IBPS Clerk Notes - Bank Exam Detailed Study

Foreign exchange reserves: The stock of liquid assets denominated in foreign currencies held by a government's monetary authorities (typically, the finance ministry or central bank). Reserves enable the monetary authorities to intervene in foreign exchange markets to affect the exchange value of their domestic currency in the market. Reserves are invested in low-risk and liquid assets, often in foreign government securities.

Gross domestic product (GDP): Gross Domestic Product: The total of goods and services produced by a nation over a given period, usually 1 year. Gross Domestic Product measures the total output from all
the resources located in a country, wherever the owners of the resources live.

Gross national product (GNP) is the value of all final goods and services produced within a nation in a given year, plus income earned by its citizens abroad, minus income earned by foreigners from domestic production. The Fact book, following current practice, uses GDP rather than GNP to measure national production. However, the user must realize that in certain countries net remittances from citizens working abroad may be important to national well being. GNP equals GDP plus net property income from abroad.

Inflation: In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When the price level rises, each unit of currency buys fewer goods and services; consequently, inflation is also erosion in the purchasing power of money a loss of real value in the internal medium of exchange and unit of account in the economy.

International Monetary Fund (IMF) An autonomous international financial institution that originated in the Bretton Woods Conference of 1944. Its main purpose is to regulate the international monetary exchange system, which also stems from that conference but has since been modified. In particular, one of the central tasks of the IMF is to control fluctuations in exchange rates of world currencies in a bid to alleviate severe balance of payments problems.

Monetary policy: The regulation of the money supply and interest rates by a central bank in order to control inflation and stabilize currency. If the economy is heating up, the central bank (such as RBI in India) can withdraw money from the banking system, raise the reserve requirement or raise the discount rate to make it cool down. If growth is slowing, it can reverse the process - increase the money supply, lower the reserve requirement and decrease the discount rate. The monetary policy influences interest rates and money supply.

Subsidy: A payment by the government to producers or distributors in an industry to prevent the decline of that industry (e.g., as a result of continuous unprofitable operations) or an increase in the prices of its products or simply to encourage it to hire more labor (as in the case of a wage subsidy). Examples are export subsidies to encourage the sale of exports; subsidies on some foodstuffs to keep down the cost of living, especially in urban areas; and farm subsidies to encourage expansion of farm production and achieve self-reliance in food production.