An  exchange-rate regime  is the way an authority manages its currency in relation to other currencies and the foreign exchange market. It is closely related to monetary policy Exchange rate is defined as the price of a nation’s currency in terms of another (foreign) currency. In another word an exchange rate is the unit of domestic currency necessary to give up to get one unit of foreign currency. There are two types of exchange rate: Fixed and Flexible. Flexible Exchange Rate Flexible exchange rate also called as a floating exchange rate is such an exchange rate which is determined by market forces. It is the exchange rate determined by demand for foreign currency and supply of the foreign currency in currency market. Floating rates are the most common exchange rate regime today. For example, the dollar, euro,   yen, and   British pound   all are floating currencies with Nepalese rupee. However, since central banks frequently intervene to a...

The   balance of payments   (BOP) of a country is the record of all economic transactions between the residents of a country and the rest of the world in a particular period (a year). These transactions are made by individuals, firms and government bodies. Thus the balance of payments includes all external visible and non-visible transactions of a country during a given period, usually a year. It represents a summation of country's current demand and supply of the claims on foreign currencies and of foreign claims on its currency. ‘Balance of Payments’ is a term that is used to refer to an accounting record for all the monetary transactions conducted by a country with other countries within a specified period of time, usually one year. Balance of Payments is actually a numerical summary of all international transactions, and is preferably presented in the country’s domestic currency. In a balance of payments document, exports are recorded as positive items, due to the fact tha...

In today’s world, all countries import some goods and services from other countries, and they also export certain other goods and services which are surplus in their country.  A ‘balance of trade (BOT)’ is a relationship between the country’s imports and exports, in monetary value. Hence Balance of Trade (exchange) is the difference between the value of goods and services exported out of a country and the value of goods and services imported into the country. If a country has a balance of trade deficit, it imports more than it exports, and if it has a balance of trade surplus, it exports more than it imports. A country is said to be experiencing positive balance of trade, or surplus, if the value of its exports exceed the value of its imports. Conversely, a country is said to be in deficit, or to be having a negative balance of trade (exchange), if the value of its imports is higher than the value of its exports. Countries always tries to have a positive balance of trade. The balan...

Various economists have suggested different indicators for the measurement of economic development. The major indicators of economic development are as follows Gross National Product (GNP) Some economists have considered GNP as the indicator of economic development. According to this criterion, economic development refers to the increase in the production of an economy over a long period of time. That is, economic development can be measured in terms of an increase in the economy’s real national income over a long period of time. However, the major drawback of this indicator is that it does not take into account the changes in the population growth. It also does not include the equity aspect of development. Per Capita Income (PCI) Per Capita Income is another indicator of economic development. According to this indicator, economic development is the process whereby the real per capita increases over a long period of time. Therefore, for the economic development, growth rate of inco...

The origins of modern development economics are often traced to the need for, and likely problems with the industrialization of eastern Europe in the aftermath of World War II. The key authors are  Paul Rosenstein-Rodan,   Kurt Mandelbaum  and  Ragnar Nurkse . Only after the war did economists turn their concerns towards Asia, Africa and Latin America. At the heart of these studies, by authors such as  Simon Kuznets  and  W. Arthur Lewis  was  an analysis of not only economic growth but also structural transformation.

Development Economics  is a branch of economics which deals with  economic aspects of the development process  in low-income countries. Its focus is not only on methods of promoting economic growth and structural change but also on improving the potential for the mass of the population, for example, through health and education and workplace conditions, whether through public or private channels. Thus, development economics involves  the creation of theories and methods that aid in the determination of types of policies and practices and can be implemented at either the domestic or international level. This may involve restructuring market incentives or using mathematical methods like inter-temporal optimization for project analysis, or it may involve a mixture of quantitative and qualitative methods.Unlike in many other fields of economics, approaches in development economics may  incorporate social and political factors  to devise particular plans.

Economic Growth Economic Growth   is defined as the long term increase in per capita income of people of a nation. Hence, it is an increase in a country's real level of national output because of an increase in the quantity of resources, increase in the quality of resources, improvements in   technology   etc. which increases the value of goods and services produced by every sector of the economy. In a nutshell, the increase in productivity of an economy is called as an Economic Growth. Economic Growth is measured by an increase in a country's   GDP (Gross Domestic Product) and a country's GDP is the total monetary value of the goods and services produced by that country over a specific period of time. Economic Development Economic development   is defined as the long term increase in living standard of people of a nation. Hence, it is a normative concept i.e. it applies in the context of   people's   sense of   morality   (right and wro...

Economic development  has been defined in various ways. Generally, it refers to the  economic well being  of a nation. Economic development is the process whereby  the real per capita income of a country increases over a long period of time  subject to stipulations that  the number of people below an absolute poverty line does not increase , and that  the distribution of income does not become more unequal . In fact, economic development means  a sustainable increase in the standard of living .  Therefore, it refers not only to increase in per capita income but also the alleviation of poverty and reducing the gap between the rich and the poor. Moreover, it also incorporates other social issues such as,  education, health, freedom , rights   as well as  environmental protection .

Economic growth  is the increase in value of the goods and services produced by an economy. It is conventionally measured as  the percent rate of increase in real gross domestic product , or real GDP.  Growth is usually calculated in real terms , i.e. inflation-adjusted terms, in order to net out the effect of inflation on the price of the goods and services produced. In economics, " economic growth" or "economic growth theory " typically refers to  growth of potential output , i.e., production at "full employment," which is caused by growth in aggregate demand or observed output. As an area of study, economic growth is generally distinguished from development economics. The former is primarily the study of how rich countries can advance their economies. The latter is the study of how poor countries can catch up with rich ones. Economic growth is measured as the annual percent change of gross domestic product (GDP).

John Maynard Keynes published a book entitled ‘ The General Theory of Employment, Interest, and Money’  in 1936. This book established the theoretical bases of modern macroeconomic analysis, often referred to as ‘Keynesian economics’. As “macro” suggests, this is a level of analysis that looks at the performance of the economy as a Whole—the Big Picture—with particular attention to Business Cycles, Inflation, Unemployment and Economic Growth. Moreover, macroeconomics is designed to guide government demand management policies. Macroeconomics is the branch of economics that deals with the relationships of large aggregates in order to analyze the performance of the national economy as a whole. The Keynesian approach emphasizes the need for sustaining levels of total or aggregate demand adequate for the full employment of productive capacity. The policy tools of demand management are used to promote economic growth, reduce inflation and unemploym...