Some Important Must Knows Related to Economics in the Insurance Sector

Dear Aspirants,

In order to appear successfully in the examinations conducted by the Insurance Sector, it is necessary to have a good knowledge of Economics. So, we have listed below some of the most important terms related to economics:

Absolute Poverty: Poverty defined with respect to an absolute material standard of living.Someone is absolutely poor if their income does not allow them to consume enough to purchase a minimum bundle of consumer goods and services (including shelter, food, and clothing). An alternative approach is to measure relative poverty.

Accelerator, Investment: Investment spending stimulates economic growth, which in turn stimulates further investment spending (as businesses enjoy stronger demand for their products).This positive feedback loop (investment causes growth which causes more investment) is called
the accelerator.

Allocative Efficiency: A neoclassical concept referring to the allocation of productive resources (capital, labour, etc.) in a manner which best maximizes the well-being (or “utility”) of
individuals.

Automatic Stabilizers: Government fiscal policies which have the effect of automatically moderating the cyclical ups and downs of capitalism. Examples include income taxes (which collect more or less taxes depending on the state of the economy) and unemployment insurance benefits (which automatically replace lost income for people who lose their jobs).

Balanced Budget: An annual budget (such as for a government) in which revenues perfectly offset expenditures, so that there is neither a deficit nor a surplus.

Balanced Budget Laws: Laws (usually passed by right-wing governments) which require governments to run balanced budgets regardless of the state of the overall economy. These laws have the negative effect of worsening economic downturns – since governments either must reduce spending or increase taxes during a recession, in order to offset the impact of the
recession on its budget, and those fiscal actions deepen the recession.

Market Economy : an economy that allocates resources through the decentralized decisions of many ﬁrms and households as they interact in markets for goods and services

Production possibilities curve : It is a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology.