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Human Resource Management B.Com (p) Chapter 2 Role, Status and competencies of HR Manager

2020-10-24T20:21:00.004+05:30

Human Resource Management B.Com (p) Chapter 2 Role, Status and competencies of HR Manager

Role of Human Resource Manager:

HR Manager plays variety of roles on the basis of needs of the firm. He also reminds managers of their moral and social duties and obligations towards the employees and the society at large. He acts as a mediator and helps to maintain industrial peace and reduce conflicts.
He is sometimes called the 'third force' in the industry. The role of Human Resource Manager may be analysed as follows:

(1) As a specialist: HR Manager is an expert and thus he advices the departmental heads on various issues concerning HRM such as recruitment, selection, training, appraisal, etc. He Provides information, suggestions and help and is considered to be a major help than a source of threat to the line managers.

(2) As a Controller: He assists the line managers in implementation of HR policies and programmes effectively. His suggestions are important for monitoring and controlling the progress.

(3) As a Liaison man: He acts as a linking agent between different departments of the firm.

(4) As an information source: He provides valuable information about the labour market and the labour laws. He plays the role of record keeper and researcher to provide the required information.

(5) As a change /agent: He can act as in internal change agent to initiate necessary improvements in HR practices. He can also provide required infrastructure and support for organisational development. He acts as an innovator in HR issues.

(6) As a fire fighter: He act as a shock absorber and a trouble shooter. He is the management's defence against trade unions.

Competencies of HR manager

The HR Manager must be able to deal successfully with people who have different likes and dislikes. He has to deal with the workers. The other competencies of the HR Manager are as follows:

(1) Fairness and Firmness: The basic quality of the HR Manager is fairness and firmness. He should be fair in matters of promotions/demotions, transfers and enforcing discipline.

(2) Tactful: He must be tactful in dealing with difficult situations. Tact implies determining what is good and fair in trying conditions and skill in dealing with most demanding situations. The HR Manager must be resourceful, too. He should have an open mind, objectivity and adjustability to tackle a difficult matter from different angles.

(3) Sympathy and consideration: He must be guided by a sympathetic attitude towards the employees demand. He should have patient listening, open mind and concern for the employees. The intentions and actions of the HR Manager must be tempered with consideration for others.

(4) Knowledge of labour laws and other Terms: It is desirable that the HR Manager is familiar with the legal provisions affecting labour. He must be aware of the government's policy towards labour and general economic conditions prevailing at a given point of time.

(5) Broad Social Outlook: It is desirable that the HR Manger has a social outlook and contributes towards the betterment of quality of life of the employees and those who live around and beyond the organisation.

(6) Educated and Experienced: The HR Manager is expected to contribute to the strategic direction of the organisation that employs him, by helping create and sustain the competitive advantage of the organisation. To play such strategic roles, the HR Manager needs to be well-educated and experienced.

Human Resource Management Notes for B.com(P) Chapter 1 Human Resource Management

2020-10-23T18:18:00.000+05:30

Human Resource Management Notes for B.com(P) Chapter 1 Human Resource Management

Characteristics / Features of Human Resources Management:

(1) HRM is a service Function: HRM is not a profit centre. It serves all other functional departments. but the basic responsibility always lies with the line managers. HRM is a staff function. The HTM manager has line authority only within his own department, but has staff authority as far as other departments are concerned.

(2) Focus on Results: HRM is performance oriented. It has its focus on rules. It encourages people to give their 100%. It tries to secure the best from people by wining the whole hearted cooperation. It is a process of bringing people and organisation together so that the goals of each are met. It is commitment oriented.

(3) People-Centred: HRM is about people at work both as individual and as a group. It tries to help employees to develop their potential fully. It comprises people-related functions like hiring, training and development, working environment, etc.

(4) Continuous Process: Human resource management is a continuous process in the sense that it is in operation from the day an entity comes into existence till the day its winds up. It basically takes into account managing human capital of the firm which is not one day or one weak deal rather it is an ongoing process.

(5) Comprehensive function: Managing human resources can never be an exclusive process as it involves all people at work. No individual irrespective of his designation, salary, nature of work is excluded from the periphery of human resource management.

Functions of Human Resource Management

HRM function are carried out y the HR managers to fulfil the goals and objectives of the orgainsation. They perform two sets of functions, namely managerial functions and operative functions.

(1) Managerial Functions:
functions like planning, organising, staffing, directing and controlling constitute the core managerial functions of an organisation. The specific activities performed under each of these functions are as follows:
(a) Planning: It involves the process of pre determining the personnel programmes that are necessary to achieve the organisational goals. Planning is such a crucial function of an organisation. It is the key to all other managerial functions.
The steps involved in planning are as follow:
--- Establishing goods and objectives to be achieved.
--- Developing rules and procedures.
--- Determining plans and forecasting techniques.
(b) Organising: Once the plans are formulated, the next step is to organise the men and material. Organising is a process through which the firm establishes its structure and determines the authority, responsibility and accountability of each member in relation to the job.
It involves:
--- Giving each member a specific task.
--- Establishing various departments and divisions.
--- Delegating authority to the members.
--- Establishing channels of authority and communications.
--- creating a system to coordinate he works of the members.
(c) Directing:
Directing includes those activities which guide and motivate the people to accomplish the goals of the enterprise. The employees of the organisation can be motivated through career planning, ensuring employees morale, developing coordial relationship and provision of safety and welfare schemes.
(d) Controlling:
Controlling is the process of checking the efficiency of the individuals and the groups in fulfilling the plans and goals. It is essential for continuous improvement in the managerial activities.
The process involved in controlling are:
--- Establishment of standard performance
---Measurement of actual performance
--- Comparison of actual performance with the standard one to find the deviation.
---Initiation of corrective actions, if there are any deviations.

(2) Operative Functions:
The Operative functions of HRM are as follow:
(a) Procurement:
It refers to a series of activities undertaken by the HR managers for filling the present and future vacancies of the organisation. The activities include job analysis and designing, HR planning, recruitment and finally, the selection of employees.
(b) Development:
Development refers to employees training as well as management development. HR managers are responsible for conducting and supervising training and development programmes for employees. The purpose of a training and development programmes is to increase the employees competencies in their job by improving their knowledge, skills and abilities.
(c) Compensation: Compensation refers o the determination of pay scale and other benefits for the employees. HR managers must ensure fair and equitable pay rates. In addition, HR managers should regularly manage the performance evaluation system of the organisation and continuously design reward system such as bonus and flexible work schedules.
(d) Integration: The integration function consists industrial relations and aims at ensuring good relations between the management and the employees. HR managers have to implement industrial relations programmes which ensure fair treatment in disciplinary action, grievance redressal and career management process.

Mostly Asked Question

Q1. Why is Human Resource Management considered to be important for the success of modern day organisation?
Or
How HRM plays a vital role in the success of an organisation?

Ans: Human Resource Management can help an enterprise in achieving its goals more efficiently in the following manner:
(1) By attracting the required talent through effective human resource planning, recruitment, selection, placement, orientation, compensation and promotion policies.
(2) By developing necessary skills and right attitude amongst the employees through training, development, performance, appraisal etc.
(3) By securing cooperation of the employees through motivation, participation, grievance handling, etc.
(4) By utilising effectively the human resources available to the organisation.
(5) By ensuring that the organisation in future would have a team of competent and dedicated employees.

Chapter 5 Production Function Practical questions From CBSE Question Papers

2020-09-06T19:46:00.002+05:30

Chapter 5 Production Function Practical questions From CBSE Question Papers

Question 1.

Question 2.

Question no. 5

2020-08-14T13:28:00.002+05:30

. A consumer consumes two goods X and Y. Explain what will happen if MUx/Px is greater than MUy/Py?

Ans: This situation implies that by spending a rupee more on good x the consumer get x greater MU then in case of good Y. accordingly, he will spend more on 'X' than Y. As consumption of X increases, MUx will fall. on the other hand as consumption of Y falls, MUy will rise. the consumer will stop buying more of X in place of Y only when MUx/Px = MUy/Py.

A consumer consumes two goods X and Y. Explain what will happen if MUy/Py is greater than MUx/Px?
Ans: This situation implies that by spending a rupee more on good y the consumer get y greater MU then in case of good X. accordingly, he will spend more on 'Y' than X. As consumption of Y increases, MUy will fall. on the other hand as consumption of X falls, MUx will rise. the consumer will stop buying more of Y in place of X only when MUy/Py = MUx/Px.

CBSE Class 11 Business Studies Notes

2020-05-04T19:50:00.003+05:30

CBSE Class 11 Business Studies Notes

👉 CHAPTER 1 NATURE AND PURPOSE OF BUSINESS

👉 CHAPTER 2 FORMS OF BUSINESS ORGANISATIONS

Class 12

2020-04-30T18:32:00.002+05:30

CLASS 12 NOTES WITH REPEATED QUESTIONS

COMMERCE

ECONOMICS
👉 NOTES: CBSE CLASS 12 ECONOMICS NOTES
👉CBSE REPEATED QUESTIONS: CBSE CLASS 12 CBSE REPEATED QUESTIONS
👉ONE MARKS QUESTIONS: CBSE CLASS 12 ONE MARKS QUESTIONS FROM CBSE QUESTION PAPERS

CBSE Class 11 Business studies Notes Chapter 2 Forms of Business Organisations

2020-04-30T18:07:00.008+05:30

CBSE Class 11 Business studies Notes Chapter 2 Forms of Business Organisations

2.1 SOLE PROPRIETORSHIP

SOLE PROPRIETOR

↓ ↓
ONLY OWNER
Meaning: It refers to the forms of business organisation which is owned, managed and controlled by an individual.

FEATURES
(1) Individual ownership: The business is owned by a single individual.
(2) Formation and closure: Hardly any legal formalities are required to start a sole proprietary business.Closer of the business can also be done easily.
(3) Unlimited liability: Sole proprietary have unlimited liability. If the business assets are not sufficient to meet all business liabilities, the proprietor may have to sell his personal property to pay off the liabilities.
(4) Sole risk bearer and profit recipient: A sole proprietor bears all types of risks himself. If the business is successful, he is the sole beneficiary of all rewards/profits.
(5) Control: A sole proprietor has full control over his business. He can carry out his plans without any interference from others.
(6) No separate entity: In the eyes of law, there is no difference between the sole trader and his business.
(7) Limited life: Since the owner and business is same, death, insanity or bankruptcy of sole trader will cause closer of the business.

MERITS
(1) Quick decision making: A sole proprietor enjoys full freedom in making business decisions without consulting others.
(2) Ease of formation and closure: Hardly any legal formalities are required to start a sole proprietary business.Closer of the business can also be done easily.
(3) Secrecy: A sole proprietor can keep all business information and maintain secrecy.
(4) direct incentives: A sole proprietor directly gets the benefits of his efforts as he sole recipient of all the profits.
(5) Sense of accomplishment: It the business is successful, it contributes to self-satisfaction of the sole proprietor and create a sense of accomplishment in him.
(6) Flexibility of operations: All decisions are taken by a single person. There are no delays and the business can quickly adapt itself to the changing environment.

LIMITATIONS
(1) Unlimited liability:  Sole proprietary have unlimited liability. If the business assets are not sufficient to meet all business liabilities, the proprietor may have to sell his personal property to pay off the liabilities.
(2) Limited resources: Resources of a sole proprietor are limited to his/her personal savings and borrowings from others.
(3) Limited life: Since the owner and business is same, death, insanity or bankruptcy of sole trader will cause closer of the business.
(4) Limited managerial ability: The owner has to assume the responsibility of all managerial tasks such as purchasing, selling, financing, etc. Due to limited resources he may not be able to employ talented employees.

2.2 JOINT HINDU FAMILY/ HINDU UNDIVIDED FAMILY
Meaning: It is one of the oldest forms of business organisation found only in India. Business is owned and carried on by the members of the Hindu undivided family/ Joint Hindu family. It is governed by the Hindu Law.

FEATURES
(1) Membership by birth: A child get a right in the property of the Hindu Undivided family with his birth. He becomes automatically a member of the business.
(2) Only male members: Only male members can be the coparcener in the joint Hindu family business. But according to the Hindu act 1956, a woman after the death of her husband can become the coparcener of Family business.
(3) Formation: There should be two members and property to form a Joint Hindu family business. It is not created by an agreement between persons.
(4) Control: The business is controlled by the head of the family, who is the eldest member and is called Karta. He takes all the decisions to manage the business.
(5) Liability: The Karta has unlimited liability. The liability of other members is limited to their share in the property of the business.
(6) Continuity: The business continues even after the death of the Karta as the next eldest member taken up the position of Karta. The business is stable.
(7) Minor Members: Since membership is by birth, minors can also be members of the business.

MERITS
(1) Easy to start: It is easy to start joint Hindu family business because there is no need to complete any legal formalities for its establishment.
(2) Secrecy: Under the joint Hindu family business all the facts remain confined to the karta. Therefore the competing business cannot get any information.
(3) Direct contract with customer: The karta of the joint Hindu family business comes in direct contact with the customer. This helps him in planning for his business.
(4) Quick decision: The Karta of of the joint Hindu family business is free to take business decisions. He does not not need to consult anybody for this purpose. Therefore he can take quick decision which are essential for the success of the business.
(5)  Continuity: The business continues even after the death of the Karta as the next eldest member taken up the position of Karta. The business is stable.

LIMITATIONS
(1)  Liability: The Karta has unlimited liability. The liability of other members is limited to their share in the property of the business.
(2) Limited managerial skills: It cannot be expected to know all the complexity of business from any person. In join Hindu family business all the decisions have to be taken by the karta. Therefore, sometimes the decisions taken are not favorable to the business.
(3) Limited resources: The resources of the joint Hindu family business are limited. This reduce the power of competition in business. These factors also become a hindrance in the development of business.

2.3 PARTNERSHIP
Meaning: Partnership is that form of business in which two or more persons willingly join and agree to run some lawful business.

FEATURES
(1) Formation: The partnership form of business organisation is governed by the Indian partnership Act,1932. The partnership comes into existence with an agreement (written or oral) among the partners.
(2) Membership: There must be at least two members and maximum 50 partners.
(3) liability: The partners of a firm have unlimited liability. If the business assets are not sufficient to meet all business liabilities, the proprietor may have to sell his personal property to pay off the liabilities.
(4) Risk bearing: The partners bear the risks involved in running the business. The reward comes in the form of profit which were shared by them in an agreed ratio.
(5) Decision making and control: Every partner has a right to take part in the management of business. Decisions are generally taken with mutual consent.
(6) Continuity: Partnership comes to an end with the death, retirement, insolvency of any partner. However the remaining partners may continue the business on the basis of new agreement.
(7) Registration: Registration of a partnership firm is nott obligatory. It is optional.

MERITS
(1) Ease of formation and closure: A Partnership firm can be formed easily with an agreement between two or more persons to carry some lawful business. Registration is not compulsory. Closure of the firm too is an easy task.
(2) Balanced decision making: Every partner has a right to take part in the management of business. Decisions are generally taken with mutual consent.
(3) More funds: In a partnership, the capital is contributed by a number of partners. This helps in expanding business and earning higher profits.
(4) Sharing of risks: The risks are shared by all the partners. This reduce the burden and stress on individual partner.
(5) Secrecy: A Partnership firms is not legally bound to publish its accounts. so it can maintain confidentiality of information and secrecy.

LIMITATIONS
(1) Unlimited liability: The partners of a firm have unlimited liability. If the business assets are not sufficient to meet all business liabilities, the proprietor may have to sell his personal property to pay off the liabilities.
(2) Limited resources: Capital investment by partners is low as there is restriction on the number of partners. The firm cannot expand beyond a certain size.
(3) Possibility of conflicts: Partnership is run by a group of persons where in decision making authority is shared. There is possibility of conflicts among the partners in case of difference in opinion on some issues.
(4) Lack of continuity: Partnership comes to an end with the death, retirement, insolvency of any partner. However the remaining partners may continue the business on the basis of new agreement.
(5) Lack of public confidence: The confidence of the public in partnership firms is generally low because it is not legally required to publish its accounts.

2.4 TYPES OF PARTNERS

2.5 PARTNERSHIP DEED
Partnership is established by an agreement which may be oral or in writing. However, it is always better to have written partnership agreement to avoid any dispute which may rise in future.
The document containing terms of the agreement in writing amongst partners is called partnership deed.
CLAUSE / CONTENTS OF PARTNERSHIP DEED
(1) Name, Nature, Address of the firm.
(2) Names, Description and addresses of the partners.
(3)The amount of capital to be contributed by each partners.
(4) Ratio in which the profits are to be shared.
(5) If the partner is to be pain salary, commission, then how much?
(6)Rules to be followed in case of admission, retirement or death of a partner.
(7) Interest on capital and interest to drawings
(8) Method of solving disputes.
(9) Procedure for dissolution of the firm.

2.6 COOPERATIVE SOCIETIES
Cooperative
↓
Working together and with others for a common purpose
Meaning: It refers to that voluntary association of persons, who join together with the motive of welfare of the members.

FEATURES
(1) Voluntary membership: Any person having a common interest can join a cooperative society and can leave any time by giving a prior notice.
(2) Legal status: Registration of a cooperative society is compulsory. Therefore, it is a separate legal entity from its members. It can hold property in its name and enter into contract. The death, insolvency of a member do not affect its existence.
(3) Limited liability: The liability of the members of a cooperative society is limited to the extent of the amount contributed by them as capital.
(4) Democratic management: business is managed by a managing committee which is elected by members on the principle'one member one vote'.
(5) Service motive: The purpose of a cooperative society is mutual help and welfare. It is formed with the motive of service to tits members, not to earn profits.

MERITS
(1) Ease formation: Any ten adult persons can form a cooperative society. The registration procedure is simple involving a few legal formalities.
(2) Democratic management: business is managed by a managing committee which is elected by members on the principle'one member one vote'.
(3) Limited liability: The liability of the members of a cooperative society is limited to the extent of the amount contributed by them as capital.
(4) Stable existence: it is a separate legal entity from its members. death, insolvency of a member do not affect its existence.
(5) Support from government: Government gives all kind of support to cooperative societies in the form of relief in taxation, subsidies and low interest rates on loans.

LIMITATIONS
(1) Limited resources: Cooperative society are usually at a disadvantage of limited capital from its members.
(2) Lack of secrecy: Affairs of a cooperative society are openly discussed in meetings of members and its accounts are published. so, it is difficult to maintain secrecy about the operations of a cooperative society.
(3) Government control: Cooperative society have to follow several rules and regulations related to auditing of accounts, submission of accounts, etc.
(4) Difference in opinion: Difference and conflicts among members may lead to internal quarrels and difficulties in decision making.

2.7 TYPES OF COOPERATIVE SOCIETIES

2.8 JOINT STOCK COMPANY
Meaning: A joint stock of company is the largest form of business organisation. It is an association of persons formed for carrying out business activities and has a legal status independent of its members.

FEATURES
(1) Incorporated association: The company must be registered under the Indian companies Act, 2013. without registration, no company can come into existence.
(2) Separate legal entity: A company is a legal entity distinct from its shareholders, directors and promoters. It can carry on business in its own name, enter into contracts, buy, sell and hold property, sue and be sued.
(3) Artificial person: Company is an artificial person created by law. company is called artificial person because it has no mother to give it birth but is only a creation of law.It is an invisible individual having no body and soul.
(4) Limited liability: The liability of the members is limited to the face value of the shares held by them. They are not personally liable to the debts of the company. They could not be called upon to bear losses from his private property.
(5) Perpetual succession: The death, insolvency or retirement of members does not affect the life of the company. Members may come and go, but the company can go forever.
(6) Transfer-ability of shares: The shares of a joint stock company are freely transferable. A shareholders can transfer his shares to any person without the consent of other members.
(7) Common seal: Common seal is the official signature of the company. Being an artificial person, company acts through its Board of Directors and other officers. Company is bound by only those documents which bear its signature.
(8) Risk bearing: The risk of losses in a company is born by all the shareholders since they are the owners of the business.

MERITS
(1) Limited liability: The liability of the members is limited to the face value of the shares held by them. They are not personally liable to the debts of the company. They could not be called upon to bear losses from his private property.
(2) Perpetual succession: The death, insolvency or retirement of members does not affect the life of the company. Members may come and go, but the company can go forever.
(3) Separate legal entity: A company is a legal entity distinct from its shareholders, directors and promoters. It can carry on business in its own name, enter into contracts, buy, sell and hold property, sue and be sued.
(4) Professional management: A company can afford to pay higher salaries to specialists and professionals. It can appoint professional managers(MBAs).
(5) Transfer-ability of shares: The shares of a joint stock company are freely transferable. A shareholders can transfer his shares to any person without the consent of other members.

LIMITATIONS
(1) Complexity in formation: The formation of a company is time consuming, expensive and complicated process. It involves the preparation of several documents and fulfilling several legal requirements. Registration of a company is compulsory under the Indian Companies Act, 2013.
(2) Lack of secrecy: A public is required to provide a lot of information and file reports to the registrar of the company. such information is available to the general public also. so, it is difficult to maintain secrecy about the business.
(3) Numerous regulation: A company has to fulfill many legal provisions and regulations like audit, filing of reports, preparation of documents, etc.
(4) Delay in decision making: Companies are democratically managed through the Board of Directors which is followed by top management, middle management and lower level management. There is a chain command. This leads to delay in decision making.
(5) Conflict in interest: There may be conflict of interest amongst various stakeholders of a company. For the employees may demand higher salaries, consumers desire higher quality products at lower price, etc. Such conflicts create problems in managing the affairs of the company.

2.9 TYPES OF COMPANIES

(1) Private Company
(2) Public Company

(3) One Person Company (OPC)
Meaning: The Indian Company Act, 2013 introduces a new entity a 'one person company' . An one person company means a company with only one person as its member.
RULE
(1) A natural person who is an Indian citizen and resident in India shall be eligible to incorporate one person company.
(2) No person shall be eligible to incorporate more than one OPC or become nominee in more than one such company.
(3) OPC to compulsory convert itself into public or private company in certain cases. If the share capital of an OPC exceeds Rs.50 lakh or its average annunal turnover exceeds Rs. 2 crore, it shall cease to be entitled to continue as a one person company.

(4) Small Company
Meaning: 'small company' means a company, other than a public company-
(1) Paid - up share capital of which does not exceed Rs. 50 lakh or such higher amount as may be prescribed which shall not be more than Rs. 5 crores;
(2) Turnover of which as per its last statement of profit and loss does not exceed Rs. 2 crore or such higher amount as may be prescribed which shall not be more than Rs. 20 crore.

(5) Dormant company:The Indian companies Act, 2013 states that a company can be classified as dormant when it is formed and registered under this Act for a future project and has no significant accounting transaction. Such a company may apply to the registrar of companies in such manner as may be prescribed for obtaining the status of a dormant company.

(6) Company Limited by Guarantee: It means a company having the liability of its members limited by the memorandum to such amount as the members may respectively undertakes to contribute to the assets of the company in the event of its being wound up.

(7) Company Limited by share: It means a company having the liability of its members limited by the memorandum to the amount, if any , unpaid on the shares respectively held by them.

2.10 STAGES IN FORMATION OF A COMPANY

1. Promotion
Promotion means conceiving a business opportunity and taking an initiative to form a company.

Steps in promotion
(1) Identification of business idea/opportunity: Producing a new product or service.
(2) Feasibility studies: The promoters undertakes detailed studies to investigate all aspects of business, with the help of the specialists engineers, C.A etc. If the project is technically, financially and economically viable, the promoter may decide to actually launcha company.
(3) Name Approval: Having decided to launch a company, the promoters have to select a name for it and submit an application to the registrar of companies of the state for its approval.
(4) Fixing up signatories to the Memorandum of association: Promoters have to decide about the members who will be signing the memorandum of association of the proposed company. Usually, they are also the first Directors of the company.
(5) Appointment of professionals: Promoters appoint merchant bankers, auditors, etc. to assist them in the preparation of necessary documents to be submitted with the registrar of companies.
(6) Preparation of necessary legal documents: to be submitted to the registrar of the companies for registration of the company. These documents are Memorandum of Association, Articles of Association, etc.

2. Incorporation
Incorporation means registration of the company as a body corporate under the Indian companies Act, 2013 and receiving 'certificate of incorporation'.

Steps in Incorporation
(1) Application for incorporation: Promoters make an application for the incorporation of the company to registrar of companies along with necessary documents.
(2) Filling of necessary documents:
(a) Memorandum of Association
(b) Articles of Association
(c) Statement of Authorized Capital
(d) Written consent of proposed directors

CLASS 11

2020-04-27T17:22:00.003+05:30

CLASS 11 NOTES WITH CBSE REPEATED QUESTIONS

COMMERCE

(1) ECONOMICS

👉 NOTES: CBSE CLASS 11 ECONOMICS NOTES

👉 CBSE REPEATED QUESTION: CBSE CLASS 11 CBSE REPEATED QUESTIONS

👉 ONE MARKS QUESTIONS FROM CBSE QUESTION PAPERS: CBSE CLASS 11 ONE MARKS QUESTIONS

(2) BUSINESS STUDIES

👉 NOTES: CBSE CLASS 11 BUSINESS STUDIES NOTES

CBSE Class 11 Micro Economics Notes

2020-04-23T21:14:00.002+05:30

CBSE Class 11 Micro Economics Notes

Every field of study has its own language and its own way of thinking. An economics language consists of terms like demand, market, supply etc. the most important purpose of economics is to help you understand an economist's way of thinking. of course, as one cannot become a economist overnight, in the same way learning to think like an economist will take some time. these notes will give you an opportunity to develop your skills.

Chapter 1 Introduction

Chapter 2 Consumer's Equilibrium

Chapter 3 Demand & Chapter 4 Elasticity of Demand

Chapter 5 Production Function

Chapter 6 Cost

Chapter 7 Revenue

Chapter 8 Producer's Equilibrium

Chapter 9 Supply

Chapter 10 Main Market Forms

Chapter 11 Price determination with simple Applications

CBSE repeated questions

One Marks Questions From CBSE Question papers

CBSE Class 12 Macroeconomics Notes

2020-04-23T21:13:00.000+05:30

CBSE Class 12 Macroeconomics Notes

Every field of study has its own language and its own way of thinking. An economics language consists of terms like demand, market, supply etc. the most important purpose of economics is to help you understand an economist's way of thinking. of course, as one cannot become a economist overnight, in the same way learning to think like an economist will take some time. You may develop your skills through these notes.

chapter 1 Circular Flow of income

Chapter 2 Basic Concepts Of Macroeconomics

Chapter 3 National Income And Related Aggregates

Chapter 4 Measurement Of National Income

Chapter 5 Money

Chapter 6 Banking: Commercial Banks & Central Banks

Chapter 7 Aggregate And Related Concepts

Chapter 8 Income Determination And Multiplier

Chapter 9 Excess Demand And Deficient Demand

Chapter 10 Government budget and the economy

Chapter 11 Foreign Exchange Rate

Chapter 12 Balance of Payments

One Marks Questions From CBSE Question papers

CBSE repeated Questions of class 12 Macroeconomics

CBSE Class 12th Indian Economic Development Notes _ Chapter 1 Indian Economy on the Eve of Independence

2020-04-18T12:42:00.004+05:30

CBSE Class 12th Indian Economic Development Notes

Chapter 1 Indian Economy on the Eve of Independence

Agricultural Sector On The Eve Of Independence
1. Low Level of Productivity: Level of productivity was extremely low.

2. High degree of Vulnerability: Agriculture showed a high degree of vulnerability. Because, it was excessively dependent upon rainfall. Good rainfall implied good output, While poor rainfall implied poor output.
3. A wedge between owners of the soil and tillers of the soil: Owners, as crop sharers, were never committed to prosperity of agriculture; they were only interested in maximizing their rental income. The tillers of the soil were given barely enough for substance.
4. Uneconomic and fragmented landholdings: On the eve of independence, Indian farmlands were fragmented and scattered in pieces. Accordingly, most landholdings were uneconomic, yielding low surplus.

Factors Causing Backwardness And Stagnation Of Indian Agriculture during The British Rule

1. Land Revenue System Under The British Raj:
(a)The British government in India invented a unique system of land revenue. This was popularly known a Zamindari system of Land Revenue.

(b)The Zamindars were absolutely free to extract as much from the tillers of the soil as they could. They frequently raised the land revenue and ejected the existing tillers in case they objected to the raise.

2. Forced Commercialization of Agriculture:
(a) Farmers were forced to shift to commercial crops from the conventional subsistence crops. The farmers were lured or forced to accept advance payments for the cultivation of indigo. It exposed the subsistence farmers to uncertainties of the market. Consequence: Stick to agriculture, and always be at the mercy of landlords or moneylenders.
(b) Consequence, on the eve of independence, agricultural sector of the economy was absolutely backward, stagnant and non-vibrant. The impact was significantly felt with regard to jute production. Because the bulk of fertile land went to east Pakistan.

Industrial Sector On The Eve Of Independence

1. Discriminatory Tariff Policy of the state: The British needed raw material for their expanding industry, as well as market for their final products. They found India as a lucrative source of raw material and a promising market for their industrial products. A Discriminatory Tariff Policy was pursued. It allowed tariff free export of raw material from India and tariff free import of British industrial product into India, but placed a heavy duty on the export of Indian handicraft products.

2. Disappearance of Princely Courts: They used to partronise the handicrafts, enable to acquire international reputation. The beginning of British rule implied the end of princely courts, and therefore, the end of state patronage to handicrafts. Consequently, the handicrafts started decaying.

3. Competition from Machine-made products: Machine-made products from Britain were low-cost products and gave a stiff competition to the handicraft products in India. Competition forced the Indian craftsmen to shut-down their enterprises forever.

4. New Pattern of Demand: Owing to the impact of British culture, a new class emerged in India which was keen to adopt the western lifestyle. This changed the pattern of demand against the Indian products and in favour of the British products.

5. Introduction of Railways in India: The British government introduced railways in India. This was to facilitate transportation of the British products across different parts of the country. Consequently, Size of the market for the low-cost British products tended to expand while it started shrinking for the high-cost Indian products.

BLEAK GROWTH OF MODERN INDUSTRY
1. Under British Raj modern industry showed only a bleak growth.

2. A few textile mills sprang up followed by some iron&steel enterprises. Subsequently, a few sugar, cement and paper mills were established.

3. The state participation in the process of modern industrialization was very limited and confined only to the area which would enlarge the size of the market for the British products in India. These included: (1) Railway, (2) Power generation, (3) Development of ports and (4) The means of communication.

4. There was no capital goods industry worth the name. Capital goods industry produces goods like machines and industrial plants which are used for further industrialization.

Foreign Trade Under Thee British Rule

1. Net Exporter of primary products and Importer of finished goods: Owing to colonial exploitation of the Indian economy, India Became net exporter of raw materials and primary products. On the other hand it became net importer of finished goods produced by the British industry.

2. Monopoly Control of India's Foreign trade: Since India was being ruled as a British colony, exports and imports of the country became under monopoly control of the British government . More than 50 percent of India's foreign trade was directed towards Great Britain.

3. Surplus Trade but only to Benefit Britishers:
(1) Surprisingly, during the British regime, India's exports exceeded her imports, imports, implying a surplus of balance of trade. But this surplus was owing largely to the export of primary goods which is a sign of economic backwardness.

(2) Still worse was the fact that the trade surplus was not used for growth and development of the country; instead it was used to meet administrative expenses of the British government in India, as well as to meet expenses of wars fought by the British government.

Demographic Profile During The British Rule
A. Infant Mortality Rate: Death rate of children below the age of one year was very high. It was about 218 per thousand- contrasting sharply with 42 per thousand at present.

B. Life Expectancy: Average life of a person was as low as 32 years, while presently it is 66 years. Low life expectancy reflects lack of health care facilities.

C. Birth Rate And Death Rate: Both birth rate (BR) and death rate (DR) were very high-nearly 48 and 40 per thousand respectively. High BR and high DR suggest a state of massive poverty in the country.
D. Literacy Rate: was nearly 16 percent, reflecting social backwardness as a reflection of economic backwardness. Female literacy rate was still worse -- only 7 percent. This indicated gender-bias in the society.

Occupational Structure On The Eve Of Independence

1. Agriculture -The principal source of occupation: On the eve of independence, about 72.7 percent of working population was engaged in agriculture.
2. Industry-an insignficiant source of occupation
3. Unbalanced Growth: Growth is said to be balanced when all sectors of the economy are equally developed. In case of India, secondary and tertiary sectors were in their infant stage of growth.

WAS THERE ANY POSITIVE IMPACT OF THE BRITISH RULE IN INDIA?
1. Commercial agriculture
2. Spread of railways and roadways
3. Expanding means of transport: served as a support system to combat the spread of famines.
4. There was a significant transition from barter system of exchange to monetary system of exchange.
5. The British Raj in India left a legacy of an efficient system of administration. This served as a ready-reckoner for our politicians and planners.

CBSE Class 11th Business Studies Notes Chapter 1 Nature And Purpose Of Business

2020-04-07T23:24:00.003+05:30

CBSE Class 11th Business Studies Notes
Chapter 1 Nature And Purpose Of Business

1.1 Economic And Non-Economic Activities

Every human being is busy in one activity or the other to satisfy his/her needs. Human activities classified as economic and non economic activities.

1.2 CONCEPTS AND CHARACTERISTICS OF BUSINESS

Meaning and Definitions:
Business may be defined as an economic activity involving the purchase, production and sale of goods and services with a motive of earning profits by satisfying human needs in society.

Characteristics/Features of Business
1. An economic activity: Business is considered to be an economic activity because of the following reasons:
(a) It undertaken with the objective of earning money.
(b) It involves sale,exchange,purchase of goods and services for mutual profit.
(c) Business requires use of scarce economic resources like land, capital and machinery.

2. Production of goods and services: Business either manufactures goods (sugar,pen,furniture) or acquire them from producers. Services include transportation, banking, insurance etc.

3. Sale of goods and services: One of the essential characteristic of business is that there should be sale or exchange of goods and services between the seller and the buyer.

4. Dealings in goods and services on a regular basis: One single transaction of sale or purchase does not constitute business. For example, sale of old newspapers by a housewife to scrap dealer is not business. Because business involves dealings goods and services on a regular basis.

5. Profit earning: One of the main purposes of business is to earn profit. Profit is essential to cover costs and risks of the business. Every business must earn a reasonable profit to survive and grow. A business cannot survive without making profits.

6. Uncertainty of return: There is always uncertainty of return and possibility of loss. Every businessman invests money in his business with the objective of earning profit. However, there is always a possibility of loss.

7. Element of risk: Risk implies the possibility of reward or the possibility of loss. There are always some element of risk present in business. We can minimize the risk through insurance but cannot eliminated. The risks are related to change in consumer taste and fashions, competition, fire, theft accidents etc.

1.3 COMPARISON BETWEEN BUSINESS,PROFESSION AND EMPLOYMENT

Business: Business may be defined as an economic activity involving the purchase, production and sale of goods and services with a motive of earning profits by satisfying human needs in society.

Profession: Profession includes those economic activities which require application of special knowledge and skills in the occupation.
Employment: Employment refers to the occupation in which people work for others and get remuneration in return.

example: 1 People work in a factories receive wages

2 Bank employees get salaries etc.

1.4 OBJECTIVES OF BUSINESS

Objectives of business classified under two category:

1. Economic Objectives
Economic objective of business are centered around the personal profit of the business and are based on one slogan 'to earn maximum profits'.
(a) Profit Making: One of the main purposes of business is to earn profit. Profit is essential to cover costs and risks of the business. Every business must earn a reasonable profit to survive and grow. A business cannot survive without making profits.
(b) Survival: It is the basic objective of any business management must ensure the survival of the organisation. To survive, an organisation must earn enough revenues to cover costs.
(c) Growth: It is important for business to grow. Indicators of growth of a business are- (a) Increase in sale turnover, (b) Increase in the number of products and employees,etc.
2. Social Objectives
Social objective of business are centered around the interests of society and based on the slogan of 'social welfare'.
(a) Production and supply of quality goods and services: Business should produce and supply products of proper quality to satisfy consumer needs and expectations. Quality means durability and purity.
(b) Avoidance of anti-social and unfair trade practices: A businessman should avoid black-marketing, over-charging, misleading advertisement,etc. Such unfair practices destroy the goodwill and image of the business.
(c) Generation of employment: Business should generate employment opportunities to the backward area of the society.
(d) Welfare of employees: Business should provide good working conditions and pay satisfactory salaries/wages to its employees.
(e) Community service: Large business units should undertake community services like setting up charitable dispensaries, schools,etc.

1.5 ROLE OF PROFIT IN BUSINESS

1 Source of income for business persons: Profit is the source of income for the businessmen that provide livelihood.

2 Source of funds for meeting expansion requirements: Profits can be a source of finance for meeting growth and expansion requirements of business.

3 Indication of efficient working of business: Profits indicate the efficiency and a managed business. It is a measure to performance and success of a business.

4 Reward for risk taking: Profit is the reward for risk taking. Profit is essential to cover costs and risks of the business. Every business must earn a reasonable profit to survive and grow. A business cannot survive without making profits.

5 Builds up reputation of business: With increase in profits, a business earns reputation. It is able to rise loans and obtain credit more easily. It is in a better position to pay higher wages and salaries to its employees.

1.6 BUSINESS RISKS
Meaning: Business risk refers to the possibility of inadequate profits or even losses due to uncertainties or unexpected events.

Nature Of Business Risks

1 Business risks arise due to uncertainties: Natural calamities, change in demand and prices, change in government policy, improvement in technology,etc. are some example of uncertainty which create risks for business.
2 Risk is an essential part of every business: No business can avoid risk. Risk can be minimized but cannot be eliminated.
3 Degree of Risk depends mainly upon the nature ans size of business: A business dealing in fashionable items has a high degree of risk similarly, a large-scale business has a higher risk than a small-scale business.
4 Profit is the reward for risk taking: "No risk, no gain" is an old principle, which applies to all types of business. Greater the risk, higher is the chance of profit.

Causes Of Business Risks
1 Natural Causes: Natural causes of business risks (Flood, earthquake, heavy rains) are beyond human control. They result in heavy loss of life, property and income.
2 Human causes: Human causes of business risk include carelessness of employees, theft, riots, etc.
3 Economic Causes: Economic Causes such as fluctuations in demand and prices, competition, change in technology etc.
4 Other causes: These include undeclared/unwarranted events like political disturbance, mechanical failures such as bursting of boiler, etc.
Types Of Business Risks
1 Speculative risks: Speculative risks involve both the possibility of gain as well as loss. It arise due to fluctuations in demand and supply, etc.
2 Pure risk: Pure risk involve only the possibility of loss or no loss. Fire, theft, strike are example of pure risk.
3 Insurable risk: Insurable risk are those which can be insured because it is possible to determine the possibility of such risks. example- fire/theft of goods.
4 Uninsurable risks: uninsurable risk are those which cannot be insured because their probability cannot be determined. example- fluctuations in demand and price, change in government policies, etc.
1.7 CLASSIFICATION OF BUSINESS ACTIVITIES

Business activities may be classified into two categories: INDUSTRY and COMMERCE.

INDUSTRY
Meaning: industry means the production and manufacturing of goods. Three types of goods are manufactured in the industry:
(1) Producer's or capital goods: Those things which are used in production by other industries are called capital goods.
(2) Consumer's goods: Those tings which are directly put to use are called consumer;s goods. for example, bread, cloth, medicines, etc.
(3) Intermediate goods: Those gods which are processed in soome other industry to produce some need goods are called intermediate goods. for example: plastic, rubber, aluminium.

TYPES OF INDUSTRY
(1) Primary Industry: The primary industry includes those activities through which the natural resources are used as a raw material to other industries.
The primary industry are of two types:
(a) Genetic industry: Genetic means heredity. These industries involves breeding or reproduction of plants and animals. for example: Cattle breeding farms, poultry farms.
(b) Extractive industries: These industries extract/draw out various products from natural resources such as earth, soil, water, etc.

(2) Secondary Industry: Under the secondary industry, new products are manufactured by using the material extracted at the primary stage.
The secondary industry is two types:
(a) Manufacturing industries: These industries convert raw materials or semi-finished goods into finished products.
Manufacturing industries may be subdivided into four categories:
O Analytical industry: A basic raw material is separated into a number of products. for example, an oil into petrol, diesel etc.
O Synthetical industry: Two or more materials are combined together to manufacturing a new products. for example, cement soap, plastics, paints etc.
O Processing industry: Involves successive stages for manufacturing finished products. for example, sugar and paper.
O Assembling industry: Various parts are bought together to produce a finished products. for example, TV, car, computer, watches, etc.
(b) Construction industries: These industries are engaged in construction of buildings, bridges, roads, dams, canals, etc.

(3) Tertiary Industries: These industries provide services facilities. It includes transport, warehousing, communication, banking, insurance, advertising, etc.

COMMERCE
Meaning: Commerce includes all those activities which are necessary for facilitating the exchange of goods and services.
Commerce includes two types of activities
(1) Trade
(2) Auxiliaries to trade

TYPES OF TRADE
(1) Internal Trade: Trade which takes place within a country.
Internal trade can be classified into two broad categories:
(a) Wholesale trade: Wholesale trade refers to buying and selling of goods and services in large quantities for the purpose of resale.
(b) Retail trade: Retail trade refers to buying of goods and services in small quantity and selling them to the consumers.

(2) External Trade: Trade between two or more countries.
External trade can be classified into three categories.
(a) Import trade: If goods are purchased from another country, it is called import trade.
(b) Export Trade: If goods and services are sold to other countries, it is called export trade.
(c) Entrepot Trade: where goods are imported for export to other countries.

AUXILIARIES TO TRADE
(1) Banking: Business needs funds for acquiring assets, purchasing raw materials and meeting day-to-day expenses. Banking helps business activities overcome the problem of finance.
(2) Insurance: Business involves various types of risks. Insurance makes provision against such risks.
(3) Transportation: Transport facilitates movement of
-raw material to the place of production,
- the finished goods from factories to the place of consumption.
Because of transportation that a producer can sell his goods in different parts of the world. It creates place utility.
(4) Warehousing: Warehousing refers to the holding and preservation of goods until they are finally consumed.
(5) Communication: Communication services are helpful to the business for:
-establishing links with the outside world,
-for quick exchange of information.
The electronic media is mainly responsible for this transformation.

ROLE OF COMMERCE -- TRADE AND AUXILIARIES OF TRADE
(1) Trade removes hindrance of person: By making goods available to the consumers from the producers.
(2) Transportation removes hindrance of place: By moving goods from the places of production to the markets for sale.
(3) Storage and warehousing activities remove the hindrance of time: by facilitating holding of stock of goods to be sold as and when required.
(4) Insurance removes hindrance of risk: Of loss or damage of goods due to theft, fire, accidents, etc.
(5) Banking removes hindrance of finance: By providing funds to a businessman for purchasing raw materials and meeting other expenses.
(6) Advertising removes hindrance of information: By informing consumers about the goods and services available in the market.

Conclusion: Commerce is the backbone of the industry and other business activities.

Accountancy Theory Questions

2020-03-15T09:59:00.000+05:30

Accountancy Theory Questions From CBSE Question Papers

One Marks Questions

Q1: Book Keeping and Accounting
(a) Means same and are used interchangeably
(b) Does not mean same and are not used interchangeably
(c) Both (a) and (b)
(d) None of the above

Q2: Capital is
(a) Internal Liability
(b) External liability
(c) Internal as well as external liability
(d) None of these

Q3: According to cost concept
(a) Assets are recorded at the value paid for acquiring them
(b) assets are recorded at estimated market value at the time of purchase
(c) Assets are recorded at lower of cost or market value
(d) None of the above

Q4: Rohan commenced business 1st April with a capital of Rs. 6,00,000. On 31st March 2019 his assets were worth Rs 8,00,000 and liabilities Rs. 50,000. find out his closing capital ----
(a) 7,50,000
(b) 2,00,000
(c) 5,00,000
(d) 1,50,000

Q5: Withdrawal of cash from business by the proprietor is credited to
(a) Drawings A/C
(b) Capital A/C
(c) Cash A/C
(d) Profit and loss A/C

Q6: Cash Memo is a source voucher for purchase of goods
(a) For cash purchases
(b) For credit purchases
(c) For credit sales
(d) For cash sales

Q7: Interstate purchase of goods which GST is levied
(a) CGST
(b) SGST
(c) CGST & SGST
(d) IGST

Q8: ledger account is prepared from
(a) Transactions
(b) Journal
(c) Events
(d) None of these

Q9: Which of the following is not recorded in cash book ?
(a) Bad debt
(b) Depreciation
(c) Credit sales
(d) All of above

Q10: Cash sales of business are recorded in
(a) Sales book
(b) Cash book
(c) Sales return book
(d) Journal proper

Q11: Bank reconciliation statement is
(a) A part of double entry system
(b) not a part of double entry system
(c) part of bank statement
(d) None of these

Q12: Which item is shown as Debit balance in Trial Balance
(a) Creditors
(b) Bank overdraft
(c) Rent outstanding
(d) Cash in Hand

Q13: which of the following is not part of financial statement of a sole proprietorship?
(a) Receipt and payment account
(b) Profit and loss account
(c) Balance sheet
(d) Trading account

Q14: Under the Accrual basis of Accounting expenses are recorded
(a) On payment
(b) On being incurred
(c) either (a) and (b)
(d) None of these

Q15: IFRS are based on
(a) Historical cost
(b) Fair value
(c) Both historical and fair value

Q16: Define revenue with example.

Q17: List any two objectives of accounting

Q18: Mr. vikas who owed us Rs 60000 became insolvent and paid only 40% of this amount not received?

Q19: Distinguish between capital expenditure and revenue expenditure.

Q20: An old machinery was sold to Mahesh for Rs 56000. Name the book in which this entry will be recorded.

Q21: What is meant by noting of bill of exchange?

Q22: Lalit of Delhi purchased goods of Rs 20000 from Mehar of kanpur. Whether IGST or CGST and SGST will be charged by Mehar? Why?

Q23: Under which accounting concept is provision for Doubtful Debts made?

Q24: The debts written off as bad, if recovered subsequently, are credited to the Debtor's Account. Is it correct? Why?

Q25: How is unearned Income shown in the final Accounts?

Q26: Give one limitation of incomplete record.

Q27: A firm earns a revenue of Rs 21000 and the expenses to earn this revenue are Rs 15000. Calculate its income.

Q28: Mr. Raj an electronic goods dealer, gifted a microwave of value Rs 30000 to his friend Rohan and recorded it in books as drawings. Is he correct?

Q29: Due to labour strike, in a factory the production had to stop for a week. The accountant estimated the loss of production and likely loss of profit and recorded it in the books of accounts. Is the accountant correct?

Q30: If machinery is purchased for cash , indicates how accounting equation will be affected?

Q31: Differentiate between cash basis of accounting and Accrual basis of accounting on the basis of timing of recording an income.

Q32: Meena is owner of a restaurant. She paid sons fees from her personal bank account Rs 20000. whether this constitute her business transaction? Give reason.

Q33: Hari gifted a set of six T-shirt to one of his friend. In which accounts this transaction should be debited and credited?

Q34: How would you treat goods given away as charity while preparing financial statement of an organization.

Q35: what do you mean by 'Legacy'.

CBSE repeated Questions of class 12 Macroeconomics

2020-02-21T00:15:00.000+05:30

Most important CBSE repeated questions in Exams of class 12 macroeconomics

Question 1. Define multiplier. What is the relation between marginal propensity to consume and multiplier? Calculate the marginal propensity to consume if the value of multiplier is 4.

Question 2. Explain the role of the reserve Bank of India as the "lender of last resort".

Question 3. What is meant by inflationary gap? State three measures to reduce this gap.

Question 4. What iss meant by aggregate demand? state its components.

Question 5. The value of marginal propensity to consume is 0.6 and initial income in the economy is 100 crore. prepare a schedule showing Income, consumption and saving. Also show the equilibrium level of income by assuming autonomous investment of 80 crores.

Question 6. Explain the meaning of the following:
(a) Revenue deficit
(b) Fiscal deficit
(c) Primary deficit

Question 7. Explain the following objective of government budget:
(a) Allocation of resources
(b) reducing income inequalities

Question 8. (a)Explain the impact of rise in exchange rate on national income.
(b) Explain the concept of 'deficit' in balance of payments.

Question 9. (a) Net National Product at market price, and (b) Gross Domestic Product at Factor Cost:
(1) Rent and interest -------------- 6000
(2) Wages and salaries -------------- 1800
(3) Undistributed profit -------------- 400
(4) Net indirect taxes --------- 100
(5) Subsidies ---------- 20
(6) Corporation tax ---------120
(7) Net factor income to abroad ------- 70
(8) Dividends -----------80
(9) Consumption of fixed capital --------- 50
(10) Social security contribution by employers ------200
(11) Mixed income ------ 1000

Question 10. Distinguish between stocks and flows. Give an example of each.

Question 11. Explain the "medium of exchange" Function of money.

Question 12. Distinguish between direct taxes and indirect taxes. Give an example of each.

Question 13. An economy is in equilibrium. From the following data, calculate the marginal propensity to save:
(a) Income ---------10,000
(b) Autonomous consumption ----- 500
(c) Consumption expenditure ------ 8000

Question 14. Explain the "Bankers Bank" Function of the central bank.
Question 15. Explain the process of credit creation by commercial banks.

Question 16. What are non-debt creating capital receipts? Give two example of such receipts.
Question 17. Distinguish between (a) Current account and capital account, and (b) Between autonomous transactions and accommodating transactions of balance of payments account.

Question 18. Explain the precautions that should be taken while estimating national income by expenditure method.
OR
Calculate the (a) Gross National Product at market price and (b) Net National Disposable Income:
(1) Compensation of employees -------- 2500
(2) Profit -------- 700
(3) Mixed income of self-employed -------- 7500
(4) Government final consumption expenditure ------ 3000
(5) Rent -------- 400
(6) Interest -------- 350
(7) Net Factor income from abroad ------- 50
(8) Net current transfers to abroad -----------100
(9) Net indirect taxes ------- 150
(10) Depreciation ------ 70
(11) Net exports ------ 40

Question 19. Describe the circular flow of income in a two sector economy with help of diagram showing real flow and nominal flow.

Question 20. Calculate (a) Depreciation (b) Subsidies (c) NDPfc
(In crores)
(a) GNPfc ------------95000
(b) Indirect Tax ------- 14000
(c) NDPmp -------- 100422
(d) NNPmp -------- 100000
(e) GNPmp ----------107000

Question 21. Calculate national income by income and Expenditure method.
(a) Compensation of employees --------25
(b) Imports -------- 59
(c) Mixed income ------- 50
(d) Gross fixed capital formation ------- 120
(e) Private final consumption expenditure -------- 550
(f) Depreciation ---------- 10
(g) NFIA ---------20
(h) NIT -------- 80
(i) Change in stock -------20
(j) Rent ----------100
(k) Interest ---------200
(l) Profit --------- 50
(m) exports -------- 10
(o) Govt. final consumption expenditure ----- 60

Question 22. What is meant by 'Money supply'? Discuss in brief, the various constituents of money supply.

Question 23. Distinguish between stock and flow variables with suitable examples.

question 24. What are capital goods? How are they different from consumption goods?

Question 25. Define investment multiplier. How is it related to marginal propensity to consume?

Question 26. What is monetary policy? State any three instruments of monetary policy.

Question 27. Define full employment in an economy. Discuss the situation when aggregate demand is more than aggregates supply at full employment income level.

Question 28. What are two alternative ways of determining equilibrium level of income? How are these related?

Question 29. What is government budget? Explain its major components.

Question 30. Explain (a) Allocation of resources and (b) Economic stability objectives of government budget.

Question 31. Discuss briefly the meanings of:
(a) Fixed Exchange Rate
(b) Flexible Exchange Rate
(c) Managed Floating Exchange Rate.

Question 32. Calculate (a) Operating surplus and (b) Domestic Income:
(1) Compensation of employees ------ 2000
(2) Rent and interest ------- 800
(3) Indirect taxes ----- 120
(4) Corporation tax ------- 460
(5) Consumption of fixed capital ------ 100
(6) Subsidies ------ 20
(7) Dividend ------ 940
(8) undistributed profits ---- 300
(9) Net factor income to abroad ----- 150
(10) Mixed income -------- 200

Question 33. Explain any three limitations of using GDP as a measure of welfare of a country.

Question 34. Discuss any two differences between GDP at constant prices and GDP at current prices.

Question 35. in an economy investment expenditure increased by 400 crores and MPC is 0.8 calculate increase in income and increase in saving.

Question 36. What is deflationary gap? What is its impact on output, employment and prices?

One Marks Questions From CBSE Question papers

2020-02-19T20:33:00.001+05:30

Important One mark Questions from CBSE Question papers
As CBSE changes its pattern, So it's most important to study One marks questions because in question paper there will be 10 questions carry one mark each, to solve this problem study more and more one marks questions but the questions which was already asking in CBSE question papers that will be very helpful for us.
1. CRR refers to ------(a) Credit reserve rate(b) Cash reserve ratio(c) Central reserve ratio(d) None of these
2. Retirement pension is ------(a) A king of transfer payments
(b) a kind of corporate tax
(c) a kind of deferred wage
(d) None of these

3. The value of multiplier lies between-----
(a) 0 to 1
(b) 0 to ∞
(c) -1 to 1
(d) 1 to ∞

4. The central bank is ----
(a) an apex bank
(b) the sole agency of note-issuing
(c) Focuses on stability and growth of the economy
(d) All of these

5. In which type of Economy domestic income s equals to national income----
(a) Open Economy
(b) Closed Economy
(c) Both A and B
(d) none of these

6. Who regulated money in India?
(a) The RBI
(b) The commercial Banks
(c) The Government
(d) All of these

7. Define excess demand.

8.What do you mean by money.

9.Which of the following is not a transfer payments----
(a) Old age pension
(b) scholarship
(c) School fees paid by the students
(d) payment of wealth tax

10. In expansionary monetary policy, the central bank-----
(a) Increases Bank Rate
(b) Increases margin requirement
(c) Purchases securities in the open market
(d) All the above

11. State two main components of money supply.

12. What can be the maximum value of marginal propensity to save?
(a) 0
(b) 1
(c) 2
(d) -1

13. Is national income is a stock concept or flow concept?

14. Can purchase of a new car can be categorized as an intermediate good?

15. Define GDPmp

16. Give one example of negative externalities.

17. Credit creation by commercial banks is determined by -----
(a) Cash Reserve Ratio (CRR)
(b) Statutory Liquidity Ratio (SLR)
(c) Initial Deposits
(d) All the above

18. State the two components of M1 measure of money supply.

19. Define aggregate supply.

20. Define revenue deficit.

21. If the marginal propensity to consume is greater than marginal propensity to save, the value of the multiplier will be-----
(a) greater than 2
(b) less than 2
(c) equal to 2
(d) equal to 5

22. Demand deposits include----
(a) Saving account deposits and fixed deposits
(b) Saving account deposits and current account deposits
(c) Current account deposits and fixed deposits
(d) All types of deposits

21. What is meant by depreciation of domestic currency?

22. Define marginal propensity to save.

23. Which of the following affects national income?
(a) Goods and services tax
(b) Corporation tax
(c) Subsidies
(d) None Of the above

24. Define money supply.

25. The central bank can increase availability of credit by------
(a) Raising repo rate
(b) Raising reverse repo rate
(c) Buying government securities
(d) Selling government securities

26. Why does consumption curve not start from the origin?

27.What will be the value of investment multiplier if value of MPC is three times of value of MPS?

28. When does the situation of deficient demand arise in the economy?

29. What will be the effect of a decrease in CRR on money supply----
(a) Money supply will increase
(b) Money supply will decrease
(c) Money supply will remain constant
(d) None of these

30. Borrowing requirement is always equal to ------
(a) Capital Receipts
(b) Fiscal Deficit
(c) Revenue Deficit
(d) Primary Deficit

31. -------- increase the liability of the government.
(a) Capital receipts
(b) Capital expenditure
(c) Revenue receipts
(d) Revenue expenditure

32. Define GDP deflator.

33. Which of these is a stock?
(a) Investment
(b) Savings
(c) Exports
(d) Foreign Reserve with RBI

34. What is national income?
(a) Income generated with in the domestic territory of a country in a year.
(b) Income generated by the normal resident of a country in a year.
(c) Income generated with in the country in an year.
(d) None of above

35. What is meant by Zero primary deficit?
(a) Equality between fiscal deficit and interest payments
(b) Equality between fiscal deficit and revenue deficit
(c) Balance budget
(d) Surplus Budget

36. What is full employment?

37. Other things remaining unchanged when in a country the price of foreign currency rises national income is:
(a) Likely to rise
(b) Likely to fall
(c) Likely to rise and fall both
(d) Not affected

38. If MPC = 0, the value of multiplier is:
(a) 0
(b) Between 0 and 1
(c) 1
(d) infinity

39. Who regulates money supply?
(a) Government of India
(b) Reserve Bank of India
(c) Commercial Banks
(d) Planning Commission

40. State the components of supply of money.

41. How will the money supply be affected when there is reduction in cash Reserve Ratio
(a) Money supply will increase
(b) Money supply will decrease
(c) Money supply will remain constant
(d) none of these

42. If saving function is S = 50 + 0.2Y then MPC will be
(a) 0.45
(b) 0.8
(c) 0.65
(d) 0.25

43. Name the situation under which AD falls short of AS at full employment level?
(a) Excess Demand
(B) Deficient demand
(c) Inflationary Gap
(d) None of these

44. Fiscal deficit is equal to ----
(a) Total expenditure
(b) Total Revenue
(c) Capital receipts
(d) borrowing

45. What is meant by primary deficit?

46. If real GDP is Rs 500 and price index is 125, Calculate normal GDP.

47. The ratio of total deposits that a commercial bank has to keep with RBI is called:
(a) Statutory liquid ratio
(b) Deposit ratio
(c) Cash reserve ratio
(d) Legal reserve ratio

48. What is marginal propensity to consume?

49. Which of the following is stock variable?
(a) Water in a river
(b) Population
(c) Wealth
(d) Income

50. Which of the following will increase credit in the country?
(a) Fall in repo rate
(b) Decrease in CRR
(c) Purchase of securities in open market
(d) All of these

51. Define marginal propensity to consume.

52. Gross investment is equal to :
(a) Net investment - Depreciation
(b) Net investment * Depreciation
(c) Net investment + Depreciation
(d) Net investment / Depreciation

53. Money supply is a -------- concept :
(a) Stock
(b) Flow
(c) Both A & B
(d) None of these

CBSE Class 12 Macroeconomics Notes Chapter 12 Balance of Payments

2020-02-19T19:41:00.000+05:30

Chapter 12 Balance of Payments

Balance of Payments
Meaning: BOP is an accounting statement that provides a systematic record of all the economics transaction between resides of a country and the rest of the world in a given period of time.

It records flow of goods, services, & capital

BOP Account is always Balanced

Current Account
Meaning: It is an account which records imports & exports of goods, services and also the unilateral transfer during a year.

Components of current Account
1. Export & Import of goods
2. Export & Import of services
3. Unilateral transfers

Capital Account
Meaning: It records are such transactions between residents of a country & rest of the world which affect the assets & liabilities of a nation.

Components of Capital Account
1. Private transaction: Those transactions which affect the assets & liability by individuals, business an non-govt entities.
2. Official transactions: These includes transactions affecting assets & liabilities by govt & its agencies.
3. Direct Investment: It means purchasing an assets & at the same time acquiring control of it.
eg. Purchase of a house abroad.
4. Portfolio Investment: It is also acquisition of an assets but it does not give the purchasing full control of it.
eg. Purchase of shares in a foreign company

Causes of BOP1. Economic Factors:

Large scale development expenditure.
high domestic prices causes imports.
Cyclical fluctuations like recessions or depression increases imports.

2. Political factors:

Political instability and disturbances cause large capital outflow and less of inflows of foreign capital.

Difference between Balance Of Current Account of BOP And Balance Of Payments

Difference between Autonomous items of BOP And Accommodating items of BOP

Difference between Balance of Trade And Balance of Payments

One Marks Questions From CBSE Question papers

2020-02-18T15:57:00.000+05:30

Important One mark Questions from CBSE Question papers


As CBSE changes its pattern, So it's most important to study One marks questions because in question paper there will be 10 questions carry one mark each, to solve this problem study more and more one marks questions but the questions which was already asking in CBSE question papers that will be very helpful for us.

1. If the first quartile is 104 and quartile deviation is 8, the third quartile is :
(a). 130
(b). 120
(c). 136
(d). 146

2. The square of standard deviation is known as :
(a). Variance
(b). Mean deviation
(c). Standard deviation
(d). None of these

3. Standard Deviation is :
(a). Absolute measure
(b). Relative measure
(c). Both (a) and (b)
(d). None of these

4. Semi-interquartile range is also known as :
(a). Mean deviation
(b). Standard deviation
(c). Quartile deviation
(d). Quartile range

5. The range of the following set of observations 2,3,5,9,8,7,6,5,7,4,3 is :
(a). 6
(b). 7
(c). 5.5
(d). 11

6. Under monopoly, selling costs are incurred for :
(a). Persuading customers for not buying competitor's product.
(b). Informative purpose
(c). Promoting sales of the product
(d). None of these

7. ---------- refers to the minimum price, fixed by the govt, which is above equilibrium price:
(a). Price Floor
(b). Minimum support price
(c). Price ceiling
(d). Both (a) and (b)

8. Equilibrium price remain the same when :
(a). Increase in demand = Increase in supply
(b). Increase in Demand > Decrease in supply
(c). Decrease in Demand > Increase in supply
(d). Increase in Demand = Decrease in supply

9. Demand curve of a firm is perfectly Elastic under :
(a). Perfect competition
(b). Monopoly
(c). Monopolistic competition
(d). Oligopoly

10. Homogeneous products is a characteristic of :
(a). perfect competition only
(b). Perfect oligopoly only
(c). Both (a) and (b)
(d). None of the above

11. In singular sense, statistics means :
(a). statistical science
(b). Statistical Data
(c). Statistical Method
(d). A and C both

12. State two examples of qualitative data.
OR
State two examples of quantitative data.

13. Which of the following is an economics activity?
(a). Production
(b). Exchange
(c). Investment
(d) All of the above

14. Range is the
(a). Difference between the largest and the smallest observations
(b). Difference between the smallest and the largest observations
(c). Average of the largest and smallest observations
(d). Ratio of the largest to the smallest observations

15. Bar diagram is a
(a). One dimensional diagram
(b). Two dimensional diagram
(c). Three dimensional diagram
(d). None of the above

16. Which is the most important part of a table
(a). Heading
(b). Body
(c). Table number
(d). None of the above

17. Most commonly used measures of central tendency is
(a). Arithmetic mean
(b). median
(c). mode

(d). partition value

18. Mode is the value of a series that occurs---------- times in the series?
(a).  zero

(b). maximum

(c). minimum

19.State the formula of calculating median under continuous series?

20. The sum of deviations of different values from actual arithmetic mean is always______.
(a) Zero
(b) Infinity
(c) One
(d) Two
21. Equilibrium is determined where-------
(a) Explanation of buyer match with explanation of seller.
(b) Quantity of demand becomes equal to quantity supplied
(c) Situation of Zero excess supply and zero excess demand
(d) All of these

22. Why PPC is concave to the origin------
(a) Due to increase in MRT
(b) Due to constant MRT
(c) Due to decrease in MRT
(d) None of these
23. When a consumer consumes more and more amount of good the utility derived from the consumption of successive unit ---
(a) Rises
(b) Remains constant
(c) Falls
(d) All of these

24. Central problem of economy arises due to----
(a) Limited supply of resources
(b) Human wants are unlimited
(c) Resources can be used in alternative manner
(d) All of these

25. When supply of a good increases and at the same time demand decrease the equilibrium Price----
(a) Remains unchanged
(b) Falls
(c) Rises
(d) None of these

26. All point inside PPC are
(a) NON attainable combination
(b) Attainable combination
(c) Increasing MRT
(d) All of the above

27. When TR is maximum---
(a) AR is Maximum
(b) MR is Maximum
(c) MR Zero
(d) None of the above

28. Which of the following is true when one unit of quantity is produced?
(a) Marginal Cost > Total variable cost
(b) Marginal Cost = Total variable cost
(c) Marginal Cost < Total variable cost
(d) none of these

29. What do mean by exceptions to law of supply?

30. Why is the production possibility curve concave to the origin?

31. A firm is able to sell more quantity of a good only by lowering the price. The firm's marginal revenue, as he goes on selling would be:
(a) Greater than average revenue
(b) Less than average revenue
(c) Equal to average revenue
(d) Zero

32. When total revenue increases at an increasing rate MR will ------
(a) Rise
(b) Fall
(c) Remain constant
(d) First fall then rise

33. Which one from the following leads to expansion in supply?
(a) fall in price
(b) rise in Price
(c) Price remain constant
(d) None of these

34. Scarcity is a situation when demand for good is ----
(a) Equal to supply
(b) More than supply
(c) Less than supply
(d) None of these

35. Total production increases at decreasing rate then marginal product.
(a) Increase
(b) Become Zero
(c) Remains Constant
(d) Decreases

36. Which concept of revenue is called price -----
(a) Total revenue
(b) Marginal revenue
(c) Average revenue
(d) None of these

37. Which cost curve is rectangular hyperbola ----
(a) AFC Curve
(b) AVC Curve
(c) AC Curve
(d) TFC Curve

38. What will be happen to PPF if there is technological up-gradation in case of both goods?
(a) Rightward Shift in PPF
(b) Leftward shift in PPF
(c) Rotation of PPF
(d) None of these

39. Average Product cannot be negative because:
(a) Total product can never be zero
(b) Total product can never be negative
(c) Neither (a) nor (b)
(d) Both (a) and (b)

40. Which formula is incorrect to determine the value of TC ----
(a) TC = TVC + TFC
(b) TC = ∑MC
(c) TC = AC * Q
(d) TC =  ∑MC + TFC

41. In case of perfect competition, a firm is in equilibrium when ----
(a) MC = MR
(b) MC Cuts MR from below
(c) MC is rising when it cuts MR
(d) All Of these

42. Why is production possibility curve concave to the origin?
43. For a perfectly competitive market price would be equivalent to -----
(a) Average revenue
(b) Marginal revenue
(c) Total revenue
(d) Both A & B

43. Define variable Cost.
44. What is meant by change in quantity supplied?

45. Define law of variable proportion.

CBSE Class 12 Macroeconomics Notes Chapter 11 Foreign Exchange Rate

2020-02-17T21:06:00.003+05:30

Chapter 11 Foreign Exchange Rate

Foreign Exchange/ Foreign Currency
Meaning: It refers to the currency other than our domestic currency.

Foreign Exchange Rate
Meaning: Rate at which currency is exchange with the currency of other country.

Foreign Exchange Market
Meaning: It refers to a market in which foreign currency are bought and sold.

Functions of foreign exchange market
1. Transfer function: Transferring the purchasing power between the countries.
2. Credit Function: It provides credit for foreign exchange/ trade.
3. Hedging function: Protecting the interest of investor & minimizing his risk of foreign exchange market.

Two types of foreign exchange Rate systems
1. Fixed exchange rate system
2. Flexible/ Floating exchange rate system

1. Fixed exchange rate system
Meaning: It refers to the system in which exchange rate for currency is fixed by the govt.

Revaluation of a currency: Increase in the value of our domestic currency under fixed exchange rate system.
Devaluation of a currency: Decrease in the value of our currency under fixed exchange rate system.

Merits
1. It leads to market stability.
2. It also prevents speculation in the market.

Demerits
1. Govt. will have to maintain.
2. venture capitalists would not like to invest.

2. Flexible Exchange Rate System
Meaning: It refers to the system in which exchange rate for foreign exchange is determined by the market force of demand and supply.

Appreciation of a currency: Increase in the value of our currency because of market forces of DD & SS.
Depreciation of a currency: Decrease in the value of our currency because of market forces of DD & SS.

Merits
1. Govt. is under no obligation maintain reserves.
2. Venture capitalists would like to invest.

Demerits
1. Leads to fluctuation in market.
2. Speculation is prevalent.

Demand For Foreign Exchange
1. To purchase goods & services abroad.
2. To purchase land, building etc abroad.
3. To invest in financial assets like shares, debentures of foreign companies.
4. To travel abroad.
5. To send gifts & grants abroad.

Sources of supply of foreign
1. When foreigners purchase goods & services from India.
2. When foreigners purchase assets like land, building, machinery etc. in India.
3. When foreigners purchase financial assets like shares in India.
4. When foreigners travel to India.

Currency Depreciation And Currency Appreciation

Currency Depreciation: It refers to decrease in value of domestic currency in terms of foreign currency.
Currency Appreciation: It refers to increase in the value of domestic currency in terms of foreign currency.

Difference Between Depreciation And Devaluation of currency

Difference between Appreciation of currency And Revaluation of currency

CBSE Class 12 Macroeconomics Chapter 10 Government budget and the economy

2020-02-17T15:29:00.001+05:30

Chapter 10 Government Budget And The Economy

Government Budget
Meaning: It is an annual financial statement showing item wise estimates of revenue and expenditure during a fiscal year

Objectives of Govt. Budget

(1). Economic Growth: The govt. seeks to accelerate the peace of growth through investment in efficient enterprises and disinvestment in inefficient in enterprise. This is to accelerate the GDP.
(2). Redistribution of income and wealth: Through budget the government redistributes income and wealth to reduce inequalities in two ways. The budget should aim to impose high taxes on income of the rich and goods consumed by the rich. It will reduce disposable income of the rich. Budget should aim to spend more on the schemes which benefits the poor. This will raise disposable income of the poor. This will raise disposable income of the poor. In this way, Gap between rich and poor will reduce.
(3). Eradication of poverty, unemployment, illiteracy: Govt. budget also aims at the removal of evils in the economy, like poverty, illiteracy. This is done by running poverty eradication programs, rozgar yognas etc.
(4). Economic stability: Government budget can help to bring stability in economy. In inflationary situation government reduces its own expenditure and increases taxes, During deflation government try to increase the spending and cut down the taxation.
(5).Allocation Of Resources: Govt. ensures proper allocation of resources in the economy. Through its budgetary policy, the govt. makes sufficient provision for the supply of public goods. It also issues environmental issues by offering subsidies on the use of cleaner energy (LPG).
(6). Management of public enterprises: These are some industries and enterprises which effects the growth and development of economy. These enterprises are controlled and regulated by government . The decision about investment and disinvestment, about changes in wages and salaries of government employees and changes regarding retirement pension i also taken under budget.

*Please learn each & every objective, separate Questions can be asked on any objective.

Difference Between Revenue Budget And Capital Budget

Budget receiptsMeaning: It refers to the estimated receipts of the government from all the sources during a financial year.

Capital Receipts

Meaning: Govt. receipts which either creates liability or reduces assets are called as capital receipts.
(1). Borrowings: Borrowings done by government creates a liability on govt. Therefore it is a capital receipts.
(2). Disinvestment / sale of shares of public enterprise: When govt. receives money by selling shares that it reduces the govt. assets. Therefore it is a capital receipt. e.g- Indian Airlines shares given to private firms.
(3). Recovery of loan: When govt. lends money, it creates asset for govt. but when this loan is recovered, then it leads to reduction in the asset of the nation.
(4). Small savings in post offices: Small savings by general public in post officers etc. are received by govt. but it is liable to repay, when asked by general public, so it is a capital receipt for the govt.

Difference between Revenue Receipts And Capital Receipts

Tax Revenue: It consists of proceeds of taxes & other duties levied by the govt.

Tax: It is legally compulsory payment, imposed by govt. on income & profits of individuals and organisations.
Difference Between Direct Taxes And Indirect Taxes

Non-Tax Revenue Receipts
Meaning: Income from sources other than taxes is called as non-tax revenue receipts.
(1). Profits: Profits earned by govt. companies like BHEL, GAIL, SAIL are also non-tax revenue. As they neither create a liability on govt. to repay, nor do they reduce the asset.
(2). Dividends: Dividends received by govt. investments done, neither creates liability nor reduces assets.
(3). Interest: Interest received on govt. of India on loans given, does not create any liability nor does it reduce the assets.
(4).Fees & Fines: All the types of fees like OPD fees, school fees etc. and fines like Callan does not create any liability nor does it reduce any asset.
(5). Special Assessment: When govt. undertakes any development activity, the property & the rental value of the near by areas goes up. Govt. charges a special assessment in proportion to the benefit accrued, this neither creates a liability nor reduce the assets.
(6). External Grants in AID: During the times of calamities & crisis, govt receives aids & assistance from other nations. This neither creates liability nor reduces the assets.

Budget Expenditure
Meaning: Refers to the estimated expenditure to be incurred by the govt. under different heads in an year.

Objectives of Budget Expenditure
1. For smooth functioning of the govt.
2. For social & economic welfare.
3. For removing regional disparities.
4. For economic growth.

Different Between Revenue Expenditure And Capital Expenditure

Types of Budget

1. Balanced Budget
Meaning: It refers to the govt. budget is balanced when its estimated receipts are equal to its estimated expenditure.
Balanced Budget = (Estimated Budget Receipts = Estimated Budget Expenditure)

Merits
1. Ensures financial stability.
2. Avoids wasteful expenditure.

Demerits
1. Economic growth hindered.
2. Scope of undertaking welfare activities is restricted.

2. Surplus Budget
Meaning: When govt. estimated receipts are greater than the estimated expenditure.
Surplus Budget = ( Estimated govt. receipts > Estimated govt. expenditure)

Surplus budget is a cure for inflation
Surplus budget is a cause for deflation.

3. Deficit Budget
Meaning: When govt. estimated receipts are less than govt. estimated expenditure.
Deficit Budget = ( Estimated govt. receipts < estimated govt. expenditure)

Merits
1.Accelerates economic growth.
2. Enables to undertake welfare programs

Demerits
1.Encourages wasteful expenditure.
2. Financial & political instability.

Deficit Budget is a cure for deflation.
Deficit Budget is a cause for inflation.

Types Of Budget Deficit

1. Revenue Deficit
Meaning: It refers to a situation where the govt. revenue expenditure exceeds revenue receipts.
Revenue Deficit = Revenue expenditure - Revenue receipts

Remedies
1. govt must raise the rates of takes specially on rich people.
2. govt must try to reduce expenditure & avoid unnecessary expenses.

Implications/ Impact/ Consequences of Revenue Deficit
1. Increase in Borrowings requirements and Debt trap: To fulfill the expenditures, if govt. borrows money and then it is not capable enough to repay, then it might force the govt. to take a fresh loan, this would bring the govt. under debt trap.
2. Reduction in Assets: Again to meet up the financial obligations, the govt might end up and selling assets to cover up.
3. Inflationary pressure: Since the borrowed funds are largely used to find the consumption expenditure, this may create inflationary pressure.
4. Wasteful expenditure: Deficit also shows that govt. might be doing wasteful expenditure.

2. Fiscal Deficit
Meaning: When govt. total budget expenditure is greater than the total budget receipts excluding borrowings.
Fiscal Deficit = Total Expenditure - Total Receipts excluding borrowings

Implications of Fiscal Deficit
1. Increase in Borrowings requirements and Debt trap: To fulfill the expenditures, if govt. borrows money and then it is not capable enough to repay, then it might force the govt. to take a fresh loan, this would bring the govt. under debt trap.
2. Reduction in Assets: Again to meet up the financial obligations, the govt might end up and selling assets to cover up.
3. Inflationary pressure: Since the borrowed funds are largely used to find the consumption expenditure, this may create inflationary pressure.
4. Wasteful expenditure: Deficit also shows that govt. might be doing wasteful expenditure.

3. Primary Deficit
Meaning: It is defined as fiscal deficit less then interest payments on previous borrowings.

Primary Deficit = Fiscal Deficit - Interest payments

CBSE Class 12 Macroeconomics Chapter 9 Excess Demand And Deficient Demand

2020-02-05T20:17:00.000+05:30

Chapter 9 Excess Demand And Deficient Demand

Excess Demand / Inflationary Gap / Over employment Equilibrium
Excess Demand: It is the situation in which AD is for an output which is above full employment AD.
Inflationary Gap: It is the gap showing excess of AD above full employment AD.
Diagram:

Effects of Excess Demand
(1). It causes a continuous & persistent rise in price.
(2). The producer gets abnormal profits margin.
(3). The consumers are losses as their purchasing power goes down with rise in prices.
(4). It results in a wage-price spiral i.e rise in prices implies that real wages will fall. So, the union will demand for higher wages. It will increase the cost of production & It will again lead to rise in prices.
(5). It will lead to increase in employment. But generally there is no change in unemployment because the system is in full employment.
(6). If there is full employment in the economy, production cannot be increased. But if the resources are not fully employed, then they will be fully employed & production will increases.
(7). It leads to prosperity or boom conditions in the trade cycle of an economy.

Deficient Demand / Deflationary Gap / Under employment equilibrium
Deficient Demand: It is a situation in which AD is for an output which is below full employment AD.Deflationary Gap: It is a gap showing deficiency of AD below full employment AD.Diagram:

Effects of Deficient Demand
(1). There is a fall in the general price level.
(2). The producer incur losses or their profits are nil.There is a fall in the level of production are there are unsold stock of goods.
(3). Consumers are gainers because prices have gone down.
(4). Fall in the level of national income.
(5). Fall in the level of employment which leads to strikes & lockouts.
(6). It there is oligopoly, the price will remain same but level of production will decline.
(7). It will lead to recession & depression in the trade cycle of an economy.

Measures to Control Excess Demand / Inflationary Gap/ Over employment equilibrium
Fiscal Policy OR Budgetary Policy
Meaning: It is the revenue & Expenditure policy formulated by government to combat inflation and deflation.

(1). Revenue Policy: During inflation government increases its revenue by increasing the taxes to reduce flow of excessive money in economy.
(2). Expenditure Policy: Government reduces its expenditure on public works like roadways, Dams, bridges etc , So that supply of money does not increase in the economy.
(3). Public Borrowings: Government by issuing bonds and other securities should borrow money from public. It reduce the excessive flow of money in the economy.
(4). Deficit Financing: Government should cu down on printing of new currency notes, as there is already excessive money flowing in the economy.

Quantitative & Qualitative Measures

1. Bank Rate: It refers to the rate at which central Bank lends money to commercial banks to meet their long-terms needs.

At the time of inflation: When there is excessive flow of money in the economy, RBI increases the bank rate which makes loans costlier & flow of money in the economy is reduced.

At the time of Deflation: When the money flow in economy is less, bank rate is reduced loans become cheaper & the flow of money is boosted.

2. Repo Rate: It is rate at which the central bank lends money to commercial banks to meet their short-terms needs.

At the time of Inflation: An increase in repo rate increase the cost of borrowings from the central bank. It forces the commercial banks to increase their lending rate, which discourages borrowers from taking loans. It reduces the ability of commercial banks create credit.

At the time of Deflation: Decrease in repo rate, decrease the cost of borrowings from the central bank. It forces the commercial banks to decrease their lending rate, which encourages borrowers from taking loans. It increase the ability of commercial banks create credit.

3. Legal Reserve Requirements: Banks are obliged to maintain reserves with the central bank on two accounts:

(a). Cash Reserve Ratio: It refers to the Minimum % of net demand and time liabilities, to be kept by commercial banks with central banks.

At the time of Inflation: An increase in CRR as the effect of reducing the banks excess reserves and thus curtail their ability to give to give credit.

At the time of Deflation: An decrease in CRR as the effect of increasing the banks excess reserves and thus it increase their ability to give credit.

(b). Statutory Liquidity Ratio (SLR): It refers to the minimum % of net demand and time liabilities which central banks are required to maintain with themselves.

At the time of Inflation: This effects their freedom to increase the quantum of credit and therefore the money supply increasing the SLR reduces the ability banks to give credit.

At the time of Deflation: This effects their freedom to decreases the quantum of credit and therefore the money supply decreases the SLR increases the ability banks to give credit.

4. Open Market Operation: refers to buying and selling of government securities by the central banks from to the public and commercial banks.

At the time of inflation: RBI sells securities to commercial banks & general public so that it can reduce the excessive flow of money.

At the time of Deflation: RBI buys these securities & gives money to the people & banks.

5. Margin Requirement: Refers to the difference between the loan value & market value.

At the time of Inflation: This margin is increased so that people can be discouraged from taking loans.

At the time of Deflation: This margin is reduced so that people are encouraged to take loans.

Measures To Control Deficient Demand / deflationary Gap / under employment equilibrium
Fiscal Policy Or Budgetary Policy

Meaning: It is the revenue & Expenditure policy formulated by government to combat inflation and deflation.(1). Revenue Policy: During deflation government decreases its revenue by decreasing the taxes to increase flow of excessive money in economy.(2). Expenditure Policy: Government increases its expenditure on public works like roadways, Dams, bridges etc , So that supply of money increase in the economy.(3). Public Borrowings: Government by purchase bonds and other securities from public. It increase the flow of money in the economy.(4). Deficit Financing: Government printing of new currency notes, as there is an increase in money flowing in the economy.

Quantitative & Qualitative Measures

1. Bank Rate: It refers to the rate at which central Bank lends money to commercial banks to meet their long-terms needs.

At the time of inflation: When there is excessive flow of money in the economy, RBI increases the bank rate which makes loans costlier & flow of money in the economy is reduced.

At the time of Deflation: When the money flow in economy is less, bank rate is reduced loans become cheaper & the flow of money is boosted.

2. Repo Rate: It is rate at which the central bank lends money to commercial banks to meet their short-terms needs.

At the time of Inflation: An increase in repo rate increase the cost of borrowings from the central bank. It forces the commercial banks to increase their lending rate, which discourages borrowers from taking loans. It reduces the ability of commercial banks create credit.

At the time of Deflation: Decrease in repo rate, decrease the cost of borrowings from the central bank. It forces the commercial banks to decrease their lending rate, which encourages borrowers from taking loans. It increase the ability of commercial banks create credit.

3. Legal Reserve Requirements: Banks are obliged to maintain reserves with the central bank on two accounts:

(a). Cash Reserve Ratio: It refers to the Minimum % of net demand and time liabilities, to be kept by commercial banks with central banks.

At the time of Inflation: An increase in CRR as the effect of reducing the banks excess reserves and thus curtail their ability to give to give credit.

At the time of Deflation: An decrease in CRR as the effect of increasing the banks excess reserves and thus it increase their ability to give credit.

(b). Statutory Liquidity Ratio (SLR): It refers to the minimum % of net demand and time liabilities which central banks are required to maintain with themselves.

At the time of Inflation: This effects their freedom to increase the quantum of credit and therefore the money supply increasing the SLR reduces the ability banks to give credit.

At the time of Deflation: This effects their freedom to decreases the quantum of credit and therefore the money supply decreases the SLR increases the ability banks to give credit.

4. Open Market Operation: refers to buying and selling of government securities by the central banks from to the public and commercial banks.

At the time of inflation: RBI sells securities to commercial banks & general public so that it can reduce the excessive flow of money.

At the time of Deflation: RBI buys these securities & gives money to the people & banks.

5. Margin Requirement: Refers to the difference between the loan value & market value.

At the time of Inflation: This margin is increased so that people can be discouraged from taking loans.

At the time of Deflation: This margin is reduced so that people are encouraged to take loans.

CBSE Class 12 Macroeconomics Chapter 8 Income Determination And Multiplier

2020-02-03T22:11:00.000+05:30

Chapter 8 Income Determination And Multiplier

Aggregate Demand And Aggregate Supply Approach (AD - AS Approach)

Statement: Equilibrium level of Income & Employment in an economy is attained where AD is equal to AS.

Aggregate Demand: It refers to the total demand for goods & services in an economy.
Aggregate Supply: It refers to the value of goods & services produced in an economy.

Schedule:

Diagram:

In the above diagram (E) Is the point of Equilibrium where AD = AS, before E, AD > AS and after E, AD< AS.

Effective Demand: That level of AD which helps in determining equilibrium level of income and employment OR AD which equal to AS.

Investment And Savings Approach ( I & S Approach)

Statement: Equilibrium level of income & employment is determined where the level of planned savings are equal to the level of planned investment
I = S

Savings: That part of Income which is not spent on consumption.
Investment: Money spent on creation of fixed assets.
Schedule:

Diagram:

In the above diagram, equilibrium is attained at point. (E) where the investment becomes equal to the savings. Before (E), I > S, After (E), I > S After (E), I < S.

Investment Multiplier Approach

It shows the relationship between the resulting increases in income due to initial increases in the investment.
It is the ratio of change in income(Y), to change in Investment (I). It is denoted by (K)
K = change in income / Change in investment

Working Of Multiplier:
This working is based on an assumption that expenditure of one person is the income of another person which means expenditure of A is income of B & expenditure of B is the income of C & so on.
Lets suppose govt invests rupees 100 crores in a factor. This initial increases in investment would lead to an increase in the income of workers by rupees 100 crores.
Now lets suppose that MPC in the economy is 0.9 which means 90% of increase in income is spent on consumption. so workers will consume rupees 90 crores by spending on goods & services. This expenditure of workers will become income of some other party, which would again consume 90% of 90 crores & so on. This process would continue till the time when change in Income = Change in savings.
So, in this manner the income will keep on multiplying.

Schedule:

K = 1 / 1- MPC
K= 1 / 1- 0.9
K = 1/ 0.1
K = 10

change in Y = change in I * K
= 100 * 10
= 1000

K = change in Y / Change in I
K = 1000 / 100
K = 10

So, we can see here that income has got multiplied 10 times.

Full Employment: It refers to a situation in which all the able bodied persons who are willing to work are actually employed.
Voluntary Unemployment: When a person is able to work & work is also available but the person is not willing to work.
Involuntary Unemployment: When a person is able & willing to work but the appropriate work is not available.

CBSE Class 12 Macroeconomics Chapter 7 Aggregate Demand And Related Concepts

2020-02-01T14:11:00.000+05:30

Chapter 7 Aggregate And Related Concepts

Aggregate Demand

Meaning: It refers to the total demand of goods & services in an economy.
It is measured in terms of total expenditure

Components of Aggregate Demand

1. Household Or Private Consumption Demand: It refers to the total goods and services demanded by the households in an economy. His consumption is directly dependent upon the level of disposable Income. Higher the disposable income, higher is the consumption but in accordance with the PSYCHOLOGICAL LAW OF CONSUMPTION. It states that whenever income increases consumption also increases but increases in consumption is always less than increase in income.

2. Private investment Demand: It refers to the money spend on the creation of capital assets in the economy. This investment is dependent upon
(a). Expected returns on revenue
(b). Costs :-
Cost of purchase of equipment's
Cost of maintenance
Cost of borrowed funds ( Rate of interest)
(c). Business Expectations: Bullish or Bearish

* Investment Demand Function: It is the relationship between rate of interest & investment. There is an inverse relationship means higher the rate of interest, lesser would be investment.

3. Government Demand for goods & services: It refers to goods & services demanded by government sector in the economy.

4. Net Exports(Export - Import): It refers to the difference between the value of goods demanded by foreigners from our country and what we demand from their country.

Aggregate Demand in a Two sector Model (AD = C + I)

Here consumption curve would always start above zero, because even at zero level of income, there is a minimum consumption which is called AUTONOMOUS CONSUMPTION
AUTONOMOUS CONSUMPTION: Independent if income control. The gap between AD & C would always be equal to I

Investment Function
Meaning: Investment refers to the expenditure incurred on creation of new capital assets.

Investments are of two types:

Aggregate Supply

Meaning: It refers to the value of goods and services produced in an economy.

Propensity of consume OR Consumption Function

Meaning: It is the functional relationship between Income & Consumption.

Average Propensity to consume
Meaning: It refers to the ratio of consumption to the level of income
APC = C / Y

Marginal Propensity to Consume
Meaning: It is the ratio of change in consumption to change in income
MPC = change in consumption / change in income.

Consumption Function
Equation: C = C1 + BY
Diagram:

* Break even point: It is the level of income which is completely consumed. This point shows zero savings.

Saving Function OR Propensity to Save

Meaning: It is the functional relationship between income & savings
S = F(y)
Equation: S = -C1 + (1-B)Y
*(C1 = Autonomous Consumption, (1-b) = MPS )

Diagram:

Relationship between income & savings
* As income increases, savings also increases.
* When income is very low, the minimum consumption needs are satisfied from past savings, therefore there are negative savings or called as dissaving.
Average Propensity to save
Meaning: It is the ratio of savings to income.
APS = S / Y

Marginal Propensity to Save
Meaning: It s the ratio of change in savings to change in income.
MPS = change in Savings / Change in Income(y)

Derivation of Saving function From Consumption function

In Numeric:

C = C1 + BY ..........(1)
Y = C + S ............(2)
Now we have the value of C (Equation 1) , than put C's value in equation (2)
∴ Y = C1 + BY + S
S = Y - C1 - BY
S = -C1 + Y - BY
S = -C1 + Y(1-B)
(∴ C = Consumption, C1 = Autonomous consumption, B = MPC, Y = Income)

Diagram:

Derivation Of Consumption function From Saving function

In Numeric:

S = -C1 + (1-B)Y ......(1)
Y = C + S
Or we Can Say C = Y - S ......(2)
Now we have the value of S (Equation 1), than put S value in equation (2)
C = Y - { -C1 + ( 1 - B) Y }
C = Y - ( -C1 + Y - BY)
C = Y + C1 - Y + BY
C = C1 + BY

Diagram:

CBSE Class 12 Macroeconomics Notes Chapter 6 Banking: Commercial Banks and The Central Banks

2020-01-30T19:30:00.001+05:30

Chapter 6 Banking: Commercial Banks and The Central Banks

Banking

Meaning: Bank refers to a financial institution which accepts deposits & lends money for earning profit. It is also called Financial intermediary.

Commercial Bank

Meaning: Commercial Bank performs various types of function like accepting deposits, giving loans, locker facility etc.

Central Banks

Meaning: It is the apex body of Indian financial and monitory system which governs printing of currency notes along with other functions.
OR
Meaning: Central banks is an Apex body that controls, operates, regulates and directs the entire banking and monitory structure of a country.

Functions of Central Banks

1. Issue of Currency: RBI has got solmonopoly for the printing of currency notes in India. This monopoly of printing of currency notes helps in two ways:
(a). It brings uniformity in the currency notes being printed.
(b). It gives central bank a direct control over money supply.

2. Banker to the Government:
(a). Central Bank act as a banker to the govt. and its departments.
(b). It also lends money to the government & helps in international settlement of payments.
(c). RBI also helps govt. in their financial matters and investment decisions.

3. Banker's Bank & Supervisor:
(a).RBI acts as a banker to the commercial bank by acting as lender of last resorts.
(b).RBI also helps in settlement of the cheque by performing the function of cleaning house.
(c). RBI also helps commercial banks in settlement of disputes between commercial banks by acting as a supervisor.
(d). RBI also maintains the reserves for commercial banks by maintaining CRR( cash reserve ratio) & SLR( statutory liquidity ratio) which is collectively called as LRR( legal reserve ratio)

4. Lender of last resort: Central Bank acts as a lender of last resort for commercial Banks by advancing loans to them against government securities etc. It is a obligation of central bank to give loan to commercial bank as per banking law.

5. Cleaning House function: RBI act as a cleaning house for the cheques being circulated or exchange between different parties. This function is being performed by RBI for commercial bank.

6. Controller of Credit & Money Supply: RBI forms monitory policy to control the supply of money into the economy with the help of monitory policy it can inject money into the economy or can take out excessive money from the economy. This policy helps in controlling the situation of inflation and deflation.

Difference Between the Central bank And Commercial Bank

Controller of Money Supply and Credit

1. Bank Rate: It refers to the rate at which central Bank lends money to commercial banks to meet their long-terms needs.
At the time of inflation: When there is excessive flow of money in the economy, RBI increases the bank rate which makes loans costlier & flow of money in the economy is reduced.
At the time of Deflation: When the money flow in economy is less, bank rate is reduced loans become cheaper & the flow of money is boosted.

2. Repo Rate: It is rate at which the central bank lends money to commercial banks to meet their short-terms needs.
At the time of Inflation: An increase in repo rate increase the cost of borrowings from the central bank. It forces the commercial banks to increase their lending rate, which discourages borrowers from taking loans. It reduces the ability of commercial banks create credit.
At the time of Deflation: Decrease in repo rate, decrease the cost of borrowings from the central bank. It forces the commercial banks to decrease their lending rate, which encourages borrowers from taking loans. It increase the ability of commercial banks create credit.

3. Legal Reserve Requirements: Banks are obliged to maintain reserves with the central bank on two accounts:
(a). Cash Reserve Ratio: It refers to the Minimum % of net demand and time liabilities, to be kept by commercial banks with central banks.
At the time of Inflation: An increase in CRR as the effect of reducing the banks excess reserves and thus curtail their ability to give to give credit.
At the time of Deflation: An decrease in CRR as the effect of increasing the banks excess reserves and thus it increase their ability to give credit.
(b). Statutory Liquidity Ratio (SLR): It refers to the minimum % of net demand and time liabilities which central banks are required to maintain with themselves.
At the time of Inflation: This effects their freedom to increase the quantum of credit and therefore the money supply increasing the SLR reduces the ability banks to give credit.
At the time of Deflation: This effects their freedom to decreases the quantum of credit and therefore the money supply decreases the SLR increases the ability banks to give credit.

4. Open Market Operation: refers to buying and selling of government securities by the central banks from to the public and commercial banks.
At the time of inflation: RBI sells securities to commercial banks & general public so that it can reduce the excessive flow of money.
At the time of Deflation: RBI buys these securities & gives money to the people & banks.

5. Margin Requirement: Refers to the difference between the loan value & market value.
At the time of Inflation: This margin is increased so that people can be discouraged from taking loans.
At the time of Deflation: This margin is reduced so that people are encouraged to take loans.

Credit Creation Or Money Multiplier

Commercial banks are known as factories of the credit. They generate & multiply money in the economy. The phenomenon of multiplying money is called as money multiplier. On the basis of initial deposit they create secondary deposits. This process has been explained below.
Working of multiplier is based on some assumption:-
1. There is a single banking model.
2. Each & every person deposits money into the bank.

Working: Lets suppose MR. A deposits rupees 1000 into the bank. The bank would keep a certain percentage of this deposits in the form of LRR (assuming 10%). therefore rupees 100 (10% of 1000) is kept as reserve & remaining 900 is given to Mr B in the form of loan. Now Mr B purchases goods from Mr. C and Mr. C deposits this money again into the bank out of which 10% is again kept as reserve. rupees 90 & rest again distributed in the form of loan. This process continues till the time, changes in deposit becomes equal to the change in reserve.

The value of money multiplier is inversely related to LLR which means higher the LLR lower would be the value of money multiplier & vice versa.

CBSE Class 12 Macroeconomics Notes Chapter 5 Money

2020-01-27T20:32:00.004+05:30

Chapter 5 Money

Money: Anything which is generally acceptable by the people in the exchange of goods and services or the repayments of debts is called as money.

Forms Of Money

1. Fiat Money
Meaning: It refers to that money which is issued by order/ authority of the government. It includes all notes and coins which the people in a country are legally bound to accept as a medium of exchange.
2. Fiduciary Money
Meaning: It is that Money Which is accepted as a medium of exchange between the payer and the payee.

Barter system

Meaning: Barter system can work only when both buyer and seller are ready to exchange each other's goods. for example: A can exchange goods with B only when A has what B want and B has what A wants. such double coincidence is very rare.

Problems OR Limitations of Barter system

1. Lack of double co-incidence of wants: Under the barter system, simultaneous fulfillment of wants was not mandatory which means if a person A wants wheat from C then it is not necessary that MR c would want to buy Mr's A rice. Because of this problem exchange could not take place in the economy.
2. lack of measures of value:Under Barter system, it was difficult to measure the value of one goods against another good as they were in different denominators for example: meter, liter etc.
3. Lack of store of value: As some goods are of perishable nature so it was difficult to store these goods for longer duration of time & to shift the purchasing power for future.
4. Lack of standards of deferred payments: Under Barter system i was difficult to enter into contracts and obligations.
5. Lack of divisibility: Under barter system it was difficult to divide the goods as per convenience for example: One shoe against two pieces of bread.

Money supply

Meaning: It refers to the total stock of money held by general public in different forms in a country at a given point of time.

Measures of Money supply

M1 = C + DD + OD

C: refers to the currency and coins held by general public. Currency money is also termed as 'Fiat Money'
DD : refers to the demand deposits held by Banks.
OD: refers to other deposits held by RBI.

CBSE class 12 macroeconomics notes Chapter 4 Measurements of National Income

2020-01-27T17:44:00.002+05:30

Chapter 4 Measurements Of National Income

value added Method (GVAmp)

Meaning: Refers to the addition of value to the raw material(intermediate goods) by a firm, by virtue of its productive activities.
Formula:
GVAmp = Value of output - Intermediate Consumption
= (Sales + Change in stock) - Intermediate Consumption

* Sales = Domestic Sales + Exports
* Change in Stock = Closing Stock - Opening Stock
* Addition to Stock = 10 Means +10
* Reduction in Stock = 10 Means -10
* Intermediate Consumption = Domestic Purchase of Raw Material + Import of Raw Material
* Do not include Import of Machinery (Final Good)
* Include Production for self Consumption

Steps Of Value Added Method:
* Identify all the producing units in the economy.
* Classify these producing units into primary secondary & tertiary sector.
* Calculate value of output of all the three sectors (sales + change in stock)
* Calculate intermediate consumption of all the three sector.
* subtract intermediate consumption from value of output & we get GVAmp or GDPmp.
* Now subtract Depreciation, Add NFIA & subtract NIT to get national Income.

Precautions to be taken while calculating NNPfc:
* Intermediate goods are not to be included: Since such goods are already included in the value or final goods. If they are included again, It will head to double counting.
* Sale and purchase of second-hand goods is not included: as they were included in the year in which they were produced and do not add to current flow of goods and services.
However, any brokerage on sale of or purchase of such goods will be included in the national as it is a productive service.
* Production services for self-Consumption are not included: Domestic services like services of a housewife, kitchen garding are not included in national income. Since it is difficult to measure their market value.
* Production of goods for self consumption will be included: as they contribute to the current output. They value is to be estimated or imputed as they are not sold in the market.
* Imputed value of owner-occupied house should be included: people who live in their own houses, do not pay any rent. but they enjoy housing services similar to those people who stay in rented houses. therefore value of such housing service is estimated according to market rent of similar accommodation.
* Change in stock of goods will be included: Net in the stock of inventories will be included in the national income as it is a part of capital information.

Income Method( NDPfc)

Meaning: According to this method, all the incomes that accrue to the factors of production by way of wages, profit, rent, interest, etc. are summed up to obtain the national income.
Formula:
1. Compensation of Employees/ Remuneration of Employees
If Compensation of Employees Or Remuneration of Employees not given then find these
*Wages & salaries in cash
*Wages & salaries in kind
* ER's contribution to SSS
2. Operating surplus = Rent & Royalty + Interest + Profit
If Profit no given then find these substitutes
* Corporate Tax
* Dividends
* Corporate savings
* Net Retained Earnings
* Undistributed Profits
3. Mixed Income of self Employed

NDPfc: 1 + 2 + 3

Steps of Income Method:-
1. Identify all the producing units in the economy.
2. Classify these producing units into primary secondary and tertiary sector.
3. Calculate Compensation of employees.
4. calculate operating surplus.
5. Calculate mixed Income of self employed.
6. Add compensation of employees + Operating surplus + Mixed income of self employed to get NDPfc.
7. Add NFIA to get NNPfc.

Precautions to be taken while calculating Income method:-
1. Do not include transfer Income.
2. Do not include value of second hand goods.
3. Do not include financial transactions like selling & purchasing of shares.
4. Do not include illegal incomes.
5.Imputed rent of Owner Occupied houses is included.
6. Indirect Tax ( Sales tax, excise tax, custom duty, etc.) are not included in national income at factor cost.
7. Payments out of past savings( death duties, gift tax, interest tax, etc.) are not included in the national income.

Expenditure Method (GDPmp)

Meaning: This method measures national income as sum total of final expenditures incurred by households, business firms, government and foreigners.
This method is also known as 'Income Disposal Method'.

Formula:
1. Household/ Personal/ Private Final Consumption Expenditure.
2. Government final Consumption Expenditure/ Government Purchases goods & Services.
3. Gross Domestic Capital Formation
(if this is not given then find these given below (a) & (b))
a. Gross Domestic Fixed Capital Formation
* Residential construction Investment.
* Public Investment
* Business Fixed Investment
b. Change in Stock/ Inventory Investment
4. Net Export(export - Import)

GDPmp = 1 + 2 + 3 + 4

Steps Of Expenditure Method:-

1. Identify all the producing units in the economy.
2. Classify these producing units into primary secondary and tertiary sector.
3. Calculate personal/ private/ household final consumption expenditure.
4. Calculate government final consumption expenditure or govt. purchases of goods & services.
5. calculate gross Domestic capital formation/ Investment.
6. For calculating gross domestic capital formation:
a. Calculate gross domestic fixed capital formation by adding business fixed Investment + Public Investment + Residential construction Investment &
b. then calculate change in stock (Closing stock - opening stock) & then add (a) to get gross domestic capital formation.
7. Calculate Net Export (Exports - Imports)
8. By adding all we get GDPmp.
9. Now subtract depreciation, add NFIA & subtract NIT to get National Income.

Precautions to be taken while calculating expenditure Method:-

1. Do not include Intermediate Expenditure.
2. Do not included transfer payments.
3. Do not include expenditure done on feeding beggars.
4. Do not include expenditure done on second hand goods.
5. Purchase of financial assets( shares, debentures, bonds etc) will not be included.
6. Expenditure on own account production( like production for self-consumption) will be included in the national income.

Question 1. Explain the problem of double counting.
Answers: Double counting refers to the problem of counting the same value again & again which unnecessarily raises the price of the commodity value added method takes into consideration only the value addition done at every stage of production, because that is the actual income generated in the economy.

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CBSE repeated Questions of class 12 Macroeconomics

Most important CBSE repeated questions in Exams of class 12 macroeconomics Question 1. Define multiplier. What is the relation between marginal propensity to consume and multiplier? Calculate the marginal propensity to consume if the value of multiplier is 4.

Question 2. Explain the role of the reserve Bank of India as the "lender of last resort".

Question 3. What is meant by inflationary gap? State three measures to reduce this gap.

Question 4. What iss meant by aggregate demand? state its components.

Question 5. The value of marginal propensity to consume is 0.6 and initial income in the economy is 100 crore. prepare a schedule showing Income, consumption and saving. Also show the equilibrium level of income by assuming autonomous investment of 80 crores.

Question 6. Explain the meaning of the following:(a) Revenue deficit(b) Fiscal deficit(c) Primary deficit

Question 7. Explain the following objective of government budget:(a) Allocation of resources(b) reducing income inequalities

Question 8. (a)Explain the impact of rise in exchange rate on national income.(b) Explain the concept of 'deficit' in balance of payments.

Question 10. Distinguish between stocks and flows. Give an example of each.

Question 11. Explain the "medium of exchange" Function of money.

Question 12. Distinguish between direct taxes and indirect taxes. Give an example of each.

Question 13. An economy is in equilibrium. From the following data, calculate the marginal propensity to save:(a) Income ---------10,000(b) Autonomous consumption ----- 500(c) Consumption expenditure ------ 8000

Question 14. Explain the "Bankers Bank" Function of the central bank. Question 15. Explain the process of credit creation by commercial banks.

Question 19. Describe the circular flow of income in a two sector economy with help of diagram showing real flow and nominal flow.

Question 20. Calculate (a) Depreciation (b) Subsidies (c) NDPfc(In crores)(a) GNPfc ------------95000(b) Indirect Tax ------- 14000(c) NDPmp -------- 100422(d) NNPmp -------- 100000(e) GNPmp ----------107000

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CBSE Class 12 Macroeconomics Chapter 9 Excess Demand And Deficient Demand

Deficient Demand / Deflationary Gap / Under employment equilibriumDeficient Demand: It is a situation in which AD is for an output which is below full employment AD.Deflationary Gap: It is a gap showing deficiency of AD below full employment AD.Diagram:

Measures to Control Excess Demand / Inflationary Gap/ Over employment equilibrium

Quantitative & Qualitative Measures

Measures To Control Deficient Demand / deflationary Gap / under employment equilibrium Fiscal Policy Or Budgetary Policy

CBSE Class 12 Macroeconomics Chapter 8 Income Determination And Multiplier

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Investment And Savings Approach ( I & S Approach)

Investment Multiplier Approach

CBSE Class 12 Macroeconomics Chapter 7 Aggregate Demand And Related Concepts

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Aggregate Demand

Components of Aggregate Demand

Aggregate Supply

Propensity of consume OR Consumption Function

Saving Function OR Propensity to Save

Derivation of Saving function From Consumption function

Derivation Of Consumption function From Saving function

CBSE Class 12 Macroeconomics Notes Chapter 6 Banking: Commercial Banks and The Central Banks

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Commercial Bank

Central Banks

Functions of Central Banks

Difference Between the Central bank And Commercial Bank

Controller of Money Supply and Credit

Credit Creation Or Money Multiplier

CBSE Class 12 Macroeconomics Notes Chapter 5 Money

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Forms Of Money

Barter system

Problems OR Limitations of Barter system

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Most important CBSE repeated questions in Exams of class 12 macroeconomics

Question 1. Define multiplier. What is the relation between marginal propensity to consume and multiplier? Calculate the marginal propensity to consume if the value of multiplier is 4.

Question 6. Explain the meaning of the following:
(a) Revenue deficit
(b) Fiscal deficit
(c) Primary deficit

Question 7. Explain the following objective of government budget:
(a) Allocation of resources
(b) reducing income inequalities

Question 8. (a)Explain the impact of rise in exchange rate on national income.
(b) Explain the concept of 'deficit' in balance of payments.

Question 13. An economy is in equilibrium. From the following data, calculate the marginal propensity to save:
(a) Income ---------10,000
(b) Autonomous consumption ----- 500
(c) Consumption expenditure ------ 8000

Question 14. Explain the "Bankers Bank" Function of the central bank.
Question 15. Explain the process of credit creation by commercial banks.

Question 20. Calculate (a) Depreciation (b) Subsidies (c) NDPfc
(In crores)
(a) GNPfc ------------95000
(b) Indirect Tax ------- 14000
(c) NDPmp -------- 100422
(d) NNPmp -------- 100000
(e) GNPmp ----------107000

Government Budget
Meaning: It is an annual financial statement showing item wise estimates of revenue and expenditure during a fiscal year

Deficient Demand / Deflationary Gap / Under employment equilibrium
Deficient Demand: It is a situation in which AD is for an output which is below full employment AD.Deflationary Gap: It is a gap showing deficiency of AD below full employment AD.Diagram:

Measures To Control Deficient Demand / deflationary Gap / under employment equilibrium
Fiscal Policy Or Budgetary Policy