Functions of Central Bank

Functions of Central Bank Central bank is an important organization for any country. It performs traditional and developmental role to accomplish macro-economic objectives. This includes currency issuance, regulation of liquidity, supervision of banks and secondary markets, exchange rate management, balance of payment, establishment and development of financial institutions.

Central bank is the center of banking system of any country and has sole authority to control and regulate the supply of money. Central bank controls the supply of money by keeping the welfare of people in mind as primary object. Functions of central bank are discussed in detail below. Monopoly over Issuing Currency 

The primary function of central banks is to issue money in the country. Central bank issue currency notes by following certain regulations enforced by the state. There are different requirements which central bank need to fulfill for this purpose, one important prerequisite is keeping reserve against issued money.

 Some important advantages for this sole authority are: -

Credit creation by commercial banks can be checked and controlled by central bank. - Central Bank has the confidence of people as it has the government backing and recognition. - As the sole authority of issuing currency there is uniformity in the country’s currency. - Government can use this sole authority for the best interest of people.

 Government Agent and Advisor It acts as the government bank and agent, to collect and pay transactions on behalf of the government. Central bank has a detail record of all monetary issues and present in good position to advise government for monetary, banking and financial issues.

 Bankers Bank It is the bank for all commercial banks and monitor and control all commercial banks by its regulations. Commercial banks keep reserves with central bank as a requirement. Central bank also helps commercial banks in their daily business life by providing loans, security to cash reserves and gives them advice on financial and economic issues.

 Clearing House Another important function central bank does for commercial banks is acting as a clearing house for settle all the bill and checks drawn one another.

 Lender of the Last Resort Central bank helps commercial banks when they face any crisis, central bank come to rescue by advancing loans and bailout packages.

 Credit Control Credit Control becomes an emerging vital function of Central Banks. Although monitoring and controlling credit been always a function of central banks but as the technology grew and use of plastic and e-transaction is becoming more common there are many sensitive monetary issues arises. Central Banks take quantitative and qualitative methods for credit control such as bank rate, open market operation and moral situations etc.

 Financial Agent Central bank works as government agent for foreign exchange and gold transactions.

Functions of Money

Money performs four specific functions, each of which overcomes the difficulties of barter. The functions of money are to serve as: 1.Unit of value, 2. Medium of exchange, 3. Standard of deferred payments and 4. Store of value.

Money as a Unit of Value The first function of money is to be a unit of value or a unit of account. The monetary unit is the unit in terms of which the value of all goods and services is measured and expressed. The value of each good or service is expressed as a price, which is the number of monetary units for which the good or service can be exchanged. If the price of a pen is Rs. 10 then a pen can be had in exchange for ten monetary units (where the monetary unit in this case is the rupee). Measuring values in monetary units helps in measuring the exchange values of commodities. If a pen is worth Rs. 10 and a notebook is worth Rs.20 then a notebook is worth two pens. Further, accounting is simplified, as all items will be recorded in terms of monetary units that can be added and subtracted. Money is a useful measuring rod of value only if the value of money itself remains constant. This is similar to saying that a scale is a useful measure of length only if the length of the scale itself is constant. The value of money is linked to its purchasing power. Purchasing power is the inverse of the average or general level of prices as measured by the consumer price index etc. As the general price level increases, a unit of money can purchase a lesser amount of goods and services - so the value or purchasing power of money declines. So, money will be a useful unit of value only as long as its own value or purchasing power remains constant. Money as a Medium of Exchange Money also acts as a medium of exchange or as a medium of payments. This function of money is served by anything that is generally accepted by people in exchange for goods and services. 'Anything' has been quite a variety of things across places and times. Some of the things that have served as money are - clay, cowry shells, tortoise shells, cattle, pigs, horses, sheep, tea, tobacco, wool, salt, wine, boats, iron, copper, brass, silver, gold, bronze, nickel, paper, leather, playing cards, debts of individuals, debts of banks, debts of governments, etc. Money will then reduce the time and energy spent in barter. The person who owned a cow can now simply sell it to the person who offers the most money for it and then buy the bullock cart from another person who offers him the best bargain. Ultimately, all trade may be considered barter - one good or service is traded for another good or service -either directly, or indirectly with money acting as the intermediary. However, by acting as an intermediary, money increases the ease of trade. Money is also called a bearer of options or generalised purchasing power. This indicates the freedom of choice that the use of money offers. The owner of the cow need not procure goods and services from those to whom he sold his cow. He can use the money to buy the things he wants most, from those who offer him the best bargain (not necessarily those who bought his cow), at the time he considers most advantageous (not necessarily immediately). Again, this function can only be performed properly if the value of money remains constant. Money as a Standard of Deferred Payments If money performs the previous two functions then it may also perform the function of being the unit in terms of which deferred or future payments are stated. Examples of situations where future payments are to be made are pensions, principal and interest on debt, salaries etc. As long as money maintains a constant value through time, it will overcome the problems associated with making future payments with specific commodities. Money as a Store of Value If money becomes a unit of value and a means of payment then it may also perform the function of serving as a store of value. The holders of money are holders of generalised purchasing power that can be spent through time. They know that it will be accepted at any time for any good or service and is thus a store of value. This function will be performed well as long as money retains a constant purchasing power. It may be noted that any asset other than money may also perform the function of store of value, for example, bonds, land, houses, etc. These assets have the advantage that, unlike money, they yield income and may appreciate in value over time. However, they are subject to the following: (1) they may involve storage costs, (2) they may not be liquid in the sense that they could not be quickly converted into money without loss of value, and (3) they may depreciate in value. A person may choose to store value in any form depending on considerations of income, safety and liquidity.

Written English Lesson Two: The Comma and the Full Stop

I love the comma and often tend to overuse it as you’ll see in this tutorial. However, too many commas can slow down your writing and make your clauses hiccup to a point of putting your reader off. Commas should indicate a very short pause, and in most writing courses, you’ll be told to write shorter snappier sentences, rather than long flowery ones with several associated clauses. The best way to know when to use a comma is to read your writing out loud and insert them in places where you pause (and intend for your reader to pause) naturally. Note: These tutorials are by no means definitive, all inclusive guides. They are meant to briefly instruct in the areas of language most often used for every-day writing. When to use a comma 1. Use a comma when you make a list. The ingredients for a good curry are monkeys, eyeballs, a bit of dust, a two-by-four piece of cardboard, a block of ice and some toothpaste. Read more in Grammar There is no comma after “ice” because “and” is usually replaced by the comma in lists. You have one or the other and don’t need both. Having said this, years ago I did some studies with an American tutor who insisted that I needed a comma before the “and.” Having had a British education and being UK trained to teach English, I found that strange as this was not something I was taught to do. 2. Use a comma before your quotation marks for direct speech. Michael said, “Oooh, I really do so love those high heels. Do they come in purple?” I’ve seen a full stop used after “said” in sentences with direct speech, but if you’re confused, just remember that “Michael said,” and his actual speech are put together to make one complete sentence. The words “Michael said” cannot by themselves make up a complete sentence, therefore, should not be followed by a full stop. 3. Use a comma to separate two or more adjectives which refer to a particular noun Her curries tend to be chewy, thick, cold and tasteless. The adjectives (describing words) referring to the curry are in fact lists. Like number one, they would require commas to separate them. 4. Use a comma when you put a phrase into a sentence to give more explanation. In order to make a sentence clearer, we sometimes add an explanatory phrase. When we use this trick in our writing, we must enclose this phrase in commas. For example, look at the sentence below. When he broke my purple stilettos I became very upset. We could make this sentence clearer to the reader and explain that the reason why I was so upset over my broken shoes, was because they were brand new. When he broke my purple stilettos, which were brand new, I became very upset. To test yourself to make sure you’ve put the commas in the right places, try taking out the enclosed phrase. If the sentence still makes complete sense (without this phrase) then you’ve done the right thing. We will deal with dashes and brackets (which are used in the same way as commas in most cases) in another lesson. As an aside, writing clear, concise sentences is admirable. Sometimes, however, this can become boring if it’s all you do. Add a bit of spice with a different approach. For example, use clauses and commas to add interest to your writing. Look at the sentences below. (a) Her daughter is very mature for her age. (b) Her daughter, a child born a week before her father’s death, is very mature for her age. The former is a fine, complete statement. The second is a sentence offering your reader a possible answer for the girl’s maturity, while leaving them wanting to read more by creating for them additional questions about the man’s death. 5. Use a comma with these conjunctions We can’t help but use conjunctions in our writing, as they are an integral part to expressing ourselves colourfully. I will not deal with conjunctions here as this is not a tutorial on parts of speech. However, I will mention four which we are all bound to use in everyday writing. They are: of course, however, therefore and nevertheless. (Note: most conjunctions – coordinating or subordinating – do not need commas). These tutorials, of course, are not all inclusive These tutorials will, however, give you a sound starting point to writing English correctly. You will, therefore, need to do further in-depth studies to advance in your work. You have, nevertheless, been given some good pointers on the use of commas. The Full Stop The full stop is probably the easiest punctuation mark to use, as it dictates the end of a thought/sentence and commands the longest pause. 1. Use a full stop to end a sentence As everyone knows, a full stop ends a sentence. A capital letter is then used to start a new sentence. 2. Use a full stop after an abbreviation When you use a full stop after an abbreviation, you do not need a capital letter to start the next word, unless, of course, it is a proper noun which naturally needs a capital letter. Here are some sentences to correct The answers are below for you to check how you’ve done. Note that one of these sentences needs no correction. 1. He was the man of her dreams dreams she had kept hidden from her closest friends. 2. Noah had three sons they were Shem Ham, and Japhet 3. She said to him. “You have nothing to worry about. I have done the packing made the reservations rented the car the cabin and the skis.” 4. My builder, who had arrived late, told me that his car had been stolen last night. 5. “You’ve got to be kidding” I said. “Men don’t wear high heel shoes” Answers 1. He was the man of her dreams, dreams she had kept hidden from her closest friends. (1 mistake). 2. Noah had three sons, they were Shem, Ham and Japhet. (4 mistakes – don’t forget the full stop at the end. Instead of a comma after “sons” a full stop can also be used. “T” in “they would then have to be capitalised). 3. She said to him, “You have nothing to worry about. I have done the packing, made the reservations, rented the car, the cabin and the skis.” (4 mistakes). 4. My builder, who had arrived late, told me that his car had been stolen last night. (Correct) 5. “You”ve got to be kidding,” I said. “Men don’t wear high heel shoes.” (2 mistakes).

Thomas Malthus: Theory of Population

Thomas Malthus: Theory of Population



Thomas Robert Malthus was a British economist and demographer, whose famous Theory of Population highlighted the potential dangers of overpopulation. In his famous An Essay on the Principles of Population, Malthus stated that while 'the populations of the world would increase in geometric proportions the food resources available for them would increase only in arithmetic proportions'. In simple words, if human population was allowed to increase in an uncontrolled way, then the number of people would increase at a faster rate than the food supply. A point would come when human population would reach the limit up to which food sources could support it. Any further increase would lead to population crash caused by natural phenomena like famine or disease.

The Theory
Malthus put forth his ideas in six editions of his famous treatise 'An Essay on the Principle of Population'. His thinking took shape under the influence of the optimistic ideas of his father and his friends mainly Rousseau, about future improvement of the society. In the first edition of his treatise, Malthus put forth his views that opposed the belief of scholars like Marquis de Condorcet and William Godwin who were optimistic about population growth in England. During the Industrial Revolution, England experienced a steep increase in its population. In his book The Enquirer, William Godwin promoted population growth as a means for human beings to attain equality. According to him, an increased population would create more wealth that would provide food for the whole humanity. Scholars of such school of thought believed that, both man and society could be made perfect. In contrast to this viewpoint, Malthus interpreted overpopulation as an evil that would reduce the amount of food available per person.

Malthus' theory was based on the assumption that the power of population is much greater than the power of the earth to provide subsistence for man. In his own words 'passion between the sexes is an inevitable phenomenon' hence, when unchecked, population would grow at such a high rate that it would outstrip food supply. According to Malthus, disease, food shortage and death due to starvation, were nature's way to control population. He proposed that human beings adopt measures like infanticide, abortion, delay in marriage and strict following of celibacy to check population growth.

According to him, human society could never be perfected. He believed that man is a lazy animal, who would lead a satisfied life and procreate as long as his family was well fed. However, as soon as human population would feel constraints in food supply due to increase in population, he would again work hard to provide enough for his family. This might lead to an increase in agricultural production to provide for all, but at the same time man would be back to his complacent stage, where all his needs would be fulfilled. This would start the cycle of overpopulation and food shortage, all over again. Having been a clergy, Malthus validated his theory on moral grounds that suffering was a way of making human beings realize the virtues of hard work and moral behavior. Such kind of suffering due to overpopulation and food supply was inevitable.

Impact
Malthus' theory had great influence on both Charles Darwin and Alfred Wallace, who are the co-founders of the modern evolutionary theory. In his own words Darwin acknowledged, that he was already aware of the 'struggle for existence' among different species of plants and animals. However, it was only after he read Malthus' work were he realized that animals in their struggle to survive, retained the favorable features that would help them adjust to the environment, and lost those that were of no use to them. Thus the Theory of Natural Selection was born.

By the end of the 19th Century, when living standards improved and birth rates dropped in the Western countries, concerns of overpopulation became irrelevant. However, in underdeveloped countries which have agrarian economies, Malthus' theory often finds credibility.

Criticism
Some critics of Malthus, like Karl Marx, argued that Malthus failed to recognize the potential of human population to increase food supply. Malthus is accused by many to have failed to comprehend man's ability to use science and technology to increase food supply to meet the needs of an increasing population.

Thinkers from the field of social sciences have criticized Malthus for his belief that the human society could never be made perfect. Malthus opposed all political, social and economic reforms that did not aim at controlling birth rate. His own methods of checking population growth was criticized as being impractical. Malthus was opposed to the Poor Laws popular in England, which provided relief to the people who qualified as poor under the laws. According to him, such charity would provide only short term relief to them and let the poor remain in their state of financial distress. This thought of Malthus, was viewed as misanthropic.

From his writings some have interpreted Malthus as a rigid and pessimistic individual. However, he is also viewed by some as a pragmatic thinker, who put a check on the unbridled enthusiasm of some who viewed increase in population as a means of progress.

Definitions of Economics

Definitions of Economics One of the earliest and most famous definitions of economics was that of Thomas Carlyle, who in the early 19th century termed it the "dismal science." According to a much-repeated (but erroneous) story, what Carlyle had noticed was the anti-utopian implications of economics. Many utopians, people who believe that a society of abundance without conflict is possible, believe that good results come from good motives and good motives lead to good results. Economists have always disputed this, and it was to the forceful statement of this disagreement by early economists such as Thomas Malthus and David Ricardo that Carlyle supposedly reacted.1 Another early definition, one which is perhaps more useful, is that of English economist W. Stanley Jevons who, in the late 19th century, wrote that economics was "the mechanics of utility and self interest." One can think of economics as the social science that explores the results of people acting on the basis of self-interest. There is more to man than self-interest, and the other social sciences--such as psychology, sociology, anthropology, and political science--attempt to tell us about those other dimensions of man. As you read further into these pages, you will see that the assumption of self-interest, that a person tries to do the best for himself with what he has, underlies virtually all of economic theory. At the turn of the century, Alfred Marshall's Principles of Economics was the most influential textbook in economics. Marshall defined economics as "a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of wellbeing. Thus it is on one side a study of wealth; and on the other, and more important side, a part of the study of man." Many other books of the period included in their definitions something about the "study of exchange and production." Definitions of this sort emphasize that the topics with which economics is most closely identified concern those processes involved in meeting man's material needs. Economists today do not use these definitions because the boundaries of economics have expanded since Marshall. Economists do more than study exchange and production, though exchange remains at the heart of economics. Most contemporary definitions of economics involve the notions of choice and scarcity. Perhaps the earliest of these is by Lionell Robbins in 1935: "Economics is a science which studies human behavior as a relationship between ends and scarce means which have alternative uses." Virtually all textbooks have definitions that are derived from this definition. Though the exact wording differs from author to author, the standard definition is something like this: "Economics is the social science that examines how people choose to use limited or scarce resources in attempting to satisfy their unlimited wants."

Written English 1: The Apostrophe

The apostrophe seems to be one of the hardest punctuation marks to get right. I’ve seen it used incorrectly all over the Internet and on public signposting. The thing that’s most surprising however, is when it’s incorrectly written in official letters. It is useful to understand that as long as you “get” the apostrophe, you’ll find that it is not as difficult as you once thought. These tutorials are by no means definitive, all-inclusive guides. They are meant to briefly instruct on the areas of language most often used for every-day writing. When is an apostrophe needed? 1. As a Contraction This is when it’s used to show that a letter has been omitted. For instance in the above sentence, ‘This is when it’s used to show that a letter has been omitted.’ This sentence could be written thus, ‘This is when it is used to show that a letter has been omitted.’ It’s is a contraction because the two words are used as one. The apostrophe is therefore placed between “t” and “s” because the letter “i” was omitted. In contrast, its in ‘The cat licked its paw,’ is never written with an apostrophe because it is NOT a contraction, but a pronoun (like her, his etc). Other contractions are don’t (do not), can’t (cannot) doesn’t (does not) I’m (I am) you’re (you are) etc. The best way to know if you’re using contractions correctly when you write is to say the words out loud. Here I’ve said out loud ‘you are’ so I am certain that “you” and “are” are two separate words. If I am therefore going to put them together, I’ll need an apostrophe where I’m leaving out the “a.” Keep in mind that contractions are mainly used for speech and informal writing. Don’t use them in CVs and other important documents. 2. To Show Ownership To show ownership, simply add an apostrophe then an “s.” The boy’s pencils, indicates the pencils that belong to the boy. My friend’s car, means the car which belongs to my friend. My daughter’s toys, tells us that the toys belong to my daughter. Now for the tricky bit: What do you do when you want to show ownership for lots of people? Say in the first sentence, that the pencils did not belong to one boy, but to three of them. You would write the sentence the same as above: ‘The boys pencils,’ then decide who the pencils belong to. In this case, they belong to three boys, so the apostrophe goes after the “s” to make the sentence look like this: The boys’ pencils – the pencils which belong to more than one boy. Or My friends’ car – the car which belongs to the brothers who are my friends. My daughters’ toys- toys belonging to my two daughters. And suppose the owner’s name already ends in “s.” When this is the case, the extra “s” is not needed. So using our sentences again, you would write: Charles’ pencils – the pencils belonging to Charles. James’ car – the car belonging to James. Rhys’ toys – the toys belonging to Rhys. For irregular nouns that do not take “s” for their plurals like “child,” “man” and “woman.” This is not difficult, it just needs a bit more thought. However, when you get it, you’ll wonder why you found it hard to begin with. Say the pencils were owned not by three boys, but by two girls and one boy – the children. How do we write this? The “pencils belonging to the children” becomes, “The children’s pencils.” (Note that the “s” does not go after the “n” because there is no such word as “childrens.” The apostrophised word always has to make sense). The car belonging to two men becomes, “The men’s car.” As we said before, just add an apostrophe then add “s.” 3. Apostrophes Are Not Used For the Following: Plurals Plurals are just more than one of a particular item. So “bag’s for sale” (a sign I saw on the front of a shop) was incorrect. Apostrophes are not needed just because a word ends in “s” or is a plural form of a noun. Abbreviations Words like CDs DVDs CVs, etc., are all abbreviations which is why they’re written in capital letters. Putting an “s” after the letters simply implies that you mean lots of them (plural). It does not mean that they are contractions, therefore they do not need apostrophes. The 1900s or the 90s are other written examples of where an “s” is used to denote plurality and does not need an apostrophe. The Pronoun “its” For instance – the dog is chasing her tail is the same (in this case) as the dog is chasing its tail. No apostrophe is needed for “her,” so no apostrophe is needed for “its.” (If you did apostrophise its, it would be like putting an apostrophe on her). Your sentence would then read, ‘The dog is chasing it is tail.’ Here are 6 sentences for you to correct. One of them needs no correction. The answers are at the end for you to check how you did. I cleared out my house last week and got rid of some of my DVD’s. I only kept the ones’ I bought last year as theyv’e got the tunes I listen to most. He slept in his childrens’ bedroom because they were away at camp. The lion had caught a small stone in its paw, and it had to be drugged to enable its keeper to get it out. Her bag’s and shoes all got wet because of the flood which hit her village during last nights storm. The boys’ bike was broken, so he asked his Dad to fix it. My sister does’nt think she can make it tonight. Shes’ got to work instead. Answers: I cleared out my house last week and got rid of some of my DVDs. I only kept the ones I bought last year as they’ve got the tunes I listen to most. (3 mistakes) He slept in his children’s bedroom because they were away at camp. (1 mistake) The lion had caught a small stone in its paw, and it had to be drugged to enable its keeper to get it out. (Correct) Her bags and shoes all got wet because of the flood which hit her village during last night’s storm. (2 mistakes) The boy’s bike was broken, so he asked his Dad to fix it. (1 mistake). My sister doesn’t think she can make it tonight. She’s got to work instead. (2 mistakes).

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Accounting concepts and conventions

Accounting concepts and conventions In drawing up accounting statements, whether they are external "financial accounts" or internally-focused "management accounts", a clear objective has to be that the accounts fairly reflect the true "substance" of the business and the results of its operation. The theory of accounting has, therefore, developed the concept of a "true and fair view". The true and fair view is applied in ensuring and assessing whether accounts do indeed portray accurately the business' activities. To support the application of the "true and fair view", accounting has adopted certain concepts and conventions which help to ensure that accounting information is presented accurately and consistently. Accounting Conventions The most commonly encountered convention is the "historical cost convention". This requires transactions to be recorded at the price ruling at the time, and for assets to be valued at their original cost. Under the "historical cost convention", therefore, no account is taken of changing prices in the economy. The other conventions you will encounter in a set of accounts can be summarised as follows: Monetary measurement Accountants do not account for items unless they can be quantified in monetary terms. Items that are not accounted for (unless someone is prepared to pay something for them) include things like workforce skill, morale, market leadership, brand recognition, quality of management etc. Separate Entity This convention seeks to ensure that private transactions and matters relating to the owners of a business are segregated from transactions that relate to the business. Realisation With this convention, accounts recognise transactions (and any profits arising from them) at the point of sale or transfer of legal ownership - rather than just when cash actually changes hands. For example, a company that makes a sale to a customer can recognise that sale when the transaction is legal - at the point of contract. The actual payment due from the customer may not arise until several weeks (or months) later - if the customer has been granted some credit terms. Materiality An important convention. As we can see from the application of accounting standards and accounting policies, the preparation of accounts involves a high degree of judgement. Where decisions are required about the appropriateness of a particular accounting judgement, the "materiality" convention suggests that this should only be an issue if the judgement is "significant" or "material" to a user of the accounts. The concept of "materiality" is an important issue for auditors of financial accounts. Accounting Concepts Four important accounting concepts underpin the preparation of any set of accounts: Going Concern Accountants assume, unless there is evidence to the contrary, that a company is not going broke. This has important implications for the valuation of assets and liabilities. Consistency Transactions and valuation methods are treated the same way from year to year, or period to period. Users of accounts can, therefore, make more meaningful comparisons of financial performance from year to year. Where accounting policies are changed, companies are required to disclose this fact and explain the impact of any change. Prudence Profits are not recognised until a sale has been completed. In addition, a cautious view is taken for future problems and costs of the business (the are "provided for" in the accounts" as soon as their is a reasonable chance that such costs will be incurred in the future. Matching (or "Accruals") Income should be properly "matched" with the expenses of a given accounting period. Key Characteristics of Accounting Information There is general agreement that, before it can be regarded as useful in satisfying the needs of various user groups, accounting information should satisfy the following criteria: Criteria What it means for the preparation of accounting information Understandability This implies the expression, with clarity, of accounting information in such a way that it will be understandable to users - who are generally assumed to have a reasonable knowledge of business and economic activities Relevance This implies that, to be useful, accounting information must assist a user to form, confirm or maybe revise a view - usually in the context of making a decision (e.g. should I invest, should I lend money to this business? Should I work for this business?) Consistency This implies consistent treatment of similar items and application of accounting policies Comparability This implies the ability for users to be able to compare similar companies in the same industry group and to make comparisons of performance over time. Much of the work that goes into setting accounting standards is based around the need for comparability. Reliability This implies that the accounting information that is presented is truthful, accurate, complete (nothing significant missed out) and capable of being verified (e.g. by a potential investor). Objectivity This implies that accounting information is prepared and reported in a "neutral" way. In other words, it is not biased towards a particular user group or vested interest