Economics notes for macro eco

Topics: Gross domestic product, National accounts, Value added Pages: 31 (6884 words) Published: April 10, 2014
THE INDIAN HIGH SCHOOL
DUBAI

YEAR 2013-14

Page 1
COMPILED BY HOD ECONOMICS MRS. CHANDRA R

INDEX
S NO
1

TOPIC

PAGE NO
3 - 20

INTRODUCTION TO
MACRO ECONOMICS

21 – 35

2
AGGREGATE DEMAND
AND AGGREGATE SUPPLY

3

36 - 43
MONEY AND BANKING

4

44 - 49
GOVERNMENT BUDGET

5

49 - 58
BALANCE OF PAYMENT
AND FOREIGN EXCHANGE

6

59- 66
BOARD PAPER 2013 DELHI

7

67 - 75
MARKING SCHEME

Page 2
COMPILED BY HOD ECONOMICS MRS. CHANDRA R

HANDBOOK OF MACRO ECONOMICS
NOTE: THIS STUDY MATERIAL IS NOT ALL ENCOMPASSING. FOR A
COMPLETE AND THOROUGH KNOWLEDGE OF THE SUBJECT REFER TO
YOUR CLASS NOTES ALSO.
Chapter 1
I) Important terms to be learnt
Macro Economics: - Macroeconomics is the study of aggregate economic variables of an economy.
Consumption goods:- Are those which are bought by consumers as final or ultimate goods to satisfy their wants.
Eg: Durable goods car, television, radio etc.
Non-durable goods and services like fruit, oil, milk, vegetable etc. Semi durable goods such as crockery etc.
Capital goods – capital goods are those final goods, which are used and help in the process of production of other goods and services. E.g.: plant, machinery etc. Final goods: Are those goods, which are used either for final consumption or for investment.

It includes final consumer goods and final production goods. They are not meant for resale.
So, no value is added to these goods. Their value is included in the national income. Intermediate goods intermediate goods are those goods, which are used either for resale or for further production. Example for intermediate good is- milk used by a tea shop for selling tea.

Stock: - Quantity of an economic variable which is measured at a particular point of time.
Stock has no time dimension. Stock is static concept.
Eg: wealth, water in a tank.
Flow: Flow is that quantity of an economic variable, which is measured during the period of time.
Flow has time dimension- like per hr, per day etc.
Flow is a dynamic concept.
Eg: Investment, water in a stream
Depreciation: The loss of value of fixed assets due to its normal wear and tear. Concept of domestic (economic) territory
Domestic territory is a geographical territory administered by a government within which persons, goods and capital circulate freely. (Areas of operation generating domestic income, freedom of circulation of persons, goods and capital) Scope identified as

*Political frontiers including territorial waters and air space. *Embassies, consulates, military bases etc. located abroad but including those located within the political frontiers.
*Ships, aircrafts etc., operated by the residents between two or more countries. Page 3
COMPILED BY HOD ECONOMICS MRS. CHANDRA R

*Fishing vessels, oil and natural gas rigs etc. operated by the residents in the international waters or other areas over which the country enjoys the exclusive rights or jurisdiction.
Resident (normal resident):Normal resident is a person or an institution who ordinarily resides in that country and whose center of economic interest lies in that country.
(The Centre of economic interest implies :-( 1) the resident lives or is located within the economic territory. (2) The resident carries out the basic economic activities of earnings, spending and accumulation from that location 3. His center of interest lies in that country.

Mixed Income of self employed: Income of self employed persons and unincorporated enterprises which use their own resources is called mixed income of self employed. Such income is called mixed income. It is mixture of rent, interest wages and profit.

Net Indirect tax: It is defined as the difference between indirect tax and Subsidies. Relation between national product and Domestic product.
Domestic product concept is based on the production units located within domestic (economic) territory, operated both by residents and non-residents. National product concept...
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