Basic terms of business and commerce

 32. What is REPO rate? 

Repo= REPURCHASE rate. Discount rate at which a central bank repurchases government securities from the commercial banks, depending on the level of money supply it decides to maintain in the country's monetary system. To temporarily expand the money supply, the central bank decreases repo rates (so that banks can swap their holdings of government securities for cash), to contract the money supply it increases the repo rates. Alternatively, the central bank decides on a desired level of money supply and lets the market determine the appropriate repo rate.
  

33. What is inflation and what are its types ? 

When prices are rising it is called inflation. It may be due to two reasons : 1. demand is more than supply (called demand pull inflation) 2. cost is increasing (cost push inflation) due to inflation, the purchasing price of money falls. Small level of inflation is healthy for growth of industries, but hyper inflation is dangerous.
  

34. What is deficit financing ? 

When government uses deficits (expenses are more than revenue) in its budget, it is called deficit financing. Every govt. Goes for deficit financing. Revenue deficit is acceptable, but fiscal deficit should not be excessive. Then it would result in inflation, and anomalies in economic system. Deficit should be small so that it is less than half of the growth in the GDP so that it can be absorbed in the economy.
  

35. What is fiscal policy ? 

Fiscal = relating to government revenues policy = overall guidelines for action Overall policy of the government regarding taxation, revenue and expenditure is called fiscal policy