CAIIB ABM Notes – Advanced Bank Management Short Notes Part 1
CAIIB 2022 Exams are conducted by IIBF. CAIIB is one of many the flagship courses offered by IIBF, twice a year. It is conducted in the months of June & December every year. This course of CAIIB 2022 has a total of 3 subjects out of which 2 are compulsory and ABM or Advanced Bank Management is one of the two & the 3rd one is elective.
Advanced Bank Management has 4 modules which are further divided into several units.
|Advanced Bank Management||
ABM SHORT NOTES:
MODULE – A – ECONOMIC ANALYSIS
UNIT – 1 – Fundamentals of Economics, Microeconomics & Macro Economics and Types of Economies
Definition of Scarcity: Economics is a social science, “the science that studies human behavior as a relationship between ends & scarce means that have alternative uses.” as given by Prof. Lionel Robbins it’s defined as the study of “means” and “Ends”. This definition is based on:
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- Man has unlimited wants
- The means to satisfy human wants are limited
- Resources are limited & also has alternative uses
- Man has to make a choice.
The essence of Economics: Its essence lies in acknowledging the reality of scarcity and then figuring out how to organize society in a way that makes the most efficient use of resources.
Definition of Wealth : Father of Modern Economics: Adam Smith. He is also known for his book ‘The Wealth of Nations published in 1776 that enquires into the Nature & Causes of the Nations’ Wealth.
As per Smith, “Economics is the study of how wealth is produced and consumed.”
Smith’s definition is known as Wealth Definition as it gives more importance to the wealth than to man for whose use wealth is produced. He is also considered to be the founder of the field of Micro Economics.
Welfare Definition: It has been coined by Prof. Alfred Marshal. He described Economics as a science of human welfare.
MICRO & MACRO ECONOMICS
- Micro Economics: Micro Economics is concerned with the individual behavior of entities such as markets, firms, and households.
- Macro Economics: It is a branch of economics that deals with the national or regional economy’s performance, structure & behavior as a whole and is concerned with the overall performance of the Economy.
- Founder of the field of Macro Economics: John Maynard Keynes. He wrote the book “General Theory of Employment, Interest, and Money”. He developed an analysis of causes of Business cycles.
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TYPES OF ECONOMIES:
- Market Economy/ Capitalistic Economy: Economy in which individuals & private firms make the major decisions about production and consumption. One example of a Capitalistic Economy is the United Kingdom.
- LAISSEZ-FAIRE Economy: It’s the Economy which is an extreme case of a Market Economy where the government doesn’t interfere in the economic decisions.
- Command Economy/Socialistic Economy: Economy in which the government makes all important decisions about production & distribution.
- Mixed Economy: It is the economy where the public sector, private sector, and joint sector coexist and complement each other. One good example is India itself.
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Unit – 2: Supply & Demand
Theory of Supply and Demand: This theory tells us how consumer preferences determine consumer demand for commodities or products, while the supply of commodities is determined by business costs.
Price & Quantity: The relationship that exists between price and quantity bought is known as the Demand Schedule. In the general case, the quantity demanded increases with the decrease in price. Thus, there is an inverse relationship between Quantity and Price.
Demand Curve: The graphical representation of the demand schedule is known as Demand Curve.
Law of Downward – sloping demand: When the commodity price is raised (other things being constant), buyers tend to buy less quantity of the commodity. Similarly, when the price is lowered, other things being constant, buyers tend to buy increased quantity.
Market Demand curve: This curve follows or obeys the Law of Downward- Slopping demand.
Factors that influence the Demand Curve are:
- Average levels of income
- Tastes or Preferences
- The size of the market/population
- The prices & availability of related goods
- Special Influences
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Supply Schedule: It relates the quantity supplied of a good to its market price, other things being constant.
Shifts in Supply: When there are changes in factors other than the price of goods that affect the quantity supplied it shifts the supply in the market.
Supply Schedule or Supply Curve: This curve explains the relationship between the market price and the amount of a commodity that the producers are willing to produce and sell, other things being constant.
Factors that influence the Demand Curve are:
- Prices of inputs and technological advances
- Cost of Production
- Government Policy
- Prices of related goods
- Special Factors like weather influence farming and agro-industry
Supply of commodity increases when the price of supply increases at each market price or vice-versa.
Equilibrium price & quantity: Supply & demand interact to produce an equilibrium price and quantity.
Market Equilibrium: It comes at that price & quantity where the supply and demand forces are in balance. In other words, the amount that buyers want to buy the commodity at is just equal to the amount that sellers are ready to sell. It is also called as the Market Clearing Price.
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