Mod 7

• Banks


  Institutions that conduct business purely on profit motive
• Primary Functions of Banks

  • Accepting Deposits
  • Granting of Loans and Advances
• Savings Deposit


  Encourages saving habit among the public, low interest rate, withdrawals allowed with restrictions, suitable for salary and wage earners, can be single or joint name
• Fixed Deposit


  Lump sum amount deposited for a specific period, higher interest rate, withdrawals not allowed before expiry
• Current Deposit


  Operated by businessmen, freely allowed withdrawals, no interest paid, service charges, overdraft facility
• Recurring Deposit


  Operated by salaried persons and petty traders, periodic deposits, withdrawals allowed after a certain period, higher interest rate
• Types of Loans and Advances

  • Overdraft
  • Cash Credits
  • Loans
  • Discounting Bill of Exchange
• Secondary Functions of Banks

  • Agency Functions
  • General Utility Functions
• Agency Functions


  Bank acts as an agent of its customers such as trustees, executors, advisers and administrators
• Agency Functions


  • Transfer of Funds
  • Collection of Cheques
  • Periodic Payments
  • Portfolio Management
  • Periodic Collections
• General Utility Functions


  • Issue of Drafts and Letter of Credits
  • Locker Facility
  • Underwriting of Shares
  • Dealing in Foreign Exchange
  • Project Reports
  • Social Welfare Programs
• Corporations


  The most common form of business organizations, chartered by a state and given many legal rights as an entity separate from its owners, viewed as legal persons
• Corporations


  • Limited liability of its owners, issuance of shares of easily transferable stock, existence as a going concern
• Key Responsibilities and Functions of Corporations

  • Selecting a CEO
  • Providing Continuity
  • Managing Resources Effectively
  • Increasing Profits
  • Social Responsibilities
• Cooperatives


  Autonomous associations of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise
• Trade Unions


  Organizations based on membership of employees in various trades, occupations, and professions, whose major focus is the representation of its members at the workplace and in the wider society
• Functions of Trade Unions

  • Militant Functions
  • Fraternal Functions
  • Social Functions
  • Political Functions
• Reciprocity


  Exchange of goods or labor between individuals in a community
• Transfer


  Redistribution of income that is not matched by the actual exchange of goods and services
• Redistribution


  Combination of the features of transfer and reciprocity, where the economic exchange involves the collection of goods from members, the pooling of these goods, and then the redistribution of these goods among the same members
• Market system


  • Allows the free flow of goods between and among private individuals and firms with very limited participation from the government
• Invisible hand


  Integrates both the idea of self-interest and competition in the market place, which brings about a socially optimum result even in the absence of government intervention
• Market


  A mechanism and not necessarily a place that brings buyers and sellers together for the desired transaction
• Prices


  Serve as a signaling device to indicate the value of a good or service to both the buyers and the sellers and guide their actions on whether they should buy or not or supply more or less
• Specialization


  Critical to the market economy, allows for efficient production of goods and services
• Division of labor


  Human specialization, contributes to efficiency by taking advantage of the differences in every person's abilities
• Barter


  The traditional means of exchange, swapping of goods for goods
• Market transaction


  Involves parties who sell their goods and services in exchange for cash from consumers
• Free-market economy


  The price of a good or service is determined by the forces of supply and demand
• Minimum wage


  The below which no employer would allow paying their workers
• Taxes


  Compulsory contributions to government coffers, normally levied on the worker's income, business profits, and consumption of goods and services, to raise revenues for government spending
• Market and economic organizations

  • Corporate environmental users
  • Financial institutions such as banks
  • Corporations
  • Stock corporations
  • Nonstock corporations
  • Cooperatives
  • Trade or Labor Unions
• Civil society organizations


  • Academic and Science-Based Organizations
  • Mass Media
  • Religious Organizations
  • Nongovernmental Organizations
  • People's Organizations
• International organization


  An organization established by a treaty or other instrument governed by international law and possessing its own international legal personality
• Transnational advocacy group


  Self-organized advocacy groups undertaking voluntary actions across state borders in pursuit of what they deem the wider public interest
• Development agencies


  Formed as a response to crises like war damage and industrial decline, to stimulate economic development
• Academic and Science-Based Organizations – these include universities, schools, and colleges;

  private pooling firms; private think tanks and consultancy groups
• Mass media - newspapers, magazines, radio stations, television networks, film studios, publishing houses, music labels, etc.
• Cash Credits – The client is allowed cash credit up to a specific limit fixed in advance.
• Accepting Deposits – The bank collects deposits from the public.