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Todays UPSC Fact to know

Foreign Direct Investment. It is investment directly into production in a country by a company located in another country either by buying a company in the target country or by expanding operations of an existing business in that country. FDI is done for many reasons including to take advantage of cheaper wages in the country, special investment privileges such as tax exemptions offered by the country as an incentive to gain tariff free access to the markets of the country or the region.

Overvalued Exchange Rate. An official exchange rate set at a level higher than its real or shadow value. Overvalued rates cheaper the real cost of imports while raising  the real cost of exports. They often lead to a need for exchange control.

Poverty Gap. The sum of the difference between the poverty line and actual income levels of all people living below that line.

Bill of Exchange. A written, dated, and signed three party instrument containing an unconditional order by a drawer that directs a drawee to pay a definite sum of money to a payee on demand or at a specified future date. Also known as a draft. It is the most commonly used financial instrument in international trade.

Capital Account. Part of a nation’s balance of payments that includes purchases and sales of assets, such as stocks, bonds, and lend. A nation has a capital account surplus when receipts from asset sales exceed payments for the country’s purchases of foreign assets. The sum of the capital and current accounts is the overall balance of payments.