Economics Questions and Answers

Production possibility curve does not emphasized on unemployment of labour. It explain scarce of resources, economic development and inefficiency in the use of resources. The PPC is explained using the concept of scarcity, choice and opportunity cost.

The basic problem of every society arise as a result of scarcity i.e limited supply of resources since our wants are unlimited.

Fiscal policy is the use of government income and expenditure instrument to regulate or control the economy. It is used to control inflation, deflation, balance of payments deficits, economic recession, unemployment, price level, GNP etc. The two most important fiscal policy tools of government are: Government expenditure and Taxation.

Monetary policy refers to the policy taken by the Central Bank to control and regulate the supply of money with the public (economy). Examples are Open market operation, Bank rate, Cash reserve ratio etc.

Commercial bank is the bank organized to perform public utility banking services such as accepting deposits, lending of money etc. On the other hand, development bank refers to a multi-purpose financial undertaking set up to provide financial aid to the industrial and agricultural sector, to encourage development.

The difference is that raise funds from accepting deposit from the public while development banks borrow, grants and sells securities.