LAND UTILIZATION Land is a scarce resource, whose supply is fixed for all practical purposes. At the same time, the demand for land for various competing purposes is continuously increasing with the increase in human population and economic growth.Land use pattern at any given time is determined by several factors including size of human and livestock population, the demand pattern, the technology in use, the cultural traditions, the location and capability of land, institutional factors like ownership pattern and rights scale regulation. Major Types of Land Utilization in India : As in all other countries, land in India is put to various uses. The utilization of land depends upon physical factors like topography, soil and climate as well as upon human factors such as the density of population, duration of occupation of the area,land tenure and technical levels of the people.There are spatial and temporal difference in land utilization due to the continued interplay of phys...
Advantages and disadvantages of exchange rate system
Fixed exchange rate system
Merits
a)Market stability and mobility of capital :It ensures stability in the international money Market by eliminating risks relate to exchange rate variation. It promotes international mobility of capital.
b)Check on inflation:It implies an in- built check on inflation level because money supply is an important trigger factor of inflation. Also,high rate of inflation was a rarely occuring phenomenon under this system.
c)Growth of international trade:It offers an hospitable environment for growth of international trade. The traders can explore international markets for their products almost with asserted returns,involving minimum possible risk.
d)Stable MACROECONOMICS policies:The central bank can frame it's monetary policy and government can frame it's fiscal policy, independent of external shocks related to fluctuations in the exchange rate.
e) Automatic BoP adjustment : It is an automatic BOP adjustment mechanism. In the country, facing deficit BOP price level tends to fall while in the country facing surplus BOP price level tends to rise. Such a situation will cause a rise in exports of country facing deficit BOP and rise in imports facing surplus BOP. This process will continue till the surplus and deficit BOP wiped out .
Demerits
a)Huge reserves of gold:It requires huge reserves of gold.This is because different currencies are directly or indirectly convertible into gold.
b)Hinders movement of capital :Stability of market induces mobility of international capital . But at same time huge reserves of gold is a hindrance to the movement of capital due to which growth process in the global economy tends to suffer.
c)Discourages venture capital :Fixed exchange rate discouraged venture capital in the international market . Venture capital refers to investment in the purchase of foreign exchange in the internal money Market with a view to earn profits . Foreign exchange fails to develop as a commodity of Trade. International money Market is restricted largely to international payments of exports and imports.
d) Equilibrium rate:Exchange rate is fixed by the government due to which supply and demand force are not allowed to operate . Accordingly,exchange rate in international money Market may not be the equilibrium exchange rate. In the absence of an equilibrium exchange rate, allocation of resources in country nau not be optimum.
e)Reinforces recession and depression :Increase in money and supply is standard policy instrument to combat recession and depression in the economy . But ,under fixed exchange rate,supply of money canot be increased without proportionate increase in gold reserves.
f)Restricts economic growth :Supply of money must increase proportionate to increase in GDP.But scarcity of gold may not allow it. Accordingly, either GDP growth rate is hurt or the economy may slip in the cycle of depression or recession.
Flexible exchange rate system
Merits
a)Gold reserves not required:It does not requires reserves of gold. Because member countries are no longer using convert currencies.Accordingly , supply of gold is no longer a constraint relating to supply of money.
b)International capital mobility : As gold reserves are not required,there has been surge in internal capital mobility . This has led to integration of world economies.
c)venture capital :It promote venture capital in the foreign exchange market. Trading in international currencies itself has emerged as an important economic activity. This has led to expansion in business activity and growth of international money market.
d)Resource allocation:It enhances efficiency of resource allocation as it leads to equilibrium exchange rates of different currencies. Accordingly, allocation of resources is expected to become more and more efficient.
Demerits
a)Market instability:It causes instability in the market. Free markets often become volatile. Accordingly traders and investors are exposed to a high risk factor.
b)Policy formulation becomes difficult:It becomes difficult to draw long period policies of exports and imports ,because of instability in the market . Accordingly, investment in international trading is not stable.
c)Bilateral trade becomes difficult:Day to day fluctuation in exchange rate markets bilateral trade agreements a difficult excercise. This restricts the growth ig international trade.
d)Domestic economy vulnerable to external shocks:Flexible exchange rate system has enhanced integration of world economies. But it has also enhanced vulnerability of domestic economy to external shocks. For instance inflation in Indian economy is often triggered by rising crude oil prices in international money Market.
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