Explanation : The Pearson correlation coefficient (also known as the Pearson product-moment correlation) is the degree of association between variables that are interval or ratio scaled. The Pearson correlation coefficient is insightful in its own right and also plays a
key role in advanced multivariate analysis procedures. The existence of a linear scatter is a prerequisite for the Pearson correlation
coefficient to be meaningful because it is designed only to capture the extent of linear association between variables. Two other key assumptions that must be met, especially for making statistical inferences based on the Pearson correlation coefficient, are the following: 1. The two variables have a bivariate normal distribution. In other words, the population is such that all units with a given value of one variable have values on the second variable that are normally distributed. 2. The variance of the normal distribution of one variable remains the same across all values of the second variable.
Explanation : There are three affiliates of the IBRD, viz., the International Development Association (IDA), the International Finance Corporation
(IFC) and the Multilateral Investment Guarantee Agency (MIGA). The IBRD, popularly known as World Bank, and it's three affiliates are collectively called the World Bank Group. International Development Association(IDA): The IDA was set up by a resolution of the IBRD adopted on 1st October 1959 which read: “Resolved that with respect to the question of creating International Development Association as an affiliate of the Bank, the Executive Directors, having regard to the views expressed by the Governors and considering the broad principles on which such an association should be established and all other aspects of the matter are requested to formulateExecutive Directors, having regard to the views expressed by the Governors and considering the broad principles on which such an association should be established and all other aspects of the matter, are requested to formulate articles of agreement of such an association for submission to the member governments of the Bank.” The IDA formally started its operations on November 8, 1960. It grants development loans more generously to the developing countries and its terms are more flexible than the loans advanced by the IBRD. It supplements the activities of the IBRD by granting loans on more liberal terms for projects which do not receive assistance from the Bank either because they do not carry the guarantee of the Government of the country concerned or they do not contribute directly and immediately to the productive capacity of the borrowing country. Not only that, the rate of interest charged by the IBRD being high and the period of repayment being short, an urgent need was felt for setting up a new international financing agency and this need was fulfilled by setting up the IDA. Since the terms of loans are very liberal, the IDA has been nicknamed as the ‘soft loan window’.
Explanation : Although a manager may try to be completely rational, yet the limitations of the availability of information, resources, intellect, and time influence his/her rationality. In the 1950s, Herbert Simon, an economist, propounded the concept of ‘bounded rationality’, which suggests that managers may not always be perfectly rational in their decision-making. Simon argued that managers, instead of
searching for the perfect or ideal decision, frequently settle for an alternative that will adequately serve their purpose. Simon termed this phenomenon as ‘satisficing’, which actually means that managers continue to search alternatives until they identify one an alternative that looks satisfactory or good enough under the given circumstances. The satisficing approach can be considered
appropriate when the cost of searching for a better alternative or delaying a decision exceeds the potential gain that is likely to
happen by adopting the effort to search for the best alternative. This behavior of a manager can best be described as limited rationality. A manager does not maximize the outcome of a decision by searching for all the possible alternatives and then choosing the best amongst them.
Explanation : The revealed comparative advantage (RCA)—also called the balassa index, after Balassa (1965)—is an index that shows the relative
advantage or disadvantage of a country in exporting a commodity as indicated by actual export patterns relative to those of all other
countries in the world. It is defined as follows: RCA = (Eij/Eiw)/(Ewj/Ewn) where Eij refers to exports of commodity j by
the country i; w is the set of countries, and n is the set of all commodities. A country has a revealed comparative advantage in
commodity j if the RCA is greater than 1 and a comparative disadvantage in commodity j if the RCA is less than 1. While the RCA is an indirect measurement of comparative advantage based on trade patterns that are actually revealed and observed in the trade data, the domestic resource cost (DRC) directly measures a country’s comparative advantage in an industry based on factor prices, the foundation
of comparative advantage.
Explanation : Technically, normal goods are those that are demanded in increasing quantities as consumers’ income rises. Clothing, household furniture, and automobiles are some of the important examples of this category of goods. The nature of relation between income and demand for the goods of this category is shown by the curve NG in Fig. As the curve shows, demand for such goods increases with the increase in income of the consumer, but at different rates at different levels of income. Demand for normal goods increases rapidly with the increase in the consumer’s income but slows down with further increases in income. It may be noted from Fig. that up to a certain level of income (Y1) the relation between income and demand for all types of goods is similar. The difference is only of degree. The relation becomes distinctly different beyond the Y1 level of income. From a managerial point of view, therefore, it is important to view the income-demand relations in the light of the nature of the product and the level of consumers’ income.