A positive science only explains ‘what is’ and normative science tells ‘what ought to be’, i . e ., right or wrong of a thing. Positive economics is objective and thus akin to pure science. It explains the phenomenon under study with the help of a theory. It also predicts the impact of change in one economic variable to other interrelated variables. Thus, positive economics is related to the explanation of economic events as what they are. More strictly, positive economics operates by use of economic models, logically deduction, and statistical testing. Hence, positive economics deals with the questions such as: Why do doctors earn more than janitors (gatekeepers)? Does free trade raise or lower wages? What are the effects of higher taxes on cigarette? Normative economics, on the other hand, deals with ethical considerations and value judgments. In other words, normative economics involves ethical precepts (principles) and norms (standards) of fairness. Hence, it deals with the que...

There are various concepts among different economists regarding the nature of economics. Some argued that economics is directly analogous to science while others are of the view that it is an art. Any subject would be a science if it is objective; the subject matters are universally accepted and if there exist a relationship between cause and effect of a fact. In economics, there are various laws, such as, law of demand, law of supply, law of variable proportion etc., which successfully establish cause and effect relationship. In this sense, economics may be classified as a science. Any subject would be an art if it is related to the practical application of knowledge for achieving definite objectives. Economics helps us to prescribe ways and enables us to make policies in order to achieve certain desired goals, such as poverty alleviation, higher economic growth, economic stability, etc. In this view, economics is an art. Economics, on the one hand helps us to collect and analyz...

In order to solve various economic problems, economic policies are formulated. Behind these policies, there is an analytical framework of economic theory. Economic policy is equally important for both developed and developing countries. In developed countries, economic policy is important for maintaining and stabilizing already achieved growth, and for the proper distribution of wealth. Whereas, in developing countries, economic policy plays significant role in alleviating poverty, reducing unemployment and attaining higher growth. Economic analysis includes both micro and macro economic analysis in which economic events are studied on the basis of observed facts. Economic analysis provides the entire knowledge of the existing state of economic events. After having the full knowledge of existing situation of the subject under consideration, economic policy formulation becomes possible. Economic policy intends to attain specified goal in the future.

Money has become so much a part of our day to day activity that we have started to take it for granted. The complex economic system stands on the base of money because money is something which generally accepted as a medium of exchange. Before the existence of money in this world there was barter system; an economic system in which goods and services were directly exchanged with goods and services. Difficulties like; lack of double coincidence of wants, lack of divisibility, lack of store of value, lack of common measure of value, limited specialization etc. in the barter system induced people to find a better way of exchange and ultimately led to invention of money which remove all the shortcomings and made the economic system very fast and productive. The word money refers to that commodity which performs as the medium to exchange of goods and services, measuring value to factors of production, goods/services, common and useful means of credit transaction in business society and ...

The policy of safe guarding the domestic economy from international competition is known as protection policy. In other word, protection is the restriction on the import of goods and services from abroad and encouraging domestic industries to make their product in favorable position by providing subsidies or support prices.  Protection policy uses two types of instruments to protect domestic industries. Tariff barrier Under this, government imposes high custom duties on import of foreign goods. It will make foreign goods relatively expensive than that of domestic products and import declines and increases demand of domestic goods. Non-tariff barrier Under this policy, government control import applying the quota system exchange control, withdraw of subsidy and trade by government itself.

The policy of placing no restriction on the transaction of goods and services between countries is known as free trade policy. Free trade was propounded by classical economist Adam Smith. According to him, “Free trade is used to denote that system of commercial policy which draws no distinction between domestic and foreign commodities and therefore, neither imposes additional burdens on the latter nor grants any special favor to the former. Under free trade, a country imports all those goods that it can buy abroad at relatively low price than the domestic cost of production. And export all those goods that it can produce at relatively low cost than the cost of production abroad.

Bank in a very simple meaning is an institution that conducts financial related activities. It is called a departmental store of financial activities. According to history, banking was developed by goldsmiths. Banks have become a part of civilized society. Their services or functions have reached to each and every state of a modern society. Banking means the business of borrowing and lending money from the public and institution that repayable on demand, withdrawal by cheque, drafts etc Banks are classified according to its nature and function.  1.      Central Bank 2.      Commercial Bank 3.      Saving Bank 4.      Development Bank 5.      Exchange Bank 6.      Industrial Bank 7.      Investment Bank 8.      Rural Development Bank etc.

Money market is  a market for short-term loans in the sense that it provides money for working capital or circulatory capital.  It is  “collective name given to the various firms and institutions that deal in the various grades of near money.” Money market is an institution through which surplus funds move to the deficit areas so that temporary liquidity crisis can be tackled.  A well developed money market is good indicator of  central  banking operations. It enables the central bank to implement its monetary policy efficiently . There are number of tools of money market and the most important short-term instruments  are: inter-bank call money, short-notice deposits, Treasury Bills of ninety  days to a year, commercial  bills, certificate of deposits and commercial  paper.

The market dealing with long term financial transactions is known as capital market. Hence capital market is a market for long term loans.  According to Duddley and Luckett, “A capital market is just a market for capital funds. Strictly speaking, the capital market performs the transactions involving long term debt.” World Bank has defined the capital market as the market in which long term, financial instruments such as equity and bonds are traded. Hence in conclusion, capital market refers to the market having following features; ·   Capital market makes available funds for long term investment. ·   The maturity period of capital market is more than one year. ·   Capital market handles long term finance, deposits and loans. ·   The risks are higher in capital market because the maturity period is long. Anything may happen in the long run. ·   The sources of capital market are debentures, shares and government securities. ·   The capit...