1. Difference between microeconomics and macroeconomics.
2. What is national income?
National income means the value of goods and services produced by a country during a financial
year. Thus, it is the net result of all economic activities of any country during a period of one year and
is valued in terms of money. National income is an uncertain term and is often used interchangeably
with the national dividend, national output, and national expenditure. We can understand this
concept by understanding the national income definition.
3. What is economy growth and development?
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Generally economic development means development of economic condition of any
country or area. It mainly refers to the long run or secular increase in per capita
productivity.
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Economic development refers to increases in standard of living of a nation’s population
associated with sustained growth from a simple, low-income economy to a modern, highincome economy.
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Economic Growth refers to an increase in the total amount of production and wealth in
an economy.
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Economic growth means more output, while economic development implies both more
output and changes in the technical and institutional arrangements by which it is
produced and distributed.
4. What Is Per Capita Income?
Per capita income is a measure of the amount of money earned per person in a nation or
geographic region. Per capita income is used to determine the average per-person income for
an area and to evaluate the standard of living and quality of life of the population. Per capita
income for a nation is calculated by dividing the country's national income by its population.
5.
Define the term ‘flow and stock’.
Answer:
Flow
‘Flow’ is a variable that is measured with reference to a period of time.
Example: Flow of water in a river, income earned in a year, etc.
Stock
‘Stock’ is a variable that is measured with reference to a particular point of time.
Example: Water in a tank, wealth, bank balance on 31st March, etc.
6. The Classical Theory:
The fundamental principle of the classical theory is that the economy is self‐regulating. Classical
economists maintain that the economy is always capable of achieving the natural level of real GDP
or output, which is the level of real GDP that is obtained when the economy's resources are fully
employed. While circumstances arise from time to time that cause the economy to fall below or
to exceed the natural level of real GDP, self‐adjustment mechanisms exist within the market
system that work to bring the economy back to the natural level of real GDP. The classical
doctrine—that the economy is always at or near the natural level of real GDP—is based on two
firmly held beliefs: Say's Law and the belief that prices, wages, and interest rates are flexible.
Say's Law. According to Say's Law, when an economy produces a certain level of real GDP, it also
generates the income needed to purchase that level of real GDP. In other words, the economy is
always capable of demanding all of the output that its workers and firms choose to produce.
Hence, the economy is always capable of achieving the natural level of real GDP.
7. What Is Neoclassical Economics?
Neoclassical economics is a broad theory that focuses on supply and demand as the driving forces behind
the production, pricing, and consumption of goods and services. It emerged in around 1900 to compete
with the earlier theories of classical economics.
KEY TAKEAWAYS
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Classical economists assume that the most important factor in a product's price is its cost of
production.
Neoclassical economists argue that the consumer's perception of a product's value is the driving
factor in its price.
They call the difference between actual production costs and retail price the economic surplus.
The term neoclassical economics was coined in 1900.1 Neoclassical economists believe that a
consumer's first concern is to maximize personal satisfaction. Therefore, they make purchasing
decisions based on their evaluations of the utility of a product or service. This theory coincides
with rational behavior theory, which states that people act rationally when making economic
decisions.
For example, you desire to purchase designer apparel because of the attached brand label.
Besides, the clothing production cost may be insignificant. Here, the perceived value of the brand
label exceeded its input cost, creating an 'economic surplus.
8.
What is Post-Keynesian Economics (PKE)?
Post-Keynesian Economics (PKE) is a school of economic thought which builds upon John Maynard
Keynes's and Michal Kalecki's argument that effective demand is the key determinant of
economic performance.
9.
What is Dynamic economics?
In the real world, economic variables like population, capital, techniques of production, fashions,
habits, etc. do not change at a constant rate. The rate of change is different at different times.
According to Prof. Hicks, “Economic dynamics refers to that part of economic theory in which all
quantities must be dated.”
For example, the population of a country may increase at a rate of 2% in the first year; 3% in the
second year and 5% in the third year, if the other economic variables change at unequal rates, the
rate of output will also change at different times. In a dynamic state, there is uncertainty of every
change. So, it is not possible to make correct predictions.
10.
What is Keynes Budget?
Keynesians believe that, because prices are somewhat rigid, fluctuations in any component of
spending—consumption, investment, or government expenditures—cause output to change. If
government spending increases, for example, and all other spending components remain
constant, then output will increase.
11. What is financial Management System?
A financial management system is the software and processes used to manage income,
expenses, and assets in an organization. In addition to supporting daily financial
operations, the purpose of a financial management system is to maximize profits and
ensure long-term enterprise sustainability. They help finance teams:
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Streamline invoicing and bill collection
Optimize daily, monthly, and yearly cash flow
Maintain audit trails and comply with accounting regulations
12. What is budgetary system?
The budget system of the United States Government provides the means by which the
Government decides how much money to spend and what to spend it on, and how to raise the
money it has decided to spend.
13. What is inductive?
The inductive method involves collection of facts, drawing conclusions from them and testing
the conclusions by other facts.
14. What is deductive?
Deductive reasoning is used extensively in economics as we apply theory to a particular case or
instance. For example, any supply and demand analysis you do is the application of generally
accepted principles about demand and about supply; therefore, you are engaging in deductive
logic.
15. Why economics is the queen of social science?
Economics is the queen of social science. It is the study of house society uses its limited. It is concerned
with production distribution and consumption of goods and services. It examines how various factors
affect the society the use of goods and services, the involvement of individuals, businessmen, and
government.
16. Production system
i.
Agro LED production system: The Agro LED production system is an economic system in
which the production and distribution of goods and services are organized around the use
of LED technology. This system is characterized by the use of LED lights to grow crops, the
use of LED lighting to improve the efficiency of manufacturing processes, and the use of
LED lighting to provide lighting for homes and businesses. The Agro LED production
system is based on the premise that LED technology can be used to improve the efficiency
of agriculture, manufacturing, and lighting.
17. Importance of macroeconomics.
a) Understand working of macroeconomic:
What is true and valid in case of individual may not be
valid for the economy as a whole. What is true for
individual and true for the whole economy.
b) Nature of macro issues:
it explains causes of macro problems and help to solve
them. It is easy to find individual problem but difficult to
find macro problems.
c) Accelerating economic growth:
it provide us knowledge and techniques as to how to
achieve self-sustained economic growth.
d) Understanding business cycles:
annual planning program, and other development
planning is not possible without knowledge of
macroeconomic.
e) Forming government macroeconomic policies:
with the knowledge of macroeconomic; governments can formulate proper policies to tackle
them.
f) Individual decision making:
the understanding about the working of the economy as
whole helps the individuals to take better decisions.
g) Importance in business:
it also helps a good deal to businesses or their
managers who are faced with various decision making
problems.
h) Foreign trade control:
export, import, balance of payments, exchange rates are
highly influenced by the macroeconomic activities of
country
i) Proper planning:
annual planning program, and other development
planning is not possible without knowledge of
macroeconomic.
j) Budget formation:
it provides information and effective budget formulation
is not possible without proper analysis of macro
economic.
18. Types of economic system.
Socialism – Command economic system
A command economic system is often referred to as a socialist or communist system. Under this
structure, power is centralised either to the government or a sole ruler. In turn, they decide the rules
of the game and command how economic interactions take place.
Economic decisions such as what goods to produce, how much to produce, and its price are decided
upon by central powers. So it’s up to them to decide whether it is socially optimal to make iPhones or
PlayStations, or whether it’s best to divert these resources to house building or agriculture.
Under a command economic system, central powers own the means of production, so can, therefore,
shift it to where they see fit. For instance, if the nation’s central powers want to start making more
steel, they may move workers from a construction site and transfer them to a steel factory.
Moving workers may be necessary in order to fulfill long-term economic plans created by central
planners. These long-term plans are a key part of command economies – such as the five-year plans
adopted in the Soviet Union. In order to organise an economy from the top-down, clear and concise
information needs to be passed through the chain of command – which is why a plan is necessary for
everyone to understand their role.
Whilst planning can be effective, the issue with such command systems is slow and sluggish to change
to economic trends. Where people are wanting more of Product A, central powers produce more of
Product B.
Examples include North Korea, Cuba, and the former Soviet Union.
Capitalism – Market economic system
A capitalist economic system is where the means of production is owned and controlled by private
enterprise rather than the government. Instead of government dictating what goods and services
should be produced, these are driven by supply and demand mechanisms.
When consumers demand goods, it sends a signal to businesses for them to produce more. Equally,
when demand for goods falls, it sends a signal to businesses to produce less. This in turn forces the
business to offer new products that consumers may desire instead.
Under this form of economic system, government involvement is almost non-existent – other than
enforcing law and legal contracts. Instead, the economy is regulated by the fluctuations in supply and
demand, as well as other factors such as brand trust and competition.
19. Surplus economic unit and depreciate: For example, surplus units are defined as economic units
whose income exceeds spending on goods and services. Conversely, deficit units are those economic units whose spending on goods and services is in excess of their income.
20. What Is Political Economy?
Political economy is an interdisciplinary branch of the social sciences that focuses on the
interrelationships among individuals, governments, and public policy.
21. What Is Full Employment?
Full employment is an economic situation in which all available labor resources are being used in the
most efficient way possible. Full employment embodies the highest amount of skilled and unskilled labor
that can be employed within an economy at any given time.
What Is Unemployment?
The term unemployment refers to a situation where a person actively searches for employment but is
unable to find work. Unemployment is considered to be a key measure of the health of the economy.
22. What Is Fiscal Policy?
Fiscal policy refers to the use of government spending and tax policies to influence economic conditions,
especially macroeconomic conditions. These include aggregate demand for goods and services,
employment, inflation, and economic growth.
During a recession, the government may lower tax rates or increase spending to encourage demand and
spur economic activity. Conversely, to combat inflation, it may raise rates or cut spending to cool down
the economy.
What Is Monetary Policy?
Monetary policy is a set of tools used by a nation's central bank to control the overall money supply and
promote economic growth and employ strategies such as revising interest rates and changing bank
reserve requirements.
23. Business Cycles:
refer to fluctuations in output and employment with alternating periods of boom and recession,
business fluctuation over time period.
https://docs.google.com/presentation/d/1GsVGh9M61_n0u8vy_SY7D5l7Y2o49R_/edit#slide=id.p4
24. What Is Inflation?
Inflation is a rise in prices, which can be translated as the decline of purchasing power over time. The
rate at which purchasing power drops can be reflected in the average price increase of a basket of
selected goods and services over some period of time. The rise in prices, which is often expressed as a
percentage, means that a unit of currency effectively buys less than it did in prior periods. Inflation can
be contrasted with deflation, which occurs when prices decline and purchasing power increases.
What Is Deflation?
Deflation is a general decline in prices for goods and services, typically associated with a contraction in
the supply of money and credit in the economy. During deflation, the purchasing power of currency rises
over time.
25. GDP and GNP
What Is Gross Domestic Product (GDP)?
Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services
produced within a country’s borders in a specific time period. As a broad measure of overall domestic
production, it functions as a comprehensive scorecard of a given country’s economic health.
What Is Gross National Product (GNP)?
Gross national product (GNP) is an estimate of the total value of all the final products and services turned
out in a given period by the means of production owned by a country's residents.
26. NNP and NDP
What Is Net National Product (NNP)?
Net national product (NNP) is the monetary value of finished goods and services produced by a country's
citizens, overseas and domestically, in a given period.1 It is the equivalent of gross national
product (GNP), the total value of a nation's annual output, minus the amount of GNP required to
purchase new goods to maintain existing stock, otherwise known as depreciation.
What Is Net Domestic Product (NDP)?
Net domestic product (NDP) is an annual measure of the economic output of a nation that is calculated
by subtracting depreciation from gross domestic product (GDP).
27. What Is Personal Income?
Personal income refers to all income collectively received by all individuals or households in a country.
Personal income includes compensation from a number of sources, including salaries, wages, and
bonuses received from employment or self-employment, dividends and distributions received from
investments, rental receipts from real estate investments, and profit sharing from businesses.1
What Is Disposable Income?
Disposable income, also known as disposable personal income (DPI), is the amount of money that an
individual or household has to spend or save after income taxes have been deducted.
28. NI AT MARKET PRICE AND FACTOR COST
https://enotesworld.com/relationship-between-concepts-of-national-income-at-marketprice-and-factor-cost/
29. Difference between security market line and capital market line
30. What is development cap?
The development gap refers to the widening gap between the richest (most developed) and
poorest (least developed) countries of the world. Development in this sense can be referred to as
either economic development where the county has an increase in wealth, or human
development where quality of life is improved for the people who live there.
31. Ultimate objective of macroeconomics
32. What Is the Circular Flow Model?
The circular flow model demonstrates how money moves through society. Money flows from producers
to workers as wages and flows back to producers as payment for products.
a. Household Sector:
Households provide factor services to firms, government and foreign sector. In return, it receives factor
payments. Households also receive transfer payments from the government and the foreign sector.
Households spend their income on:
(i) Payment for goods and services purchased from firms;
(ii) Tax payments to government;
(iii) Payments for imports.
b. Firms:
Firms receive revenue from households, government and the foreign sector for sale of their goods and
services. Firms also receive subsidies from the government.
Firm makes payments for:
(i) Factor services to households;
(ii) Taxes to the government;
(iii) Imports to the foreign sector.
c. Government:
Government receives revenue from firms, households and the foreign sector for sale of goods and
services, taxes, fees, etc. Government makes factor payments to households and also spends money on
transfer payments and subsidies.
d. Foreign Sector:
Foreign sector receives revenue from firms, households and government for export of goods and services.
It makes payments for import of goods and services from firms and the government. It also makes
payment for the factor services to the households.
The savings of households, firms and the government sector get accumulated in the financial market.
Financial market invests money by lending out money to households, firms and the government. The
inflows of money in the financial market are equal to outflows of money. It makes the circular flow of
income complete and continuous.
https://www.yourarticlelibrary.com/macro-economics/circular-flow-of-income-in-afour-sector-economy/30259
33. Effective demand chart
34. Theory of income and employment
35. What is the Gini Coefficient?
The Gini coefficient (Gini index or Gini ratio) is a statistical measure of economic inequality in a population.
The coefficient measures the dispersion of income or distribution of wealth among the members of
a population.
36. What is MPC?
MPC is the ratio of change in consumption to change in income. Cha
37. Comparison of economic system
Comparative Economic Systems is the sub-classification of economics dealing with
the comparative study of different systems of economic organization, such
as capitalism, socialism, feudalism and the mixed economy. income.
38. What Is Financial Economics?
Financial economics is a branch of economics that analyzes the use and distribution of resources
in markets. Financial decisions must often take into account future events, whether those be related to
individual stocks, portfolios, or the market as a whole.
KEY TAKEAWAYS
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Financial economics analyzes the use and distribution of resources in markets.
It employs economic theory to evaluate how time, risk, opportunity costs, and information can
create incentives or disincentives for a particular decision.
Financial economics often involves the creation of sophisticated models to test the variables
affecting a particular decision.