Category: Economics
Economic Chapter 10: Population economics
Population Population refers to the number of people living in a certain area (region) at a given time. The total number of people is established ... Read More
Economic Chapter 9: Economic Inflation
Inflation refers to the continuous (persistent) rise in the general price level of goods and services in the economy in a given time. It ... Read More
Positive Role (Implications) of foreign commercial banks in developing countries
They create employment opportunities. Foreign commercial banks employment to the local population in form of bank accountants, credit officers, marketing managers, cleaners etc. This increases ... Read More
Negative role (Implications) of foreign commercial banks in developing countries
They accelerate regional income inequalities in economy. This is because most of their banking activities are mainly concentrated in urban areas neglecting the rural areas. ... Read More
Measures of commercial bank for security,
The bank has to secure a collateral security from the borrower. It should have aimed personnel to safe guard the bank. 3. The bank should ... Read More
Problems facing Commercial banks in Developing countries
Unfavorable government policies in form of fixing high interest rates. This discourages individuals from borrowing money from commercial banks. High levels of economic instabilities. For ... Read More
Limitations of credit creation by Commercial banks in developing countries
Use of restrictive monetary policies by the central bank. The central bank limits the powers of commercial banks to create credit by using the restrictive ... Read More
Measures of commercial bank for profit maximization
Giving low interest rates to the depositors and charging high interest rates on the borrowers. under taking short term and medium term commercial investments. Charging ... Read More
Credit creation and credit multiplier
Credit creation is the process by which money lent out by commercial banks using the cheque facility expands to result into greater volume of credit ... Read More
CREDIT and credit instruments
Credit is when an individual borrows money or buys commodities without making cash payment. Credit instruments refer to the written documents which guarantee payments at ... Read More
Types of deposits (Accounts)
Current accounts. These are accounts where the depositor can withdraw any amount at any time by use of the cheques. For this reason, no interest ... Read More
Liabilities of Commercial banks
Liabilities are claims against the commercial bank, that is, what the bank owes to other banks and non-bank institutions. They include; Deposits of customers Deposits ... Read More
Functions of commercial banks
They accept deposits and safe guard them on the behalf of their customers. This is done by opening up an account with the bank. They ... Read More
Limitations of the application of the monetary policy in developing countries
Lack of well-developed financial markets. In developing countries, there are no well-developed security markets. This makes the use of open market operations makes ineffective. Concentration ... Read More
Commercial banking
A Commercial bank is a financial intermediary which collects surplus funds from the public (that is, accepts deposits), safe guards them and makes them available ... Read More
Instruments (Tools) of the monetary policy
The bank rate (discount rate) policy. The bank (discount) rate refers to the interest rate charged by the Central bank on commercial banks. This ... Read More
Aims (Objectives) of the monetary policy
To maintain domestic price stability To stimulate economic growth and development To ensure equitable income distribution To help to achieve full employment of resources in ... Read More
The monetary policy
The monetary policy refers to the measures used by the Central bank to control the demand and supply of money together with the interest rate ... Read More
Functions of the Central bank
Banker to the government. It keeps government funds and cash balances. It also carries out transactions on behalf of the government and it acts as ... Read More
Central banking
A Central bank is a financial institution established by the government with the aim of controlling the quantity and use of money in the ... Read More
Differences between Banking and Non-banking financial intermediaries
Banking Financial Intermediaries Non-Bank financial Intermediaries 1. They create credit which is considered as money (deposit money) 2. They lend on short term basis ... Read More
Financial intermediaries
These are financial institutions which bring together the deficit spending units (borrowers) and the surplus spending units (lenders) together. They trade in money as ... Read More
Determinants of interest rate
The level of demand for loanable funds (that is, funds available in financial institutions for lending). The higher the demand, the higher the interest rate ... Read More
Why interest is paid or charged
Reward for savings that is, interest is paid to reward those who postpone their consumption to the future. It is paid to reverse the positive ... Read More
Interest and Interest rate
Interest is the reward for use of capital in the production process. Interest rate refers to the price at which money is lent out or ... Read More
Criticisms (Limitations) of the classical Quantity theory of money demand
The quantity theory of money is criticized on the following grounds; The theory only emphasizes the transaction motive of holding money and it ignores the ... Read More
The Keynesian theory of Money Demand
According to Lord John Maynard Keynes, individuals demand for money for three major reasons (motives). These include; Transaction motive. Here, individuals demand for money in ... Read More
Factors that influence the level of liquidity preference
The income levels of individuals The degree of economic uncertainty The general price levels of goods and services (level of inflation) The level of monetization ... Read More
The Classical Quantity theory of Money Demand
The classical quantity theory of money demand states that, keeping the level of transactions and velocity of money constant, the general price level of goods ... Read More
Demand for money (liquidity preference)
Money demand (liquidity preference) refers to the desire by individuals to hold wealth in cash or near cash form. Read More
Types of Money supply
Endogenous (Automatic) Money Supply. This is money supply which is determined by the level of economic activity. For example level of output, interest rates, etc. ... Read More
Money supply
This refers to the amount of money circulating in the economy at a given time. Read More
Determinants of money supply
Amount of money printed by the Central Bank (government). If the central bank prints more money, money supply increases, but if the central bank does ... Read More
Soft (Managed) currency.
Soft (Managed) currency. This is currency which is used only within the country and cannot be accepted in carrying out international transactions. For example Ugandan ... Read More
Convertible (Hard) currency
Convertible (Hard) currency. This is currency which can be exchanged for other currencies and it is internationally accepted in carrying out transactions. For example pounds, ... Read More
Foreign exchange reserves.
Foreign exchange reserves. This is foreign currency held by the country's central bank. Read More
Real money value (Value of money).
Real money value (Value of money). This refers to the amount of commodities a unit of money can purchase. This depends on the general price ... Read More
Nominal value of money.
Nominal value of money. This refers to the monetary (face) value of money. For example 2,000/=. Read More
Broad money.
Broad money. This is the sum of currency in circulation, demand deposits, savings and time deposits. Read More
Narrow money.
Narrow money. This is currency circulating in the economy plus demand deposits (demand deposits is money deposited on current accounts). Read More
Dear money.
Dear money. This is money borrowed at very high interest rates. Read More
Quasi (Near) money
Quasi (Near) money. This is money which can easily be converted into cash. For example cheques, postal orders etc. Read More
Hot money.
Hot money. This is money in liquid or cash form. Read More
Fiduciary issue
Fiduciary issue. This is the money issued by the central bank which is not fully backed by gold reserves (foreign exchange reserves) but by government ... Read More
Flat money
Flat money. This is money issued on the directive of the government irrespective of the level of economic activity. Read More
Commodity money
Commodity money. This is money in terms of the value of commodities. For example beads, tobacco, cowry shells etc. Read More
Intrinsic money.
Intrinsic money. This is money whose metal value is equal to its face value. That is, it is money in terms of metal value. For ... Read More
Token money.
Token money. This is money whose metal value is less than the face value. For example, coins, paper money etc. Read More
Limitations (Problems/Defects) of Barter trade
It is not easy to establish the double coincidence of wants which satisfy both parties, that is, it is difficult to find one party who ... Read More
Barter trade
This is the exchange of commodities for commodities between individuals or countries. For barter trade to take place, it is necessary to have double coincidence ... Read More
Qualities (characteristics/features) of money
Relative scarcity. Money must be relatively scarce. This is because, if it is in plenty it loses value and fails to perform the useful role ... Read More
Functions/roles of money
Money is a unit of account. This means that it is used as a unit of value for carrying out calculations and accounting procedures so ... Read More
Money meaning
Money is anything which is legally acceptable for carrying out transactions and discharge of debts. To settle legal payments, money must be legal tender meaning ... Read More
11Negative role (implications) of Foreign Direct investments and Multinational Corporations in developing countries
They promote regional income inequalities in economy. This is because most of the production, and business activities of foreign investors are mainly concentrated in urban ... Read More
Economics Chapter 7: Choice of development strategy
Economic development process This refers to the accumulative improvement in the living standards of people characterized by the increase in the real income per capita ... Read More
10Measures (Strategies/Steps) taken to attract Foreign Direct Investments
Providing a favorable investment climate by the government. This is in form of providing tax holidays, subsidization, offering investment incentives, assisting foreign investors to ... Read More
8 Problems facing foreign direct investments in developing countries
Unfavorable government policies in form of high taxes, low taxes on imports, high interest rates on loans etc. This discourages foreign direct investments. High levels ... Read More
15The Role (Implications) of Foreign Direct investments and Multinational Corporations in developing countries
Positive roles (implications) They create employment opportunities. Foreign investors set up production activities and business enterprises like banks, hotels, industries etc. which provide employment to ... Read More
Foreign direct investments
Foreign direct investments refer to the transfer of capital and other productive resources from one country especially from a developed country and investing them in ... Read More
Multi-National corporations (MNCs)
Multi-National corporations (MNCs) are large scale overseas companies having their headquarter in their home countries with their investments extended in several countries both developed and ... Read More