IIMs WAT process: Key Economic terms to score high in Essay round

http://www.mbauniverse.com/article/id/7499/IIMs-WAT-Process MBAUniverse.com gives you probable topics for IIM

short lists to successfully clear the IIM WAT process

round for Admission 2014. Deep understanding of these

topics will help candidates to score valuable points in

IIMs WAT Process.

IIMs and other top B schools have started their WAT and

personal interview round at various centres. The topics

related to economy need an understanding of economic

terms required to be used in expansion of these topics

and answering certain questions based on them. Since Written Ability Test - WAT is the preferred part of final admission process

and consists of spot writing of an essay on the topic not known earlier, knowing a few economic terms will be a great help in WAT

and PI. Frequently used economic terms Following are a few explained economic terms which may be needed in expansion of WAT topics in IIMs and other B schools 1. Deficit Financing

When government goes for more public borrowing or borrowing from RBI to make up the huge gap between less revenues and

more expenditure. Government may need to take this step to meet out the expenditure on its expansionary policies; developmental

plans; welfare schemes. It resorts to expansion of money supply. 2. Fiscal Policy

Government is the Fiscal authority. Policies related to taxation, government expenditure, Revenue are the examples of fiscal policy. 3. Fiscal Deficit The difference between the higher government expenditure and lower revenue in a fiscal year excluding the money it has borrowed

is the fiscal deficit. This is denoted usually as a percentage of its GDP. 4. Budgetary Deficit Less than planned revenue in budget is the budgetary deficit. It includes Fiscal Deficit plus past debts before this fiscal year. 5. Difference between Fiscal and Budget Deficit The major difference is of time period. Fiscal deficit accounts for a fiscal year were not enough money is available due to higher

expenditure. 6. Monetary Policy

Central Bank of the country (Reserve Bank of India in our case) is the monetary authority of India. Expansion or contraction of

money supply according to the need; controlling the money market; keeping the value of rupee stable and the tools to be used to

implement these policies are the major roles to be played by the Reserve Bank of India effectively.

7. Cash Reserve Ratio (CRR) It is a quantitative measure adopted by Reserve Bank of India to regulate the money supply. Higher CRR will leave less disposable

money with the banks and lower CRR with more disposable money to be circulated in the market. 8. Bank Rate: It is another important quantitative measure to regulate the money supply. The rate at which Reserve Bank of India

discounts the securities of scheduled commercial banks is called Bank rate. Share your GD/WAT/PI Experiences of IIMs Admission 2014-2016 9. Trade Cycles: When the economy fluctuates from inflation to boom and then dips to deflation and depression or slump, the

entire period of this cycle is called Trade cycle. Theoretically, an inflation or boom is bound to be followed by deflation, depression.

It will again recover and will begin moving to inflation. Ideologically, if the market is left free for adjustment these cycles will recur

automatically but with the government invention or intervention by any other agency the periodicity may change.

11. Deflation: It is opposite to Inflation but more dangerous than it. Although prices remain steady, currency may not lose value but

the economy is deprived of money since employment generation doesn’t happen because of which demand doesn’t pick up which

in turn causes more industries to shut down causing more unemployment. 12. Balance of Payment: It is an annual account of a country’s all monetary transactions with the rest of the world. Items in these

transactions include payments for the country’s exports and imports of goods and services; financial transfers; grants in aid. 13. Balance of payment always balances: The sum of all the included components should be zero with no surplus or deficit. For

example, if a country is importing more than it exports, although its trade balance will be in deficit, but the deficit will have to be

counterbalanced by funds earned either from its foreign investments, by running down central bank reserves or by receiving loans

from other countries. 14. Balance of Trade: It is a part of Balance of payment Account. All the exports and imports and other custom verifiable items are

included in the annual Balance of trade account of a country. 15. GDP: Gross Domestic Product is the sum total of the market value of finished goods and services produced in a given year in a

country. There are three approaches to measure GDP vis. production (or output) approach; income approach; expenditure

approach. 16. Upvaluation/devaluation of home currency and how does it affect the flow of international trade

When the foreign currency like US Dollar, GBP, Euro, becomes costlier in terms of Home currency(Rupee for India), the home

currency is devalued; when it becomes cheaper, the home currency is upvalued. IIMs WAT Process: Final Tip: Although MBAUniverse.com will publish solved topics related to economics, candidates are advised

to understand these terms as they are likely to be used on various topics in WAT sessions of top rated B schools. Share your GD/WAT/PI Experiences of IIMs Admission 2014-2016

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