Edition 1 May 2023

AMITY INTERNATIONAL SCHOOL, SECTOR 43, GURUGRAM

A PUBLICATION OF THE ECONOMICS CLUB

Message from The Chairperson

We believe that education should not only teach how to make a living but
also " how to live".
Indians have the potential of being the best in the world. For them to be
successful, their talents need to be nurtured. I feel proud of all those
students who are aspiring for admission into the prime institutions of the
country for building up a successful career. We, at Amity, realise and
applaud your guts to dream, as we know that it takes much more than a
dream to approach the daunting. So, we try to give our best so as to help
you realise your dreams. All of us at Amity Institute for Competitive
Examinations pray for your success at every stage of your life.
My blessings are always with you.
Dr. (Mrs.) Amita Chauhan

Message from The Principal

In the words of a leading 19th century economist, Alfred Marshall,
“Economics is the study of mankind in the ordinary business of life”.
This provides us the essence of Economics which is to understand the
human behaviour as an interrelation between resources and wants.
The knowledge of the subject teaches how to evaluate alternatives
and make better choices which in turn develops critical thinking and
problem-solving skills. An understanding of the subject helps the
young learners to understand how decisions are made, how markets
work, how wealth is created and how economic forces drive social
systems. Sound knowledge of Economics equips a learner to take
right decisions that eventually translates into success in work and in
Dr. Anshu Arora
life. I congratulate the dedicated team behind this newsletter who have
meticulously planned it and aim to inculcate an interest in Economics
among the young learners.
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 Message from The Economics and Commerce Department

The word 'Economics' is derived from two Greek words, 'eco' meaning home and 'nomos' meaning
account, which refers to household management. Whereas at present the dimensions of economics
are dynamic and includes all aspect of socio-economic factors.

What is Economics?
Economics is the study of scarcity and its implications for the use of resources, production of goods
and services, growth of production and welfare over time, and a great variety of other complex
issues of vital concern to society.
The subject of Economics helps an individual to delve deep into understanding the ever-changing
world of businesses.
The newsletter is a step taken by our students to ignite the spark of inquisitiveness and inspire our
students to gain knowledge about the Indian as well as the world economy.
Wishing the team success in this endeavour.

Mrs. Mandira Ganguly, Mr. Prakash Singh Negi, Mrs. Rupali Virmani & Mrs. Manisha Sandhu

Message from the Founder

What is Economics? & President of the club

Welcome to the inaugural edition of

Economics is the study of scarcity and Musings on Economics and Finance.
its implications for the use of We will write thoughtful and well
resources, production of goods and researched articles highlighting the
services, growth of production and importance of Economics in our
welfare over time, and a great variety everyday life.
of other complex issues of vital
concern to society. The goal of the magazine is to bring
awareness to the field of economics
through serious discussions and
some humor as well.

Mansha Rapria
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 CONTENT:

Economics in Our Lives

1. Factors of the Economy (Page 4)

1.1 Becoming a Stock Investor Guru (Page 6)

1.2 Famous Economics Theories (Page 7)

2. Identify the famous Economist! (Page 10)

3. Current State of Indian Economy (Page 11)

4. The Economics impact of Covid Pandemic Globally (Page 14)

5. Hilarious Economic Jokes (Page 16)

6. Crossword (Page 17)

7. The Use of Economics and Finance in our Everyday Life (Page 18)

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 Article: Factors of the Economy (By Mansha Rapria)

In describing the diverse facets constituting an economy wholly, a multitude of pivotal

economic factors are instrumental. These indicators offer a glimpse into an economic
system's general welfare, efficiency, and consistency. A quintet of consequential economic
variables customarily implemented to characterize an economy encompass the gross
domestic product (GDP), the rate of inflation, the unemployment rate, interest rates, and
fiscal deficits (Lipsey and Chrystal, 2011).

The GDP is an economic indicator of substantial influence, measuring the aggregated

fiscal worth of all commodities fabricated and amenities proffered within a nation’s
geographical borders during a particular duration, annually for the most part (Lipsey and
Chrystal, 2011). Encompassing the outputs of miscellaneous spheres, inclusive of
agriculture, manufacturing, and services. It is a crucial contraption for gauging economic
growth. It is an indicator of the aggregate health and enactment of an economy is it. It
helps assist in policymaking, investing, and by economic entities to gauge the economy’s
magnitude, monitoring its progress transversely over time, and comparing it to other
countries. By scrutinizing the GDP, economists can pinpoint tendencies, patterns, and
potential areas of amelioration within an economy, enabling well-informed decision-
making and policy formation.

The rate of inflation of products and amenities over time is an important financial
variable (Lipsey and Chrystal, 2011). This is because it evaluates the aggregate surge in
charges of merchandise and facilities over a distinct time period. It acts as a fundamental
marker of the acquisition of capital. It imparts insight into the proportion at which the
survival expense fluctuates inside a system. When the inflation percentage is elevated, it can
drastically reduce the value of money as time passes, as prices outmatch wage expansion.

This may decrease consumers’ purchasing power, as they are forced to pay more for the
same goods and services. High inflation can also spawn uncertainty and rattle economic
stability, impacting enterprises, investments, and economies. Central banks and policymakers
carefully scrutinize and regulate inflation to uphold price constancy and promote viable
economic augmentation.

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The rate of unemployment can also illuminate the abundance or rarity of job openings
in a financial system (Lipsey and Chrystal, 2011). This affords perceptiveness into the
aggregate vitality of trade. The aggregate unemployed discloses the degree of openings. It
also indicates the prosperity or privation in commercial spheres, offering a glimpse into the
holistic well-being of the roles and responsibilities domain.

Interest rates determine the cost of borrowing money and the return on savings (Lipsey
and Chrystal, 2011). They influence consumption and investment decisions by individuals and
businesses. Lower interest rates generally encourage borrowing and stimulate economic
activity, while higher rates can have the opposite effect.

The fiscal deficit represents the difference between a government's spending and its
revenue from taxes and other sources (Lipsey and Chrystal, 2011). This delineates the degree to
which expenditures trump income acquired via taxes and other avenues. A high fiscal
deficiency can provoke lending at elevated rates and potentially detrimental consequences
exemplified by cost-of-living increases or interest rates.

References: -Lipsey, R. and Chrystal, A., 2011. Economics. Oxford University

Press.

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Becoming a Stock Investor Guru

Two stocks have the same expected return. One has standard deviation of
returns of 20%, and the other has standard deviation of returns of 30%. The
correlation between their returns is 50%. How do I allocate money between
these so as to minimize my risk?

Ans. Let 𝜎1=0.20,𝜎2=0.30,𝑎𝑛𝑑 𝜌=0.50 be the standard deviations and

correlation, respectively. Let w be the weight put into stock 1. The portfolio
variance is just 𝜎=𝑤2𝜎2+(1+𝑤)2𝜎2212+2𝑤(1−𝑤)𝜎1𝜎2𝜌. Differentiate this with
respect to w to get

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Famous Economics Theories

1. Supply and Demand

Supply and demand is a theory in microeconomics that offers an economic model for price
determination. This theory states that the unit price for a good or service may vary until it
settles at a point of economic equilibrium, or when the quantity at which consumers
demand a good equals the quantity at which a consumer supplies it.
For example, as the supply of a good or service decreases and consumer demand persists,
the price of it may skyrocket—in this case, the demand is greater than the supply.

2. Classical Economics
Classical economics is an area of thought established by early economists and political
thinkers Adam Smith, John Stuart Mill and others. The primary theory of classical
economics states that market economies are, by definition, self-regulating systems that are
ruled by the laws of production and exchange.
With this basis, Smith also introduced the invisible hand, a metaphorical concept and
justification for free markets that implies individuals acting within their own self-interests
generate social benefits and the public good.

3. Keynesian Economics
Keynesian economics consists of multiple macroeconomic theories and models that offer
explanations for how aggregate demand—the entirety of an economy's spending—impacts
phenomena like economic output and inflation.

The central idea of Keynesian thought is that aggregate demand doesn't inherently equate
of the productive capacity of an economy, but rather that a variety of factors, both public
and private, determine it. With this, Keynesian economical methods support a system
which fluctuations in aggregate demand can lead to changes in employment and output,
but not prices.

4. Malthusian Economics
Malthusian economics refers to the idea that, while population growth may be exponential,
the growth of food supply and the supply of other resources is linear. This theory states that
when a population grows over time and outpaces a society's ability to produce resources, its
standard of living may reduce and trigger a large depopulation event.
With this, Malthusian economics supports population control efforts to avoid unchecked
growth rates. Various schools of thought have largely discredited Malthusianism as it relates
to agricultural production, but discourse around environmental degradation, resource
depletion and scarcity persists.

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 5 . Marxism
Marxism is a type of socioeconomic theory that interprets capitalism's impacts on an
economy's development, labor and productivity. This theory posits that a capitalist society
comprises two socioeconomic classes—the bourgeoisie, or the ruling class, and the
proletariat, or the working class. In Marxism, the bourgeoisie controls the means of
productions and the proletariat owns the labor that produces economic goods with value.
With this, the bourgeoisie's motivation lies in deriving the most work from the proletariat
while paying the least amount possible in wages, creating an exploitative economic balance.
Marxist economists argue that this inequality may lead to revolution.

6. Laissez-faire Capitalism
Laissez-faire is a theory of free-market capitalism directly opposed to government
intervention such as regulation, subsidies, minimum wages, trade restrictions and corporate
taxes. This theory states that economic prosperity is more obtainable in systems that
governments "leave alone"—the direct translation of the French term laissez-faire.
Economists that adhere to this theory argue that economic competition instills self
regulation that doesn't necessitate federal involvement. Laissez-faire capitalists promote this
theory as a pathway in achieving economic prosperity, but it provides no inherent protection
for vulnerable populations.

7. Market Socialism
Market socialism, often called liberal socialism, is a theory that proposes the creation of an
economic system that incorporates elements from both socialist planning and free
enterprise. In a market socialist system, capital is owned cooperatively, but market forces
define production and exchange rather than government oversight. Different market
socialist models direct the profit generated by socially owned firms toward varying channels,
such as employee remuneration, public financing or a social dividend.

8. Monetarism
Monetarism is a macroeconomic theory that promotes the idea that governments can
achieve economic stability by controlling monetary supply. The key principle of monetarism
is that the total amount of money circulating in an economy is the main factor that
determines its growth.

Monetarism greatly relies upon the quantity theory of money, a concept that also exists as a
part of Keynesian economics, which posits that money supply (M), multiplied by velocity (V)
—the rate at which an economy exchanges money each year—equals its nominal
expenditures. Therefore, the money supply is a determinant of employment, inflation and
production rates.
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9 . Tragedy of the Commons
The tragedy of the commons is a theory that explains an economic problem relating to
the consumption of resources and the over-exploitation of resources unregulated by
formal governing bodies. This theory states that individuals who have unrestricted access
to a resource are likely to act within their own self-interest and, through collective action,
may deplete the resource in its entirety.
For such a problem to occur, a resource must be scarce by nature. This theory has
contributed to discourses surrounding sustainable development practices,
environmental protection and regulation of open-access resources, such as fisheries and
forests.

10. New Growth Theory

New growth theory states that human desire drives perpetually increasing rates of
productivity and continued economic growth. A key idea behind new growth theory is the
assumption that competition flattens profit and forces people to seek better, more
efficient methods of doing things to maximize their potential to earn profit. Therefore, this
theory centers on entrepreneurship, knowledge, innovation and technological
advancement as the impetuses behind economic growth.

11. Moral Hazard Theory

A moral hazard is an economic phenomenon observed throughout systems in history in

which parties enter contracts in bad faith. Moral hazards often occur when an entity, such as
a corporation, increases its exposure to risk during a transaction to maximize profit because
the entity may not have to endure the consequences of taking on that risk.
In such a situation, the other party of the transaction typically bears the costs of that risk.
The term moral hazard originates from the idea that a party makes the previously described
decision to enjoy the highest level of benefit without moral considerations.

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 Identify the famous Economist!

He is an Indian economist and philosopher who, since 1972, has

taught and worked in the United Kingdom and the United States.
His name was given by Rabindranath Tagore. He has contributed to
welfare economics, social choice theory, economic and social justice,
economic theories of famines, decision theory, development
economics, public health, and measures of the well-being of
countries.
He is currently a Thomas W. Lamont University Professor and a
Professor of Economics and Philosophy at Harvard University. He
formerly served as Master of Trinity College at the University of
Cambridge. He was awarded the Nobel Memorial Prize in Economic
Sciences in 1998 and India's highest civilian honor, the Bharat Ratna,
the following year for his contribution to welfare economics. The
German Publishers and Booksellers Association awarded him the
2020 Peace Prize of the German Book Trade for his pioneering
scholarship addressing global justice issues and combating social
inequality in education and healthcare.

Ans - Amartya Sen

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Article: Current State of Indian Economy (By Mansha Rapria)

The country’s outlook is positive but policymakers have to do more from risks arising from
global financial systems, sustained higher oil prices, higher retail and wholesale inflation, high
fiscal deficit incurred by the Indian government during pandemic and stay vigilant. Among
emerging nations, India has been among those with the least currency volatility since the
pandemic.

It was a roller-coaster ride for the Indian stock market in the financial year ended March 31,
2023 amid aggressive monetary policy stance by global central banks, high inflation, the
Russia-Ukraine war, and outflow from overseas funds. Still, Indian capital markets was the
second-best performer among the emerging markets in FY23 after South Africa. Equity
benchmarks of some countries, such as Russia, Indonesia, Singapore, Thailand, Hong Kong,
South Korea, and Taiwan, fell between 3% and 10% in FY23. The resilience in Indian equities
was thanks to the flows from domestic investors. Foreign investments in India for the April-
January period stood at $61.5 billion, down nearly 13% in the first ten months of FY 2023
compared to FY 2022.

Rating agencies have given the banking sector a stable outlook and projected gross non-
performing assets (GNPA) of the banking sector fell to 4.9 per cent of the total loan book by
March, 2023 from around 8.2 percent in March 2020. Banks have continued to strengthen
their financials by raising capital and adding to provision buffers. However, bank credit to the
commercial sector slowed down to 16.8% in the October-December 2022 period from a year
earlier. This compares with 17.2% seen in the previous quarter.

This essentially implies that businesses are not very hopeful of increased demand in the near
term. Besides, India’s foreign exchange reserves have increased 2.3 times since 2013, and the
country’s import cover of more than 18 months provides a cushion against unforeseen
external shocks. An important concern for the Indian economy is the high fiscal deficit
incurred by the Indian government during the pandemic and its impact on the rising debt. For
FY21, total debt jumped to 60.5% of GDP from 51.6% in FY20.

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The fiscal deficit for 2020-2021 was 9.3% of the GDP. According to most recent data,
country's external debt-to-GDP ratio in December FY22 stood at the same level as the
September quarter at 19.1 per cent. This was largely driven by the depreciation of the US
Dollars against other major currencies such as yen, euro and UK pound. However,
according to RBI, India’s total external debt is well within manageable limits.

For the current financial year, the government expects the deficit to be 5.9% of the GDP.
The pressure on the fiscal side in the absence of counterbalancing measures may impact
sovereign ratings, and lead to higher yields and borrowing costs. Rising debt servicing costs
could be a potential problem for the government and financial sector. However, India is
well-positioned with respect to reserves as well as the share of external debt and debt
denominated in dollars is low, which bolsters the country’s standing.

Despite being one of the world’s fastest growing economies, inflation remains a risk.
Headline retail inflation at 5.66% in March is just within RBI’s comfort zone (2% to 6%) as is
the core inflation indicating that the high inflation is moderating and is at its lowest level in
the last sixteen months. Furthermore, wholesale inflation eased further in March 2023 and
fell to a 29-month low of 1.34%, as per data released by the Ministry of Commerce & Industry.
India imports close to 85% of its domestic oil needs and any spike in oil prices has a
destabilizing effect on the economy. The domestic fuel inflation in March cooled sharply to
8.96% from 14.82% in Feb, while the WPI manufacturing inflation fell to -0.77% from 1.94% in
Feb. India witnessed a nearly 22 per cent increase in its import bill to $601.70 billion during
the ongoing financial year till January 2023 due to a sharp rise in crude oil imports.

Data showed that the country's crude oil import increased 43 per cent YoY to $178.4 billion
during the same period. In the last 10 years, India’s import bill also increased by 23 per cent
to $613.2 billion in FY22 from $489.1 billion in FY 12. While its current account balance has
improved noticeably since 2013, being in surplus for the first time in FY 2021 since 2003
(+0.9% GDP, it was -0.9%GDP in FY2020), the spike in commodity prices resulted in a deficit
of $18.2 billion or 2.2 per cent of GDP in the October to December quarter (Q3FY23) from 4.4
per cent of the GDP in the quarter ending September.

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If the higher commodity prices sustain, it could potentially lead to currency devaluation
which would further stoke inflation. However, commodity prices have recently started
trending down which augers
well for the Indian economy. Due to the sharp increase in interest rates and inflation in the
US, its central bank — the Federal Reserve — is in the fastest hiking cycle in its history. As a
consequence, India had to raise rates to remain an attractive destination for global investors.
It caused stiff competition for foreign capital resources from its Asian peers, where high
growth is expected to be associated with low inflation. This inevitably, led to capital outflows
and India will need stronger economic parameters to withstand the impending pressure
and would adversely impact its growth.

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 Article: The Economic Impact of Covid Pandemic Globally (By Mansha
Rapria)

The Covid Pandemic is without a doubt one of the biggest worldwide crises that have
happened this century. The epidemic shocked the world in many areas, impacting billions of
people's livelihoods worldwide. According to the United Nations' World Economic Situation
and Prospect (WESP), the economic sector was one of the most impacted internationally,
resulting in a loss of more than $8.5 trillion in global production two years following the
pandemic onset (United Nations, 2020). This article thoroughly examines the Covid
Pandemic's effects on the global economy.

The epidemic had both short-term and long-term effects on the world economy.
Resources that might have otherwise been utilized to foster economic growth were diverted
to the fight against the epidemic (Pu, Y et al, 2023). Governments responded to the epidemic
by implementing policies that increased expenditure in the health sector by, for example,
creating well-equipped facilities. In most countries, the pandemic's lasting effects may still
be felt today. The regulations put in place to stop the spread of illness made production
extremely low for one to two years.

The majority of companies, including restaurants, entertainment centers, and trade firms,
closed down, and people were told to work from home. Restrictions resulted in lower tax
receipts and more spending. Due to the financial strain, many nations, corporations, and
people were obliged to incur debt to survive. In emerging and established economies, the
epidemic caused the demise of several business organizations. Developing economies were
the most severely hit since they were ill equipped to handle the crisis.

Businesses throughout the world cut costs to stay afloat, which resulted in the termination
of several employees. Families suffered a significant blow since, according to a World Bank
study, 50% of families in developing and established countries could not maintain basic
consumption for longer than 90 days in the case of income losses. Most families and
businesses in developing countries had been in debt before the epidemic (World Bank, 2022).

The pandemic also contributed to rising inequality and poverty rates. An estimated 34.5
million people fell below severe poverty by 2020, according to United Nations research. The
report also predicted that the long-term effects of the pandemic's influence on the
economic sector will result in an extra 130 million people worldwide falling below the
severe poverty level by 2030. People with low skill levels and those making low incomes
are the most impacted. The pandemic resulted in a rise in inequality since highly skilled
occupations were the least affected.
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In conclusion, the Covid epidemic has significantly impacted the world economy.
Among other short- and long-term financial effects, the pandemic caused an increase in
poverty and inequality and the dissolution of several commercial groups. The effects of
the covid epidemic must be lessened globally, and this will take a lot of work.

The Covid Pandemic's economic consequences can be significantly reduced with the
support of effective legislation and the development of environmentally and economically
sound surroundings.

Reference List

Pu, Y., Xu, A., Wang, H. and Qian, F., 2023. Impact of the COVID-19 epidemic on medical

product imports from China from outbreak to stabilization: Monthly panel data

regression and instrumental variable test. Frontiers in Public Health, 11, p.1115650.

United Nations, 2020. COVID-19 to Slash Global Economic Output by $8.5 Trillion over

Next Two Years.

World Bank, 2022. World Development Report 2022: Finance for an equitable recovery.

The World Bank.

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 Hilarious Economics Jokes (By Nityam Varma)

1. Do you know about an economics student injured his neck by diving into a pool? He didn't
remember to seasonally adjust.
2. How many economists do you need to change a light bulb? You don't need any. If the light
bulb really had to change, the market forces would have already made it happen.

3. Why is the work of an economist and a plumber so similar in nature? Both of them handle
gross domestic product.

4. Who is an economist who sells imitation art called? E-con artist.

5. Why can't economists ever adopt a gluten-free diet? Their food choices tend to be sticky.

6. Which biblical character would have made a great economist? Noah, because while
everyone's stocks were in liquidation, his were afloat.

7. Why should you always try to order rare goods from economists? They can always supply
anything on demand.

8. Why did one man decide to become an economist after being a banker for 25 years? He lost
interest.

9. Why was the economist feeling so low about his banana bread failure? He was let down by
the deflation.

10. Who had the most success after inflation hit the market? Bouncy castles.

11. Why didn't the banker tell any of his friends a capitalism joke? They couldn't afford to get
it.
12. Why did one man only prefer writing in lowercase? He wasn't too fond of capitalism.

13. Why did the woman have to close her balloon business? It couldn't survive the cost of
inflation.

14. Why was the economist such a horrible painter? All of the paint in his paintings used to
trickle down.

15. What would happen if you ended up finding a refund receipt hidden in your economics
textbook? You would end up with a marginal benefit.

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 Crossword

Across
1.The amount of goods available to be sold.
4.Things people would like to have
5.The need or want for a good
7. work done for people
9.A person who buys things

Down
2. a person who makes things to sell
3.items that people buy or sell
4.money paid to workers
5. things people must have to live
6.money people earn for work.

1 2 needs
3
wants
4
supply
5 5
goods
6
wages
income
9 consumer
producer
demand
services

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The use of Economics and Finance in our everyday life (By Rupal )

Economics and finance have essential roles in our everyday life. They influence our
decision-making and how we do this, mostly related to finances. The first thing that is
influenced by economics and finance is budgeting. In our lives, we survive with a
budget, and we use economics and finance to manage finance. Economics helps us
understand the disposable income we are left with after paying all our expenses, and
finance helps us budget the disposable income. The budget that we create usually align
with our financial goal and priorities.

The other influence of economics and finance is purchasing decisions. In our life, we
tend to purchase different things, whether they are long-term or short-term items.
Economics influence our purchasing decision through the concept of supply and
demand and the product's pricing. We can compare different products in the market,
compare their quality and affordability, and make the purchase based on our budget.
Finance helps us to have a budget for what we want to purchase and ensure that we
purchase the product that is within our budget.

In life, we have to have savings and investments, which are influenced by economics and
finance. Finance and economics help us understand the different concepts used in saving
and investment, such as risks and return. It is important to consider the different risks that
are associated with investment and also consider the return. They also help us
understand diversification where one has to invest in different investments to help
diversify the risks(Drake, 2017).

One can make informed decisions with the knowledge of finance and economics about
saving for the future and retirement. Economics plays an essential role in students' career
choices since it provides them with insight into the labor market, salaries, and the
demand for jobs in the market. In career choice, students can consider the career that
meets their salaries expectation, the skills they are good at, and the industry's growth in
the future.

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The other way finance and economics influence our daily life is by making real estate
decisions. In life, we must consider the mortgage rates and the housing price in the
market before renting or buying a house. Finance will help us decide the best option
between a mortgage or purchasing the house since some of the mortgage rates seem so
high compared to the housing price in the market(Drake, 2017). The final way economics
and finance influence our decision is through risk management and insurance.

Understanding the risks and the probability of the risk occurring in our life helps us
understand how to manage the risk. The type of risks we will likely face helps us decide
the insurance policy we will use to protect ourselves against the risk. In deciding the
insurance to take, we have to consider different factors such as; the insurance coverage,
the requirement of the insurance, and the price of the insurance and compare it with
other insurance companies.

Reference
Drake, D. (2017, December 6). Exploring the Economics of Everyday Life. Wharton
Global Youth Program.
https://globalyouth.wharton.upenn.edu/articles/business/economics- everyday-life/

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 Compliments of the core team-

1. Mansha Rapria
2. Madhvendra Singh Chouhan
3. Rupal
4. Nityam Varma
5. Priyanshi Maheshwari
6. Avni Munjal

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