Determinants of Investment : it has two forms….

In short form it is called Working Capital,,, while in long form

it is called Capital Budgeting …. Working capital means js ko short term k andar cash mai convert kar sakty hai, or jo
current assets par jo investment kia jata hai. That is short term investment….aur agar firm fixed assets par invest kar
rahi hai, fixed assets such as building plant, machinary etc jo long term k liyeh ho then it is called capital budgeting….

Investment to firm kar rahi hai. LEKIN Investment se pehly osy 2 factors par dehan dina parta hai.. ham kahi b paisy
lagaty hai to kuch na kuch soch k lagaty hai. K kahi ham paisa laga rahy hai. To os se hamy ketna faida hoga. Return
kitna hoga, los to nahi hoga. Risk kitna hai. Individual firm kisi b project par investment karna chahti hai to wo 2
factors ko dekhti hai.

1. Marginal Efficiency of Investment.: refers to expected rate of return from our additional investment.
Marginal ka matlab, Next Step ya additional…. Jab b koi firm additional investment kary gi. To osy ketna
return melyga. Ab investment se jetna apko return milta hai wo 2 cheezo par depend karta hai.
A) supply price : it is also called replacement price, suppose ham ney same type ki koi dosri machine kharidi hai,
Firms k pas jo machine thi wo porani hogai , firm ney onhey replace kia, to replace karny k liyeh kitni cost ai.
Ketna kharcha aya. That is supply price… so a cost of producing a new asset of same kind.
B) Prospective Yield: Matlab ek asset k pory life time mai ketna return, Mely ga. Net return expected from
capital asset over its life time. …. Jetna return ho ek machine ka 10 salo mai os sey deduct karty hai oski
lifetime cost se to hamara Prospective yield income ajata hai. Ye firm ki income hogi os ek machine sy…
MEI = Prospective Yield/ Supply Price x100 = Mei WILL BE IN PERCENTAGE.
2. Rate of Interest : Cost of Borrowing for financing the investment … Matlab jetna b firm borrow karti hai
investment k liyeh,, os par lagney wali interest ….Firm bht bari hoti hai, Resources limited hoty hai. Wo har
time invest nahi karti wo kabi kabi borrow b karti hai….
Rate of interest and Investment has inverse relationship. ROI agar ziada hogaya to firm investment kam kary
gi.

If MEI> ROI agar MEI ziada ho ROI se to ye profit hoga. Or firm investment os time karygi.. jab tak oski
MEI=ROI TO ES SURAT MAI FIRM INVESTMENT KARYGI…

Ref : Easy economics by rashmi Y.T…..

BALANCE OF PAYMENT : An accounting statement that provide a systematic record of all the economic transaction
between resident of a country and rest of the world in a given period of time.

Economic Transaction mai. Visible Items (Seen, touched) include Goods…. Invisible Item (not seen, not
touched, we can only feel) include services, which include banking, insurance…. Unilateral Transfer means one
sided transaction, Include Gift, Remittances,…. Capital Transfer include Borrowing or sale of assets

To sari expenses hamari debit side par ajati hai. Ek counry jo purchases karti hai..

Inflow mai sari receipt ajati hai. Jab ham sale karty hai bahir k mulko mai… to wo receipt mai BOP ki shakal mai
ajata hai.
Components of BOP: 1. Current Account 2. Capital Account

1. An account which records all the transactions relating to export and import of goods and services and
unilateral Transfers during a given period of time. It includes visible items, invisible items and unilateral
transfers and current account skip the capital transfer.

4 Income Receipt & payment to and from abroad.

Capital Account : records all those transactions between residents of a country and the rest of the world, which
cause a change in the assets or liabilities of the residents of country or its Govt.

Assets : if someone has individual ownership and Money value. Those things are assets

Components of Capital Account: 1. Borrowing and Lending from or to abroad. Ya to foreigners se loan lynge ya
denge. 2. Investment To and From aborad: 3: Change in Foreign Exchange reserve./: yaha ka paisa bahar k banks mai
hai. Ya foreigners ka paisa hamary banks mai hai. Foreign exchange reserve mean. Foreign currency accept domestic
currency. When Inflow is more then outflow then it is called surplus …. When outflow is more then inflow then it is
deficit…

Investment To and from abroad: it has two types : 1. Foreign Direct Investment (FDI) .2. Portfolio Investment (PI)

1 Foreign Country yaha Pakistan mai investment karti hai , apne naam sy or control b wahi log karty hai.,,,,

2. Foreing Country to invest kar rahi or osy sirf investment se matlab hai. Baki jo control ya ownership ho wo
Pakistani hoga.Only paisa lagati hai Foreigners

Current account show change in Current Level of Country’s Income while capital account shows change in capital
stock of a country
Autonomous Item: wo transaction jo profit k liye kiye jaty hai.wo profit motive hoty hai… those
international economic transactions, which takes place due to profit maximization. Like exports and
imports of goods…. receipt and repayment of long term loan…. So autonomous item includes both Current
and Capital Account… autonomous item also known as above the line items…

Accommodating Items : Transactions that are undertaken to cover deficit or Surplus in autonomous Transactions.
accomodation transactin esliye karty hai k BOP balance ajaye. In accommodating Items we can only include
Capital Account transactions..it is also known as below the line items..Borrowings and selling of assets capital
account mai jata hai..

BALANCE OF TRADE: It is difference between the amount of export and imports of visible items (Goods) … Export
of goods --- Imports of Goods

BOP CAN BE YANI BOP KA RESULT.