UNIT 1 NATIONAL INCOME ACCOUNTING
........................................................................................................ 20
NATIONAL INCOME CONCEPTS ........................................................................................................................................ 20
METHODS OF CALCULATING NATIONAL INCOME ................................................................................................................. 24
PROBLEMS IN CALCULATING NATIONAL INCOME:- ............................................................................................................... 26
USES OF NATIONAL INCOME STATISTICS ............................................................................................................................ 27
NATIONAL DEBT ........................................................................................................................................................... 28
BUSINESS (TRADE) CYCLE ............................................................................................................................................... 29
PAST PAPER QUESTIONS ................................................................................................................................................ 31
UNIT 2 ECONOMIC GROWTH AND DEVELOPMENT
........................................................................................... 34
COMPARISON OF ACTUAL AND POTENTIAL GROWTH ............................................................................................................. 34
COSTS AND BENEFITS OF GROWTH, INCLUDING USING AND CONSERVING RESOURCES: ................................................................. 37
USING AND CONSERVING RESOURCES ................................................................................................................................ 38
NATIONAL INCOME STATISTICS AND STANDARD OF LIVING ..................................................................................................... 40
ECONOMIC DEVELOPMENT ............................................................................................................................................. 42
CLASSIFICATION OF COUNTRIES: ....................................................................................................................................... 43
POLICY APPROACHES FOR ECONOMIC DEVELOPMENT .......................................................................................................... 50
THE ROLE OF THE INTERNATIONAL MONETARY FUND AND THE WORLD BANK ........................................................................... 53
PROBLEMS EXISTING IN DEVELOPED COUNTRIES: ................................................................................................................ 54
PAST PAPER QUESTIONS ................................................................................................................................................ 56
UNIT 3 KEYNESIAN THEORY OF INCOME AND EMPLOYMENT
........................................................................... 68
SECTORS AND TYPES OF ECONOMIES: ............................................................................................................................... 68
CIRCULAR FLOW OF INCOME ........................................................................................................................................... 68
FROM ACTUAL TO DESIRED EXPENDITURE ......................................................................................................................... 71
1. CONSUMPTION FUNCTION: ......................................................................................................................................... 73
2: SAVING FUNCTION: ................................................................................................................................................... 79
3. TAX FUNCTION ......................................................................................................................................................... 83
4. IMPORT FUNCTIONS .................................................................................................................................................. 84
5. EXPORTS FUNCTION .................................................................................................................................................. 85
6. GOVERNMENT EXPENDITURE FUNCTION: ....................................................................................................................... 87
7. DESIRED/PLANNED INVESTMENT:- ............................................................................................................................... 90
NATIONAL INCOME EQUILIBRIUM: ................................................................................................................................... 97
INFLATIONARY AND DEFLATIONARY GAPS. .......................................................................................................................... 98
MULTIPLIER ............................................................................................................................................................... 101
ACCELERATOR: ........................................................................................................................................................... 104
PAST PAPER QUESTIONS .............................................................................................................................................. 109
UNIT 4 MONEY, BANKING AND INTEREST RATEMONEY
.................................................................................................................................................................... 114
BANKING: ................................................................................................................................................................. 114
CREDIT CREATION PROCESS: ......................................................................................................................................... 115
INTEREST RATE DETERMINATION ................................................................................................................................... 117
LIQUIDITY PREFERENCE THEORY (LPT): ........................................................................................................................... 117
DEMAND FOR MONEY/LIQUIDITY PREFERENCE (LP): ......................................................................................................... 119
CHANGES IN EQUILIBRIUM INTEREST RATE: ...................................................................................................................... 123
PAST PAPERS QUESTIONS ............................................................................................................................................. 125
4
UNIT 5 MACROECONOMIC POLICIES
.............................................................................................................. 128
MONETARY POLICY: .................................................................................................................................................... 128
MONETARY TRANSMISSION MECHANISM (MTM) ............................................................................................................ 128
GOVERNMENT FAILURE ON MACROECONOMIC POLICY ........................................................................................................ 133
PAST PAPERS QUESTIONS ............................................................................................................................................. 139
UNIT 6 EMPLOYMENT AND UNEMPLOYMENT
................................................................................................ 144
THE CAUSES OF UNEMPLOYMENT ................................................................................................................................... 144
VOLUNTARY AND INVOLUNTARY UNEMPLOYMENT ............................................................................................................ 146
FULL-EMPLOYMENT / NATURAL RATE OF UNEMPLOYMENT (NRU) ....................................................................................... 147
THE CONSEQUENCES OF UNEMPLOYMENT ........................................................................................................................ 147
METHODS AND DIFFICULTIES OF MEASURING UNEMPLOYMENT ............................................................................................ 148
POLICIES TO CORRECT UNEMPLOYMENT........................................................................................................................... 149
THE PATTERN AND TRENDS IN (UN)EMPLOYMENT .............................................................................................................. 150
INFLUENCES ON THE SIZE AND COMPOSITION OF THE LABOUR FORCE ..................................................................................... 150
PAST PAPER QUESTIONS .............................................................................................................................................. 152
UNIT 7 MACROECONOMIC OBJECTIVES AND CONFLICTS BETWEEN POLICY OBJECTIVES
................................ 156
LONG-RUN PHILIPS CURVE (LRPC): ............................................................................................................................... 157
GOVERNMENT ECONOMIC AIMS: ................................................................................................................................... 158
CONFLICTS AMONG MACROECONOMIC AIMS: ................................................................................................................... 159
KEYNESIAN AND MONETARIST THEORETICAL APPROACHES ................................................................................................... 162
PAST PAPER QUESTIONS .............................................................................................................................................. 164