All questions of Glossary of Economic and Financial Terms for UPSC CSE Exam

Understanding a Bear Market
A bear market refers to a market condition characterized by declining asset prices. This term is often used in the context of stock markets but can apply to any financial market, including bonds, commodities, and real estate. Here’s a detailed explanation of what a bear market entails:
Key Characteristics of a Bear Market
- Declining Prices: A bear market is typically defined as a period where asset prices fall by 20% or more from their recent highs. This decline often reflects a broader economic downturn or a loss of investor confidence.
- Investor Sentiment: During a bear market, investor sentiment is generally negative. Fear and uncertainty prevail as investors may anticipate further declines, leading to increased selling pressure.
- Duration: Bear markets can last for months or even years. The length and depth of a bear market can vary significantly, influenced by economic factors, interest rates, and geopolitical events.
Impact on Investors
- Investment Strategies: Investors may shift their strategies during bear markets, opting for safer assets or defensive stocks that are less susceptible to economic downturns.
- Market Recovery: Historically, bear markets are followed by recoveries, but the timing and strength of the rebound can be unpredictable.
Conclusion
In summary, option 'A' accurately describes a bear market as a market with declining asset prices. Understanding this concept is crucial for investors and analysts, as recognizing bear market conditions can help in making informed investment decisions.

Understanding Inflation
Inflation refers to the rate at which the general level of prices for goods and services rises, leading to a decrease in purchasing power. It is measured as an annual percentage change.

Key Characteristics of Inflation:
- Increase in General Price Level:
Inflation signifies that the average prices of goods and services in an economy are rising. This means that over time, each unit of currency buys fewer goods and services.
- Causes of Inflation:
- **Demand-Pull Inflation:** Occurs when demand for goods and services exceeds supply, leading to higher prices.
- **Cost-Push Inflation:** Happens when the costs of production increase (like wages and materials), prompting producers to raise prices to maintain profit margins.
- **Built-In Inflation:** Results from adaptive expectations, where businesses and workers expect prices to rise and adjust their behavior accordingly.
- Effects of Inflation:
- **Decreased Purchasing Power:** As prices rise, the value of money decreases, meaning consumers can buy less with the same amount of money.
- **Interest Rates:** Central banks may raise interest rates to control inflation, which can affect borrowing and spending.
- **Wage Adjustments:** Workers may demand higher wages to keep up with rising prices, which can contribute to a wage-price spiral.

Conclusion:
In summary, the correct answer is option 'C' because inflation is fundamentally defined as the increase in the general price level of goods and services in an economy over time. Understanding inflation is crucial for economic stability and personal financial planning.

Currency of Japan: An Overview
The correct answer to the currency of Japan is option B: Yen. Here’s a detailed explanation:
What is the Yen?
- The Yen (¥) is the official currency of Japan, established as a national currency in the late 19th century.
- It is abbreviated as JPY in international currency exchange.
Historical Background
- The Yen was introduced in 1871 as part of the Meiji Restoration, which aimed to modernize Japan's economy.
- It replaced the complex system of mon (coins) that had been used prior to its introduction.
Currency Symbol and Value
- The symbol for the Yen is ¥, and it is often used in financial contexts, both domestically and internationally.
- The value of the Yen fluctuates based on market conditions, economic policies, and trade balances.
Comparative Analysis
- The other options provided are currencies from different countries:
- Yuan: Currency of China (CNY).
- Won: Currency of South Korea (KRW).
- Euro: Currency used by many countries in the European Union (EUR).
- Each of these currencies serves a distinct economic region, whereas the Yen is specifically tied to the Japanese economy.
Conclusion
Understanding the Yen’s significance is crucial for anyone studying economics or international finance, especially in contexts related to Japan. The Yen plays a vital role in global markets and is one of the most traded currencies worldwide.