporate Governance as Risk Mitigation:
Corporate governance is of vital importance to a company and is almost as important as its primary business plan. When executed successfully, it can prevent corporate scandals, fraud and the civil and criminal liability of the company. It also improves a company’s status in the public opinion as a self-policing company that is responsible and worthy of shareholder and debt holder capital. It commands the shared philosophy, practices and culture of an organization and its employees. Firm without a system of corporate governance is often regarded as a body without a soul or conscience. Corporate governance enables a company honest and free from trouble. If this shared attitude breaks down, then corners will be cut, products will be defective and management will grow complacent and corrupt. The end result is a fall that will occur when gravity in the form of audited financial reports, criminal investigations and federal probes finally catches up, destroying the company instantaneously. Deceitful and unethical dealings can cause shareholders to escape out of fear, distrust and disgust.Plethora of research has revealed that good corporate governance can result in improved share price performance. It is well established in management reports that there is a great potential for good performance by companies, which have got good corporate governance mechanism and the greatest benefit is in developing companies. Studies have showed that investors are enthusiastic to invest in a better-governed company. Corporate Governance can be strong mechanism for development especially in country like India.
The following issues are important for good Corporate Governance.
1.The rights and obligation of shareholders.
2.Impartial treatment of all stakeholders.
3.The role of all stakeholders clearly defined and the linkage for corporate governance established.
4.Transparency, disclosure of information and audit.
5.The role of board of directors clearly defined.
6.The role of non-executive members of the board clearly defined.
7.Executive management and compensation and performance clearly defined.
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