Questions and Answers
What is the compound interest (CI) on Rs. 10,000 for 2 years at 10% per annum compounded annually?
If you invest Rs. 1,00,000 at an interest rate of 8% p.a. compounded annually, how many years will it take for the investment to double?
What is GDP?
Gross Domestic Product
The term 'economics' is derived from the ancient Greek word 'oikonomikos'.
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What does the term 'savings' refer to?
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The four factors of production are land, labor, _____, and entrepreneurship.
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Who is considered the father of modern economics?
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What is the primary aim of the Instructor workbook on Financial Education and Investment Awareness?
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Financial education is considered an essential life skill today.
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Who collaborates to create the course titled 'Financial Education and Investment Awareness'?
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The course 'Financial Education and Investment Awareness' is undertaken in the ______ of their UG program.
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What does the foreword emphasize about financial education?
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What type of course is 'Financial Education and Investment Awareness'?
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Who is the Executive Director of the Karnataka State Higher Education Council?
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The key financial statements include the income statement, balance sheet, and ______.
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Match the following components with their purposes:
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What is the formula for the compounded annual growth rate (CAGR)?
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What is the beginning value in the example provided for calculating CAGR?
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What is the end value in the given investment example?
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What is the number of years 'n' used for the CAGR calculation in the example?
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CAGR is the accepted standard measure of return on investment in financial markets for periods of less than one year.
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Which of the following is an example of a direct tax?
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Which of these is not considered a technological factor under macro-environment factors?
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The bank rate is the rate at which banks can borrow money from RBI without any collateral.
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Customs duty comes under which type of tax in India?
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What is Disposable Personal Income (DPI)?
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Which of the following factors is considered part of the macro-environment?
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Which of these is/are scheduled commercial bank(s)? (Select all that apply)
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In India, current accounts carry interest earning for balances maintained in these accounts.
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What is the purpose of Pradhan Mantri Jan-Dhan Yojana (PMJDY)?
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What are the two main types of deposits in banking?
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A bank is like a reservoir into which flow the savings of households and from which loans are given on _____ to businessmen.
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What is the primary role of banks in an economy?
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What does the Banking Regulation Act, 1949 define as a banking company?
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What are Fixed Deposit accounts also referred to as?
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What is included in cash from financial activities?
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What is the Accounting Equation?
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Match the following terms with their descriptions:
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Which of the following is a Current Asset?
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Tangible assets can be seen and touched.
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What is profit?
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What is the formula for Current Ratio?
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What does the Liquid Ratio assess?
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The excess of expense over income is called a ______.
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In which year was the RBI Act enacted?
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ATM stands for Any Time Money.
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An overdraft (OD) facility up to Rs. 10,000 is available to eligible account holders of PMJDY.
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What does CRR stand for?
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What does SLR stand for?
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What is the repo rate?
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What is the primary function of the Board for Financial Supervision (BFS)?
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The balance sheet formula is Assets = __________ + Shareholders’ Equity.
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What are the three key components of a cash flow statement?
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What does the profit and loss statement indicate?
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What is the role of the Reserve Bank of India as a banking regulator?
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Study Notes
Financial Education and Investment Awareness
- Financial education is recognized as an essential life skill that empowers individuals to make informed decisions regarding education financing, investments, and savings.
- It plays a crucial role in both individual microeconomic stability and broader macroeconomic development.
- The Karnataka State Higher Education Council has introduced a 2-credit course titled “Financial Education and Investment Awareness” as part of the National Education Policy (NEP2020).
- The course targets students in the second year of their undergraduate programs, aiming to build sound financial management skills.
Contributions and Overview
- Developed by a panel of academics and industry professionals to address financial skill gaps among students.
- The course includes practical content such as personal budgeting to encourage financial discipline.
- Acknowledgement of support from government stakeholders enhancing the significance of financial education in Karnataka.
Key Contents Covered
- Foundations for Finance: Basics of economics, banking in India, understanding financial statements, and financial planning.
- Investment Management: Investment products, objectives, risk profiles, and capital markets.
- Mutual Funds and Financial Planning: Introduction to mutual funds, criteria for selection, and financial planning essentials including personal budgeting and understanding the financial life cycle.
Structure of Financial Investments
- Investment involves goals, time frames, and various products like bank savings, government schemes, equity investments, and real estate.
- Understanding risk profiles is crucial, focusing on goals that can be growth, income, or hybrid.
- The asset allocation and diversification strategies are key elements in managing investment risk.
Banking and Financial Systems
- Overview of the Indian banking system, its functions, types of accounts, and the role of the Reserve Bank of India.
- Banking products include current, savings, and fixed deposit accounts, as well as digital payment systems.
Financial Statements and Planning
- Key financial statements include income statements, balance sheets, and cash flow statements emphasizing their structures and ratios.
- Financial planning entails setting goals, evaluating financial status, and implementing strategies for economic well-being.
Importance of Financial Literacy
- Financial literacy helps individuals navigate complex financial landscapes, leading to better personal budgeting and investment choices.
- Emphasizes a proactive approach where individuals adopt healthy financial habits and appreciate real-life financial concepts.### Key Economic Terms
- Income: Money received in exchange for labor, products, or investments. Types include wages, salaries, commissions, and investment returns.
- Expenditure: Spending on goods and services, important for both businesses (cost of operations) and individuals (basic living expenses).
- Savings: Unspent income after expenses, saved for future needs or emergencies, essential for financial security.
- Factors of Production: Resources necessary for producing goods/services, categorized into land, labor, capital, and entrepreneurship.
- Gross Domestic Product (GDP): Measures the economic output of a country, calculated using the formula GDP = C + G + I + NX (Consumption + Government Expenditure + Investments + Net Exports).
- Time Value of Money: Present money is more valuable than future money due to potential earnings from investments, highlighting the importance of cash flow timing.
- Compounding and Discounting: Compounding calculates future value of cash flows, while discounting determines present value, critical in finance.
- Taxation: Financial obligation from government, divided into direct taxes (e.g., income tax) and indirect taxes (e.g., Goods and Services Tax).
Introduction to Economics
- Etymology: Derived from Greek "oikonomikos," meaning managing a household.
- Adam Smith: Father of modern economics, known for "An Inquiry into the Nature and Causes of the Wealth of Nations" (1776).
- Definitions: Economics studies resource allocation among individuals and society, concerning production and distribution amidst scarcity.
Importance of Economic Understanding
- Understanding economic terms aids in making informed decisions regarding investments and savings.
- Economics tackles multiple concerns: production, employment, health, government spending, and environmental issues.
Income and Expenditure
- Types of Income: Include wages, salaries, interest, and governmental benefits.
- Expenditure Types: Revenue expenses (short-term, non-asset building like salaries) vs. capital expenses (long-term, asset building like machinery).
- Examples of household expenses: housing, utilities, taxes, education, health care, transportation, and entertainment.
Savings
- Savings = Income - Expenditure; essential for both personal goals and economic stability.
- Savings serve as a financial buffer and can yield returns when invested.
Factors of Production
- Land: Natural resources used in production.
- Labor: Human effort and input into goods/services.
- Capital: Produced goods facilitating further production (machines, technology).
- Entrepreneurship: Innovation and management combining other factors for profit generation.
Gross Domestic Product (GDP)
- Indicator of economic health, reflecting final goods/services produced within a time frame.
- Calculated primarily through expenditure method, capturing consumption, government, and investment activities.
Time Value of Money
- Present money's earning potential surpasses future sums.
- Key concepts include the preference for current consumption and the ability to invest for growth.
Compounding & Discounting, CAGR
- Compounding: Future value calculation of present cash flows.
- Discounting: Present value calculation for future cash flows.
- CAGR: Measures annual growth rate of an investment over time, important for assessing investment performance.
Taxation
- Distinction between direct taxes (charged on income) and indirect taxes (charged on goods/services).
- Direct taxes like income tax involve individual tax filings, while sellers are responsible for collecting indirect taxes like GST.
Factors Influencing Decision Making in Investments
- Macro factors: Interest rates, inflation, and socio-cultural conditions affecting all businesses.
- Micro factors: Individual desires, financial goals, and personal financial contexts impacting specific investment decisions.### External Factors Impacting Economy
- Businesses and governments cannot fully control external factors but can mitigate their impact through strategic decision-making.
- External environmental factors indirectly affect financial markets, sometimes leading to significant losses if no strategic action is taken.
- A favorable external environment offers profitable opportunities, influencing a country's economic development.
Demographic Factors
- Demographics include age, language, lifestyle, income distribution, and cultural differences.
- Financial literacy is influenced by demographic characteristics.
Technological Factors
- Technological advancements influence production and sales of goods/services.
- Key examples of technological factors include innovation, automation, and internet access.
Natural and Physical Factors
- Business performance is affected by geographical and ecological elements such as natural resource availability, climate change, and pollution.
Political and Legal Factors
- Government regulations impact businesses, covering aspects like employment laws, import/export laws, and health and safety regulations.
Social and Cultural Factors
- Businesses must be socially responsible and aware of socio-cultural factors like education, population growth, and consumer buying habits.
Economic Factors
- Macro-economic factors such as demand-supply, inflation, interest rates, and taxes significantly impact consumer buying decisions and investments.
Inflation
- Inflation is the rate of price increases over time, affecting purchasing power and savings.
- Major indicators of inflation in India include the Wholesale Price Index (WPI) and Consumer Price Index (CPI).
Interest Rates
- Interest is the cost of borrowing or the income earned from deposits.
- Factors influencing interest rates include money demand/supply, government borrowing, and Central Bank's monetary policy objectives.
- The Reserve Bank of India (RBI) regulates key rates like Cash Reserve Ratio (CRR) and Repo Rate.
Micro-Environment Factors
- Management has control over elements in the micro-environment, affecting companies differently based on size and strategy.
- Key micro-environment factors include customers, suppliers, competitors, and public perception.
Desire, Want, and Demand
- Desire is an individual's aspiration; want is a strong craving; demand reflects an ability to purchase at a specific price.
- These factors influence the amount of money available for savings and investments.
Disposable Personal Income (DPI)
- DPI is the amount available for spending or saving after taxes; higher DPI increases savings and investments potential.
Financial Goals & Their Timing
- Setting financial goals aids in managing savings and spending effectively, impacting personal financial planning.
Idiom Discussion
- "Money doesn't grow on trees" emphasizes the limited nature of money and encourages careful spending.
Definition of Banking
- Banking refers to accepting deposits for lending or investment, governed by the Banking Regulation Act, 1949 in India.
- A bank mobilizes savings and provides loans, essential for economic development.
Functions of Banks
- Banks mobilize savings, implement monetary policy, encourage industry growth, and reduce regional imbalances.
- Functions include accepting deposits, providing loans, facilitating payments, and offering modern digital payment services.
Types of Bank Deposits
- Deposits are categorized into Demand Deposits (withdrawable on demand) and Time Deposits (fixed duration).
- Types of demand deposits include Current Accounts and Savings Accounts, while Time Deposits refer to Fixed Deposits.
Scheduled Commercial Banks
- Scheduled commercial banks are included in the second schedule of the RBI Act, 1934, carrying out standard banking operations.
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Description
Test your knowledge on key concepts of economics and compound interest calculations. This quiz explores topics like GDP, savings, and the factors of production while challenging you with practical investment scenarios. Perfect for students studying economics or finance.
