Phillips curve, network effect, theory of interest, employmentand

money, insolvency and bankruptcy code , inflation(low and high).

The Phillips curve is an economic concept developed by A. W. Phillips stating
that inflation and unemployment have a stable and inverse relationship. The
theory claims that with economic growth comes inflation, which in turn should
lead to more jobs and less unemployment. However, the original concept has
been somewhat disproven empirically due to the occurrence of stagflation in the
1970s, when there were high levels of both inflation and unemployment. he
concept behind the Phillips curve states the change in unemployment within an
economy has a predictable effect on price inflation. The inverse relationship
between unemployment and inflation is depicted as a downward sloping,
concave curve, with inflation on the Y-axis and unemployment on the X-axis.
Increasing inflation decreases unemployment, and vice versa. Alternatively, a
focus on decreasing unemployment also increases inflation, and vice versa.

A network effect (also called network externality or demand-side economies of scale) is the

effect described in economics and business that an additional user of a good or service has on
the value of that product to others. When a network effect is present, the value of a product or
service increases according to the number of others using it.[1]
The classic example is the telephone, where a greater number of users increases the value to each.
A positive externality is created when a telephone is purchased without its owner intending to create
value for other users, but does so regardless. Online social networks work similarly, with sites
like Twitter and Facebook increasing in value to each member as more users join.
The network effect can create a bandwagon effect as the network becomes more valuable and more
people join, resulting in a positive feedback loop.
The expression "network effect" is applied to positive network externalities as in the case of the
telephone. Negative network externalities can also occur, where more users make a product less
valuable, but they are more commonly referred to as "congestion" (as in traffic congestion or network
congestion).
Broadly, there are two kinds of networks effects:
Direct network effects
An increase in usage leads to a direct increase in value for other users. For example,
telephone systems, fax machines, and social networks all imply direct contact among users.
A direct network effect is called a same-side network effect. An example is online gamers
who benefit from participation of other gamers.
Indirect network effects
Increases in usage of one product or network spawn increases in the value of a
complementary product or network, which can in turn increase the value of the original.
Examples of complementary goods include software (such as an Office suite for operating
systems) and DVDs (for DVD players). This is also called a cross-side network effect.
Windows and Linux might compete not just for users, but for software developers.[6] Most
two-sided markets (or platform-mediated markets) are characterized by indirect network
effects.
 Additionally, there are two sources of economic value that are relevant when analyzing
products that display network effects:
Inherent value
I derive value from my use of the product
Network value
I derive value from other people's use of the product
Many web sites benefit from a network effect. One example is web marketplaces and exchanges.
For example, eBay would not be a particularly useful site if auctions were not competitive. However,
as the number of users grows on eBay, auctions grow more competitive, pushing up the prices of
bids on items. This makes it more worthwhile to sell on eBay and brings more sellers onto eBay,
which drives prices down again as this increases supply, while bringing more people onto eBay
because there are more things being sold that people want. Essentially, as the number of users of
eBay grows, prices fall and supply increases, and more and more people find the site to be useful.

Indian economy is underdeveloped and role of economic growth is

very slow. This slow growth fails to provide enough unemployment
opportunities to the increasing population.

(iii) Increase in Population:

Constant increase in population has been a big problem in India. It is
one of the main causes of unemployment. The rate of unemployment
is 11.1% in 10th Plan

(v) Joint Family System:

In big families having big business, many such persons will be
available who do not do any work and depend on the joint income of
the family.

The General Theory of Employment, Interest and Money of 1936 is the last and most
important[citation needed] book by the English economist John Maynard Keynes. It created a profound shift
in economic thought, giving macroeconomics a central place in economic theory and contributing
much of its terminology[1] – the "Keynesian Revolution". It had equally powerful consequences in
economic policy, being interpreted as providing theoretical support for government spending in
general, and for budgetary deficits, monetary intervention and counter-cyclical policies in particular.
It is pervaded with an air of mistrust for the rationality of free-market decision making.
Keynes denied that an economy would automatically adapt to provide full employment even in
equilibrium, and believed that the volatile and ungovernable psychology of markets would lead to
periodic booms and crises. The General Theory is a sustained attack on the classical
economics orthodoxy of its time. It introduced the concepts of the consumption function, the principle
of effective demand and liquidity preference, and gave new prominence to the multiplier and
the marginal efficiency of capital
eynesian economics is an economic theory of total spending in the economy and
its effects on output and inflation. Keynesian economics was developed by the
British economist John Maynard Keynes during the 1930s in an attempt to
understand the Great Depression. Keynes advocated for increased government
expenditures and lower taxes to stimulate demand and pull the global economy
out of the depression.

Subsequently, Keynesian economics was used to refer to the concept that

optimal economic performance could be achieved—and
economic slumps prevented—by influencing aggregate demand through activist
stabilization and economic intervention policies by the government. Keynesian
economics is considered a "demand-side" theory that focuses on changes in the
economy over the short run.

The Insolvency and Bankruptcy Code, 2016 (IBC) is the bankruptcy law of India which seeks to
consolidate the existing framework by creating a single law for insolvency and bankruptcy. Key
features[edit]
Insolvency Resolution : The Code outlines separate insolvency resolution processes for
individuals, companies and partnership firms.The process may be initiated by either the debtor or the
creditors. A maximum time limit, for completion of the insolvency resolution process,has been set for
corporates and individuals. For companies, the process will have to be completed in 180 days, which
may be extended by 90 days, if a majority of the creditors agree. For start ups (other than
partnership firms), small companies and other companies (with asset less than Rs. 1 crore),
resolution process would be completed within 90 days of initiation of request which may be extended
by 45 days.[10]
Insolvency regulator: The Code establishes the Insolvency and Bankruptcy Board of India, to
oversee the insolvency proceedings in the country and regulate the entities registered under it. The
Board will have 10 members, including representatives from the Ministries of Finance and Law, and
the Reserve Bank of India.[9]
Insolvency professionals: The insolvency process will be managed by licensed professionals.
These professionals will also control the assets of the debtor during the insolvency process. [9]
Bankruptcy and Insolvency Adjudicator: The Code proposes two separate tribunals to oversee
the process of insolvency resolution, for individuals and companies: (i) the National Company Law
Tribunal for Companies and Limited Liability Partnership firms; and (ii) the Debt Recovery Tribunal
for individuals and partnerships.

Contractionary Monetary Policy
One popular method of controlling inflation is through a contractionary monetary
policy. The goal of a contractionary policy is to reduce the money supply within an
economy by decreasing bond prices and increasing interest rates. This helps
reduce spending because when there is less money to go around, those who
have money want to keep it and save it, instead of spending it. It also means that
there is less available credit, which can also reduce spending. Reducing
spending is important during inflation because it helps halt economic growth and,
in turn, the rate of inflation.

There are three main tools to carry out a contractionary policy. The first is to increase interest
rates through the central bank, in the case of the U.S., that's the Federal Reserve. The Fed Funds
Rate is the rate at which banks borrow money from the government, but, in order to make
money, they must lend it at higher rates. So, when the Federal Reserve increases its interest rate,
banks have no choice but to increase their rates as well. When banks increase their rates, fewer
people want to borrow money because it costs more to do so while that money accrues at a
higher interest. So, spending drops, prices drop and inflation slows.

Volume 75%
 
Reserve Requirements 
The second tool is to increase reserve requirements on the amount of money
banks are legally required to keep on hand to cover withdrawals. The more
money banks are required to hold back, the less they have to lend to consumers.
If they have less to lend, consumers will borrow less, which will decrease
spending.

Reducing the Money Supply

The third method is to directly or indirectly reduce the money supply by enacting
policies that encourage reduction of the money supply. Two examples of this
include calling in debts that are owed to the government and increasing the
interest paid on bonds so that more investors will buy them. The latter policy
raises the exchange rate of the currency due to higher demand and, in turn,
increases imports and decreases exports. Both of these policies will reduce the
amount of money in circulation because the money will be going from banks,
companies and investors pockets and into the government’s pocket where it can
control what happens to it.

What Drives Inflation

There are a myriad of factors that can drive prices or inflation in an economy.
Typically inflation results from an increase in production costs or an increase in
demand for products and services.

Cost-Push Inflation
Cost-push inflation occurs when prices increase due to increases in production
costs, such as raw materials and wages. The demand for goods is unchanged
while the supply of goods declines due to the higher costs of production. As a
result, the added costs of production are passed onto consumers in the form of
higher prices for the finished goods.

One of the signs of possible cost-push inflation can be seen in rising commodity

prices such as oil and metals since they're major production inputs. For example,
if the price of copper rises, companies that use copper to make their products
might increase the prices of their goods. If the demand for the product is
independent of the demand for copper, the business will pass on the higher costs
of raw materials to consumers. The result is higher prices for consumers without
any change in demand for the products their consuming—cost-push inflation.

Wages also affect the cost of production and are typically the single biggest
expense for businesses. When the economy is performing well, and
the unemployment rate is low, shortages in labor or workers can occur.
Companies, in turn, increase wages to attract qualified candidates, causing
production costs to rise for the company. If the company raises prices due to the
rise in employee wages, cost-plus inflation occurs.

Natural disasters can also drive prices higher. For example, if a hurricane
destroys a crop such as corn, prices can rise across the economy since corn is
used in many products.

Demand-Pull Inflation
Demand-pull inflation can be caused by strong consumer demand for a product
or service. When there's a surge in demand for goods across an economy, prices
increase, and the result is demand-pull inflation. Consumer confidence tends to
be high when unemployment is low, and wages are rising—leading to more
spending. An economic expansion has a direct impact on the level of consumer
spending in an economy, which can lead to a high demand for products and
services.

As demand for a particular good or service increases, the available supply

decreases. When fewer items are available, consumers are willing to pay more to
obtain the item—as outlined in the economic principle of supply and demand.
The result is higher prices due to demand-pull inflation.

Companies also play a role in inflation, especially if they manufacture popular

products. A company can raise prices simply because consumers are willing to
pay the increased amount. Corporations also raise prices freely when the item for
sale is something consumers need for everyday existence, such as oil and gas.
However, it's the demand from consumers that provides the corporations with the
leverage to raise prices.
The housing market, for example, has seen its ups and downs over the years. If
homes are in demand because the economy is experiencing an expansion, home
prices will rise. The demand also impacts ancillary products and services that
support the housing industry. Construction products such as lumber and steel, as
well as the nails and rivets used in homes, might all see increases in demand
resulting from higher demand for homes.

Expansionary fiscal policy by governments can increase the amount of

discretionary income for both businesses and consumers. If a government cuts
taxes, businesses may spend it on capital improvements, employee
compensation, or new hiring. Consumers may purchase more goods as well. The
government could also stimulate the economy by increasing spending on
infrastructure projects. The result could be an increase in demand for goods and
services, leading to price increases.

Expansionary monetary policy by central banks can lower interest rates. Central
banks like the Federal Reserve can lower the cost for banks to lend, which allows
banks to lend more money to businesses and consumers. The increase in money
available throughout the economy leads to more spending and demand for goods
and services.

Who Benefits from Inflation?

While consumers experience little benefit from inflation, investors can enjoy a
boost if they hold assets in markets affected by inflation. For example, those who
are invested in energy companies might see a rise in their stock prices if energy
prices are rising.

Some companies reap the rewards of inflation if they can charge more for their
products as a result of a surge in demand for their goods. If the economy is
performing well and housing demand is high, home-building companies can
charge higher prices for selling homes. In other words, inflation can provide
businesses with pricing power and increase their profit margins. If profit
margins are rising, it means the prices that companies charge for their products
are increasing at a faster rate than increases in production costs.

Also, business owners can deliberately withhold supplies from the market,
allowing prices to rise to a favorable level. However, companies can also be hurt
by inflation if it's the result of a surge in production costs. Companies are at risk if
they're unable to pass on the higher costs to consumers through higher prices. If
foreign competition, for example, is unaffected by the production cost increases,
their prices wouldn't need to rise. As a result, U.S. companies might have to eat
the higher production costs, otherwise, risk losing customers to foreign-based
companies.
Why is inflation so low?

This is lahis is largely due to low prices of food items, particularly onions and potatoes,
and fuel. In fact, retail prices of food items actually fell by 2.51% reflecting the excess
production from India’s agricultural sector.
While lower food prices are obviously a welcome developmentfor consumers, they can
hurt rural incomes. Low food inflation directly translates into lower earnings fortheir
commodities despite having similar costs for their inputs, which can make it harder for
them to repay their debt. This means lower consumption from rural India, weak
economic growth.
Low inflation also hurts people other than farmers. If businesses can’t raise the prices of
their products, they can’t increase wages, which keeps income growth stagnant.
if inflation is too low it raises concerns about a country’sGDP growth trajectory. Low
inflation means less liquidity in equity and debt markets, which will cause investors to
steer clear. It will do this in order to spur aggregate demand and consumer/business
confidence by making loans cheaper. An increase in credit-fuelled consumption will
provide a boost to the prices of items and economic growth as wages and profits rise.