Indian Economy Quiz 7

Efficient allocation of resources is achieved to greatest extent under Perfect competition. Efficient allocation of resources is a property of an efficient market whereby all goods and services are optimally distributed among buyers in an economy. It occurs when parties are able to use the accurate and readily available data reflected in the market to make decisions about how to utilize their resources.

Gross domestic product is a monetary measure of the market value of all the final goods and services produced in a specific time period by countries.

The law of diminishing marginal returns is a theory in economics that predicts that after some optimal level of capacity is reached, adding an additional factor of production will actually result in smaller increases in output. According to modern thinking, the law of diminishing returns applies to all fields of production.

The product or value-added method is a way of computing the national income of a country. This system is also known as output or inventory method.

The process of capital formation includes increasing savings, mobilization of savings, and investment of saving in such a way that will increase the stock of real capital.

The economy is in equilibrium only when saving is equal to investment. If saving and investment are equal at a time, they will be soon brought into equilibrium by automatic changes in the rate of interest. Given the rate of investment, if saving increases, then the rate of interest will fall. With the decline in the rate of interest, investment demand will rise.

Dumping, in economics, is a kind of injuring pricing, especially in the context of international trade. It occurs when manufacturers export a product to another country at a price below the normal price with an injuring effect.

The balance of trade is the difference between the monetary value of a nation's exports and imports over a certain time period.

Opportunity cost is the value of the next best alternative forgone as a result of making a decision. When economists refer to the “opportunity cost” of a resource, they mean the value of the next-highest-valued alternative use of that resource.

Gross Domestic Product (GDP) measures the value of goods and services produced within a country's borders, by citizens and non-citizens alike. Gross National Product (GNP) measures the value of goods and services produced by only a country's citizens but both domestically and abroad. Hence, If the firm sells new shares directly to individuals it has no effect on the GDP or GNP.