Important Terms
Fiscal Policy – When government adjusts
its spending levels and tax rates and observes the influence a nation’s economy.
For example, when demand
is low in the economy, the government can step in and increase its spending to
stimulate demand. Or it can lower taxes to increase disposable income for
people as well as corporations.
Monetary Policy – Monetary policy
determines when the central bank controls the supply of money. It usually
targets on inflation rate which means rising prices of things or deflation(falling prices of things). It also manages interest rate to keep the economy stable.
Fiscal Deficit - Fiscal deficit occurs when government’s
expenditures (Spending) are more than the revenue collections( Incomes). It excludes the money from
borrowing. It is an accumulation of yearly deficit (loss).
Budget Deficit – Budget deficit occurs
when government spends more than it earns.
Which is nearly every year.
Revenue Deficit – Revenue deficit
occurs when government receives less than it spends it is called revenue
deficit.
Income Tax – An income tax is a
tax imposed on individuals or entities (tax payers) that varies with respective of income or profit (taxable income). Income tax generally is computed as the
product of a tax rate times taxable income
Direct taxes – When government get
taxes from individual's salary, private firms and corporates directly is called direct taxes. For example- People get salary every month. When salary is higher which is also decided by the government, there is certain amount of tax which is imposed and collected by the income tax department.
Indirect Taxes – When government get
taxes from services indirectly are called indirect taxes. For example when you go to shop and buy the toothpaste. There are certain taxes which are hiddenly charged. These types of taxes, which are indirectly charged are known as indirect taxes. Goods and Services Tax (GST )is a type of indirect tax.
Sales Tax – Sales tax is a form
of indirect tax imposed on the sale and purchase of goods within a country. The
seller of goods can recover sales tax from the purchaser
External Debt – External debt is the
portion of a country’s debt that was borrowed from foreign lenders including
commercial banks, governments or international financial institution. These loans,
including interest, must usually be paid in the currency in which the loan was
made. To earn the needed currency, borrowing country may sell and export goods
to the lender’s country.
Internal Debt – Internal debt or
domestic debt is the part of the total government debt in a country that is owned
to lenders within the country.
Foreign Investment – Foreign investment
is when a company or individual from one nation invests in assets or ownership
stakes of a company based in another nation. This can be of two types- greenfield investment or brown field investment.
Direct Investment – Direct investment,
more commonly referred to as foreign direct investment (FDI), refers to an
investment in a foreign business enterprise designed to acquire a controlling
interest in the enterprise.
