Trade Finance BD · POE study pack
Trade Finance BD · Original revision handnote · Edition 2026.1

POE — Principles of Economics

JAIBB · Compulsory · 14 October 2026

Use economic reasoning, diagrams and calculations to explain prices, markets and policy choices.

Use this revision pack with the full syllabus and official papers. Important topics are revision priorities, not a promise of future questions.

Contents

  1. A · Choice and economic reasoning
  2. B · Demand, supply and consumer choice
  3. C · Production and cost
  4. D · Market structures
  5. E · Market failure and intervention
  6. F · Income, policy and external accounts
  7. G · Bangladesh macroeconomic interpretation
  8. Worked example
  9. Applied case and model response
  10. Terminology
  11. Official syllabus and papers

Revision priorities

PPC, market structures and monetary/fiscal policy — Reviewed 7th paper: 7th Banking Professional Exam, page 1, Q1–Q4

Economic profit and CPI calculations — Reviewed 7th paper: 7th Banking Professional Exam, page 1, Q5; Q6 on page 2

Syllabus-mapped handnotes

Module A

Choice and economic reasoning

Syllabus scope: Scarcity; opportunity cost; micro/macro; positive/normative; PPC; circular flow; economic systems

Scarcity requires a choice; opportunity cost is the value of the best alternative forgone. A production possibility curve shows feasible combinations with given resources and technology. A point inside the frontier reflects underuse; a point outside is currently infeasible; a frontier shift changes capacity. Microeconomics studies individual choices and markets; macroeconomics studies aggregates. Positive statements can be tested against evidence; normative statements incorporate value judgements. In the circular flow, households and firms exchange real resources and goods while corresponding payments flow in the opposite direction.

Apply it in banking

A bank allocating capital to trade finance forgoes its best alternative investment. Compare risk-adjusted returns rather than treating the explicit interest cost as the entire opportunity cost.

Practice question: Explain opportunity cost using a PPC and a bank’s allocation decision.

Answer framework: use the explanation above, add the banking example, then address assumptions and controls. Expand to match the question’s marks and command words.

Module B

Demand, supply and consumer choice

Syllabus scope: Equilibrium; shifts; utility; indifference; elasticity; surplus; price controls

A change in the good’s own price causes movement along its demand or supply curve; income, input costs, preferences or technology can shift curves. Equilibrium is where quantity demanded equals quantity supplied under the model. Price elasticity of demand relates percentage changes in quantity and price; distinguish elastic, inelastic and unit-elastic responses. Use the midpoint method when comparing two points and state the convention. A binding price ceiling below equilibrium can create shortage; a binding price floor above it can create surplus. Consumer choice also depends on budget constraints and preferences.

Apply it in banking

If higher fuel costs reduce transport supply, explain the leftward supply shift. Do not describe it as a movement along the supply curve caused by the resulting fare increase.

Practice question: Compare a curve shift with a movement along the curve and assess a binding price ceiling.

Answer framework: use the explanation above, add the banking example, then address assumptions and controls. Expand to match the question’s marks and command words.

Module C

Production and cost

Syllabus scope: Short/long run; fixed/variable cost; returns; isoquants/isocosts; efficient input use

The short run contains at least one fixed input; all inputs can vary in the long run. Total cost is fixed plus variable cost. Average cost is cost per unit; marginal cost is the extra cost of the next unit. Diminishing marginal returns to one variable input are different from returns to scale when all inputs change. An isoquant represents equal output; an isocost represents equal expenditure. Efficient input choice compares productive contribution with input cost, subject to technology and constraints. Sunk costs are not avoidable through a current decision and should not be counted again as an incremental cost.

Apply it in banking

For a borrower adding a second shift, distinguish the additional labour and energy cost from the factory’s existing rent. Identify whether capacity is fixed.

Practice question: Explain marginal cost and why sunk costs should not determine an incremental production decision.

Answer framework: use the explanation above, add the banking example, then address assumptions and controls. Expand to match the question’s marks and command words.

Module D

Market structures

Syllabus scope: Perfect competition; monopoly; monopolistic competition; oligopoly

Market structures differ in entry barriers, product differentiation, number of sellers and price-setting power. A competitive firm takes price as given; a monopoly faces market demand; differentiated competitors compete on features as well as price; oligopolists consider rivals’ responses. Profit-maximising output compares marginal revenue and marginal cost under the model, not simply maximum sales. Banking combines differentiation, regulation and strategic interaction, so classification requires evidence about concentration, entry and competition. Do not infer perfect competition merely from the existence of many branches.

Apply it in banking

Explain how switching costs and brand trust can give a bank pricing power even when several banks operate in the same city.

Practice question: Compare the four market structures and assess the banking industry using explicit criteria.

Answer framework: use the explanation above, add the banking example, then address assumptions and controls. Expand to match the question’s marks and command words.

Module E

Market failure and intervention

Syllabus scope: Externalities; information problems; public goods; financial-market intervention

Market failure arises when private choices do not yield an efficient social outcome. Pollution is a negative externality; financial instability can impose costs beyond the institution that causes it. Asymmetric information can create adverse selection before a contract and moral hazard after it. Regulation, disclosure, incentives and corrective taxes can address failures, but intervention also has administrative costs and unintended consequences. Explain the mechanism and compare alternatives. A subsidy that expands weak lending may increase measured access while worsening credit quality; quantity alone cannot establish social benefit.

Apply it in banking

For a polluting factory seeking finance, consider screening, environmental covenants and monitoring as well as public regulation. Show which external cost each control addresses.

Practice question: Explain adverse selection, moral hazard and a justified financial-market intervention.

Answer framework: use the explanation above, add the banking example, then address assumptions and controls. Expand to match the question’s marks and command words.

Module F

Income, policy and external accounts

Syllabus scope: National income; aggregate equilibrium; monetary/fiscal policy; balance of payments

GDP measures final domestic production over a period; avoid double counting intermediate goods. Expenditure GDP is consumption plus investment plus government final spending plus exports minus imports. Nominal GDP uses current prices; real GDP uses a price-adjustment framework. Monetary policy affects money and credit conditions; fiscal policy changes public spending, taxes and borrowing. Expansionary policy can support demand and employment but may intensify inflation or external pressure. Contractionary policy may contain demand but slow credit and activity. Distinguish the capital account from the financial account when discussing external transactions.

Apply it in banking

When inflation is supply-driven, tighter credit may reduce demand without immediately restoring food supply. Discuss the policy mix, transmission lag and distributional effects.

Practice question: Compare monetary and fiscal policy and assess their use under inflation and weak investment.

Answer framework: use the explanation above, add the banking example, then address assumptions and controls. Expand to match the question’s marks and command words.

Module G

Bangladesh macroeconomic interpretation

Syllabus scope: GDP; savings; investment; inflation; unemployment; current performance

An economic answer needs a dated indicator and a mechanism, not an unsupported headline. Inflation is a rate of price change; a lower inflation rate can coexist with rising prices. Unemployment excludes some people outside the labour force, so assess participation and underemployment as well. Investment depends on expected returns, financing, infrastructure and confidence. Remittances support household spending and external liquidity, but their allocation influences longer-term development. Use Bangladesh Bank, BBS and relevant official releases for current figures; figures printed in an old paper describe that paper’s context rather than today’s economy.

Apply it in banking

If inflation falls from 10% to 7%, prices still rise under the measure. Explain disinflation rather than saying that the price level fell.

Practice question: Interpret inflation, unemployment and investment indicators without confusing rates with levels.

Answer framework: use the explanation above, add the banking example, then address assumptions and controls. Expand to match the question’s marks and command words.

Worked example

Accounting profit versus economic profit

An entrepreneur earns BDT 900,000 revenue and incurs BDT 650,000 explicit costs. They left a job paying BDT 240,000 per year. Ignore other implicit costs. Compute accounting and economic profit.

  1. Accounting profit = 900,000 − 650,000 = BDT 250,000.
  2. Opportunity cost of forgone salary = BDT 240,000.
  3. Economic profit = 250,000 − 240,000 = BDT 10,000.
  4. The business covers the stated opportunity cost; other implicit costs could change the assessment.
Common mistake: Do not deduct forgone salary in the accounting-profit calculation.

Case clinic

Inflation control versus private investment

High inflation leads to tighter monetary policy. Banks prefer government securities and private credit slows. Discuss the trade-offs.

Model response

Explain the interest-rate and credit transmission channels: higher funding costs can slow spending and investment and affect inflation expectations. Safer or higher-yielding securities may change banks’ portfolio choices.

Distinguish weak borrower demand from restricted bank supply. Assess credit quality, fiscal borrowing, liquidity, confidence and supply shocks before attributing everything to the policy rate.

Recommend a credible, data-based policy mix that protects stability while addressing supply bottlenecks and viable investment. Avoid proposing indiscriminate cheap credit; explain timing, safeguards and measurable outcomes.

Practice marking guide · 20 marks
  • Transmission mechanism (6)
  • Bank allocation and crowding-out reasoning (4)
  • Balanced diagnosis (6)
  • Qualified policy recommendation (4)

Terminology and comparisons

Movement / shiftOwn-price change along a curve versus change in another determinant moving the curve.
Nominal / real GDPCurrent-price production value versus price-adjusted output.
Accounting / economic profitRevenue less explicit costs versus revenue less explicit and implicit opportunity costs.
Disinflation / deflationSlower positive inflation versus a decline in the general price level.

Official references

Official papers are linked for comparison; their full text and official model answers are not reproduced. This pack’s explanations, examples and cases are original. Numerical examples are practice assumptions. Current law, instructions and subsequent amendments must be checked for regulatory answers.