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Showing posts from May, 2020

Discuss the measures to correct disequilibrium in Balance of Payment?

Discuss the measures to correct disequilibrium in Balance of Payment? 1- EXPORTS MUST BE PROMOTED AND IMPORTS RESTRICTED   If the exports have declined, appropriate steps should be taken to encourage them. For this purpose, the level of costs in the country should be brought down. This measure will help in cutting down of wages and interest rate and other income. 2- DEVALUATION OF THE HOME CURRENCY  Another effective measure is to devalue the external value of the home currency. This step will help in cheapening domestic goods for the foreign markets. As a result of the fall in the external value of the currency with respect to the foreign currencies, the price of the goods to be exported fall and the price of imports go up. This act encourages exports and discourages imports. 3- POLICY OF DEFLATION AND REDUCING PRICES   Since inflation or high prices in the country discourages exports and encourages imports, therefore, if steps are taken to check inflation and lower the prices i

Briefly explains the disequilibrium in the Balance of Payment?

Briefly explains the disequilibrium in the Balance of Payment? 1- NATURAL FACTOR   Natural calamities, such as accordance of drought or floods may easily cause disequilibrium in the balance of payment. 2- INFLATIONARY PRESSURE   An inflationary rise in prices within the country may also lead to disequilibrium in its balance of payments. The price of export items may go up thereby causing a decline in the volume of exports. 3- POLITICAL INSTABILITY   The political instability may cause a serious disequilibrium in the concerned country’s balance of payment. For the existence of this issue may result in disrupting the productive potential within the country, therefore causing a decline in export and an increase in import. 4- LARGE SCALE OF CAPITAL MOVEMENTS  The large scale of capital movements can also induce disequilibrium in the balance of payments of the concerned country. A large inflow of foreign capital into the country is said to follow a favorable balance of payment. 5- T

What do you about Balance of Trade and Balance of Payment

What do you about Balance of Trade and Balance of Payment? Every country has to import and export goods and services. Import is the buying from a foreign country and export refers to selling abroad. The difference between import and export bill of a nation during a given period is known as balance of Trade / balance of Payment. BALANCE OF TRADE Balance of Trade includes only flow of goods (visible items), ignoring services (invisible items) into or out of the country. Balance of Trade of a country will be positive or favorable it its exports exceed imports. The balance will be negative or unfavorable it its import bill is greater than export. BALANCE OF PAYMENT Balance of Payment is an income and expense account of a country during a given period. It includes all flow of goods, services (visible and invisible items), current account and capital account items.  It gives a complete and detailed account and record of all types of imports and exports in the light of which a nation form

CREDIT CONTROL - Difference Between Qualitative and Quantitative Methods of Credit Control

CREDIT CONTROL Central banks are the Controller of credit system in the country. It seeks to regulate the credit system in such a way as to encourage genuine and desirable economic activities and discourage reckless expansion of unproductive and undesirable credits. Fluctuations in the volume of credit, course fluctuates purchasing power of money, this fact has far-reaching economic and social consequences. That is why credit Cantrol has become important function of any Central Bank. According to Professor Richard Lipsy “The one true, but at the same time, all suffering Function of a Central bank is control of credit.” OBJECTIVES OF CREDIT CONTROL When the Central Bank sets out control, the expansion and contraction of the volume of money, its objectives may be narrow in scope or they may be comprehensive. • STABILITY OF INTERNAL – PRICE LEVEL The Commercial Bank creates credit because their main task is borrowing and leading. They create credit without any increase of cash with them

Function of State Bank of Pakistan & Function for Bankers

STATE BANK OF PAKISTAN INTRODUCTION: Every Country must have a state bank of Pakistan. The guiding principle of State bank of Pakistan is that it should act in the public interest and for the welfare of the country as a whole without regard to profit as a primary Consideration. It is a bank, which is responsible for the financial and economic stability of the country. Therefore government authorized it to formulate and implement the economic policies (monetary policy & fiscal policy), issue currency notes and store foreign reserves. Central bank of Pakistan name is state bank of Pakistan. HISTORY: As a result of partition of India, Pakistan came into being on 14th August. 1947. To run the financial affairs of the new-born country the governor general of India issued an order called Pakistan Monetary system and Reserve Bank Order, according to which Reserve Bank of India, the central bank of India, would undertake and manage the financial and currency system of Pakistan up to Sep

Difference Between Cheque And Promissory Note

DIFFERENCE B /W PROMISSORY NOTE & CHEQUE 1. It is an unconditional promise in writing.   2. It is drawn on the creditor. 3. it is either payable on demand or after a specified date  4. it cannot be crossed 5. Three days of grace can be allowed. 6. revenue stamp is mandatory Note: In Pakistan, revenue stamp is affixed just for an excise duty. CHEQUE It is an unconditional order in writing. It is drawn on the banker. It is always payable on demand.  It can be crossed No grace days are allowed A revenue stamp is not required. 

Difference between Cheque and Bill of Exchange

DIFFERENCE B /W CHEQUE AND BILL OF EXCHANGE BILL OF EXCHANGE 1. It can be drawn on an individual, institution, or banker. 2. It must be accepted by the drawee.. 3. It is payable on demand or after a specified period. 4. Three days of grace are allowed. . 5. It cannot be crossed. 6. In case of dishonor, a notice must be give. 7. Revenue stamp according to the value must be affixed. 8. Payment cannot be stopped 9. Dishonor requires noting and protesting. CHEQUE It is drawn on a banker only. It requires no acceptance It is always payable on demand No grace days can be allowed It can be crossed. No notice is required even it is dishonored. No revenue stamp is needed. Payment can be stopped. Noting and protesting are not required in the case of dishonor

Bill of Exchange Vs Promissory Note

DIFFERENCE B /W PROMISSORY NOTE AND BILL OF EXCHANGE BILL OF EXCHANGE  1. A bill involves three parties:  a. Drawer,  b. Drawee,  c. Payee 2. it is an unconditional order. 3. It must be accepted, or else it will not be valid. 4. The responsibility of the drawer is secondary and depends on dishonor. 5. Notice must be served in case of dishonor.  6. it may accepted conditionally.  7.It can be issued or drawn in sets.   8.The drawer/maker is the creditor.  PROMISSORY NOTE 1. There are only two parties to it:    a Maker, Drawer(Debtor)  or Promissory.    b Promisee Creditor, or Drawee  2. It is an unconditional promise 3. It requires no acceptance.  4.the responsibility of the drawer is primary and final 5.No notice is required in dishonor 6. It cannot be conditional in any case 7.It cannot be drawn in sets. 8.The drawer/maker is the debtor.

Promissory note - features & Kinds of Promissory note

INTRODUCTION : Promissory note is a credit instrument, which is used in business commonly; it is a written promise to pay a sum of money to the holder. In detail Promissory note is an unconditional promise by the borrower to return the borrowed money on a specified date to the lender. When it is drawn and signed by the borrower, it is handed over to lender as security. The bill of exchange Act 1882 defines promissory note as DEFINITION: “It is a written promise made by one person to another person to pay a certain amount of money on demand at the determinate date” SPECIMEN OF PROMISSORY NOTE Promissory Note Payable on Demand Rs. 2000 Karachi 5th December 2001 On demand I promise to pay to Mr. Ahmed or order the sum of Rupees two thousand only for value received. Stamp (Signature of M. Wahid across the stamp) FEATURES OF PROMISSORY NOTE According to the above definitions we find the following features of a promissory note, which are given below.  WRITTEN PROMISE : Promissory note is

Endorsement - Kind Of Endorsement

ENDORSEMENT The word endorsement has been driven from a Latin word “Endorse” means on the back. In other words: “It refers to writing of a person’s name on the back or face of a negotiable instrument or on a piece of paper attached to it for the purpose of transferring the property in the instrument. The endorsement must be unconditional and for the entire amount of the bill or cheque. The person negotiation the instrument is called an endorser and to whom it is transferred is called and endorsee”. KIND OF ENDORESMENT  GENERAL ENDORSEMENT: It is made without referring to any person. It is made simply by signing the name without naming the endorsee. SPECIAL ENDORSEMENT : When the endorser transfers the credit instrument to a particular person by naming him in the instrument it is known as a special endorsement. CONDITIONAL ENDORSEMENT : When endorsement is made along with a condition it is known as qualified or conditional endorsement.  RESTRICTIVE ENDORSEMENT : When an endor

Bill of Exchange - Kinds of Bill

BILL OF EXCHANGE INTRODUCTION: A bill of exchange is a credit instrument. Basically it is an unconditional written order of creditor (maker) for a debtor to pay either to him, or to his order, or to the holder an amount written on the bill. According to negotiable instrument act 1882 DEFINITION : “Bill of exchange is a credit instrument in writing containing an unconditional order, signed by the maker directing a certain person to pay on demand or at a fixed or determinable future time, a certain sum in money to pay him, or to his order, or to the holder of the instrument.” Rs. 20000 Karachi 5th December 2001 On demand pay Mr. Ahmed Wahid or order the sum of Rupees twenty thousand for value received. Stamp (Signature of Mr. Ahmed Imran  Across the stamp) PARTIES OF A BILL OF EXCHANGE  THE DRAWER (CREDITOR): The person who draws the bill and puts his signature on it is known as the drawer of the bill, Also known as “MAKER” of the bill. Basically he is creditor (receiver of the money)