NCERT Noles — Economies Class 12 “Economics 1S 2 social Science concesned with the production » distribution, K consumption of gootS and Seovices. Tt studies how individuals , businesses , 90 and mations makes srtesounces.” “Economics 1S the socie) science thet Studies the Production , distotibudion , and consumption of goods & choices about how +4 allocate Seavices.” > “Mam Smith, the founding Ldbesr of modes economies! > Economic Agents :- Those individuald on inkthutions . - oO which dake economic decisions. Ine con be contumort, Prreduces 5 govt epvk ek. em tel is mek fom Fral use & > Final good:- Ao ih Slage8 of psteduction will not = pass thstough any more 07 doransfoormettions 1 called final good. Ls Consumption goods : goods that ase consumed when pustchased by tein ultima conbum eh, Capital goots: othex goods tbat ane of dustable chastacten which ane used in the Pxeducten process. > Trhermediale goods i- Mostly used as sia motesiialA om inputs fom Pptoductien of otben commodibcs. These ane et 4nal goods. Cal NOT FOR SALE - For self purpose only> ‘Deporecieation :- Peles to on accounting meted used do allocate the cost of a tangible om physical asset over) its sek) We. = Depreciation sreporeserts how much of an eset value has been used. > Net Trvestment :- Tok) amount of money thab o company spends on copra! aselg .ominud tHe cost of the de porecation of Hose atets Net Tnvestment = Gstoss tavedtment — Depxevation LULU Oe ee of +e econorny to vohich the majo exchanges ame sepmesenhd as Flows oF money » goods & seswices , ek. behoeen “economic agemby’ A Packer Se onieed. — Expendiduste meted Conost Common way to estinal a) Ly A Syaem fin calealeting GDP that combines consuraption, favestment, government Spending, and net exports NOT FOR SALE - For self purpose onl:> Dweslment :- Te purchase of goods that ave pot consumed today but ame wed in te Artuste do genenate. wealth, > GDPC Gras domethe poodueh) - The Fal value of all the &nished goods and Sesrvices Poroduced within a countory'A tesrsitosry. > np (Gees Notional Product) — The foal value. of all the gots & eowvices porodvced & te ‘nationals’ of 4 county 10 the world. GNP = GDP+ Net factor income fem absioad, “Net Lacey income from abstad = Fach income exmed by the domestic Lots of production employed in the ges} of toe world — Facts income earned ¥ te Licht of poroducton of the matt of the wood employed io the domestic ecenomy TP we deduct depsieciation fiom GNP te measuse ey aggprepte ‘ncome Hat we obbin 1A called NNP (Nef Netona! Product) NNP = GNP- Depreciation —>'Natonal Dreome': The tolal value af Baal goods & Seovices Poroduced fy the nesimal sresidents dusting an accounding geo, atten adjust dk (St is Net Netore) Product (KMD oe 96 ae NOT FOR SALE - For self pur}—> Nominal ond Real GDP’: - Nominal GDP 7A a macsiweconomic assessment of He value of goods & QDP Dellaton:- Measunes the impact of inflation on the GDP of an economy dusting a Pestiod of one specthe Exscal yeas. Foomila : @DP Deflatom = Nominal GDP. Joo fel aDP NOT FOR SALE - For self purpose onl:> Consumes Bice Tndex (CPE): Anotbes: way 4o ® measune change of peices in an economy which 1A Bnown as the ‘Consumes Pouce Index. Under of prices of a given basket of commodibes which ane bought by the srepsreserterfive. Consumes. +> Wholesale Price Index (WPL) :- Measuses the changes in commodity Prices af a selected Shige om hayes belcore goods reach the grefai! level. Some counter we WAT changes a5 4 central mersuse of inflation. But row India has adopted new CPL +o mawuse tot ladion. Howevesr, US now sreportt a Powduce Perice index (PPL). —> ( Money & BarsRing) = Money commonly accepled mediim of exchange — Grononic. exchanges without the mediation of “money ase selessred to a8 bores, acchanges/ system. = Money also acts as 4 convenient unt of account —> Assets + Zs any sxedousice owned of combroll ef be busines or an economic ently. Tt iz aoything pat can be used fo Poroduce positive economic valve. NOT FOR SALE - For self purpose only- Assefs ame Hings a Bom owns am what © a Fam can claim Brom obhens > ‘Uabilies | Legally binding obligations tet ane payable to anoten person on enhhy. - Labilibes foo ogy Bam ame Hs debts on what Lowes 4 olhenrs. ( Liabihes= Deposits) io atank Net Wosth = Assets - Liabilities > Belance sheet » Summany a Me Francia) balances of an indwidual on eorganizahion. — Shalement of a businessis assets, liabilities A cwnen's equity. > CRRC Cth Reseowe Reto) - Pestcentage £ deposits which bank must feep at Cash sreseowes with dself: >"Lenden of last meson :- REL steady fo lend funds 40 banks at all Ames. Hetough vastious instou > Open Masiket Opesiations (ome) - Peles to | | buying & selling of bonds tsued & the Govestmart| 19 the open market. Ths puorchase & sale is I eoknusted to the Central bk on behalf of dhe government. —_ NOT FOR SALE - For self purpose only> Bonk Rate :- FEL can inlluence money supply @ by changing the orate at which Ht gives loans 4e the commercial banks. - Rote of ‘otesrest changet by the contre) tank while . lending loans to 9 commestcial banks, > "Repo Role": the orale at which the control bank of @ county lends rnoney to commesicial banks “io Fhe avert of any sheorbhill of funda: >" Revesue ‘Repo Bale '- the sate a which the centsra) book of a countsry (KBE in case of Tndia) bosirows money Loom Cormenctal banks wifhin the countory. —- Of is a omonetosny policy tabbrument which can be used to control tre money supply '» the couolsy, give money ab 3 inks Re Fate: KBE Comenestczo] “fe Benks Revestse Repo : REL Commestea! Banks Boraous money af 7 inh —> NOT FOR SALE - For self purpose only: Monelany Policy " a tl ~~ Reserve Kahos Policy Roles. - cee - Repo - Basing Q — SLR ~ Revere Pepe Selling of god. | ie Senses. - Bank Rete Oper Meorket (ave > “Monefaary Bie hey Me consol of the quactty of money available in an economy & the channels by which new emoney ia supplied, "Gre PEL 7A vested wilh He Srsponsibilidy of conducting emoneh 7 Policy. >" Fiscal Dlicy the use of governments Spending & taxation fo Inbluence the economy. — Govesinments use Piscat Policy fo powomok Abriong be Saslainable goeuth 4 mtetuce poverty, eg tax cuts AL incsreased — govd. Spending. CTroee Folicie’ — oa ae leudora] Policy E: Xpowsion arg Policy Contr achonaay Policy. NOT FOR SALE - For self purpose only—> “Demonetiration New initiabve by GOT in Nov Zolé do tackle tre ‘poroblem of commuphion’, black omoney, deswtonism Be eisiculation od Pke cussreny 10 the economy. Old notes of F500 2 F loco wene no leqgesr “legal tenden New cusprency notes in the denomination of F500 & FZo0e weme laurched, ened Re Supply.” Ly. Retetonsip bakoeen the guanrhy of a commmdity that prrweducet wish do sell af vosious ‘Ponce’ and the gquenhty that consumes with to by. Gh ts He main model of pice defeamination used to economic. +heosy. = Supply and demand detestmine the "Price oF goods and quanbties Potoduced & consumed. — When the Supply 4 demand cusives intersect, the emasiket 13 io eqpilibouum. This iA whene he grartity demanded & guanhty stpplied ame equal. - Kelationhip belveen the quantity of @ commodity that produces have available fom sale & te gyantity tat consumer’ ase vallling & able he bay, NOT FOR SALE - For self purpose only _Buanbly & <> “Mixed Economy := fe economy in which there is bolh the Prrivale sectosy & Me goveenment is Brown ag Mixed Exonormny. > Annual Financial oe - Badget — Revenue Budget: Trese that selete to the croment faancal yean only ane ‘included in the revenue accoul] = Capital Budget :- FPose thet concexn tne wsetr & liabilrtiés of Ye govt. into the capital account. —> Kedintoubution Function +- The got. tterough 8 budgeleoy policy tempts +o ‘promote fais Q stight disloibution of income in an economy - Dis id done Astough -tevertion be expenditure Policy. —> Shabilisation Function :- Economic Stabilty means absence of lange ale Puchiationg in Porice level which cause uncerbinty de hardships — te People. NOT FOR SALE - For self purpose only— Tn inflationary situadion, Govt. can discounage Spending by increasing taxes & reducing #3 own expenditure. a Capital Budget Expendidusre uv Non-plan Capit} u Expenditune. Expenditure Non-Plan Revenue Gépen difure . > Balanced Budget’ :- Govesinrnert may spend an amount equal to the stevenue t+ collects. — When tax collection exc4eds the sreayisied expendihisre, the bedget 1s said to be in susnplus. — Whee endijurn exceeds sevenue, this [A when ne ot cs a budget defeil NOT FOR FOR SALE - For self purpose onl> Revenue Defer :- Relests > He excess of ® Governments sevenue expenddune ove savenve sreciphs, Revenue defeit = Revenue exp. — Revenue Becer Ag. +> Fiscal Dehcit :- The drfestence behwoeen the goen- nests tolal expenditure 2 rhs total steceiphs exclactiag beeeowiag. Goss Bscal debt = Net Besvrowing af home + Bororowing Brom REL + Bovorowing Brom alveal, —> Goods & Seowices Gee (GSP) Trdivect tax used in Thdia Compstehensive multistage , destination - based -hx Ls subsemed almost all He indinect faxes. Goods & seovices ame divided into Ave diflestent. tax slabs fom cellection of ay: 0%, 5%, 12%, 84, 28%. Paloroleuem porodubs, alcoholic derinks X elecbicrty ane not faked unden GST be ase taxed xpecohly by the indvidual State Govewmerts, Se ee cere tae alee eo Ol-Faly- 20f7- 1o1* Pmendment. (one Nation, One ‘Tat, Om Muket) NOT FOR SALE - For self purpose onl:> "An Open economy 14 one which infesracts with other countries +Hrrough vastious channels. Three ways: - Output Masiket : An economy can tetade in goodA and seswices wrth ofbesr countoties. — Pirancia) Mastkel.: Mast: often an economy Can buy nancial asefs Brom oftes? counties. — Labour Merikets Fiowms can choose where te locate Pereduation be wostkess -b choose Whee ty wok. —> Foreign exchange sale: The Pplice of one Cusrency Sp terms of- anothen coowery . C exchange ote) > Gowen Pccomt 4 the Stecomd of trade 0 goods be seavices bk toranshs, Payments. — eade in goods includes exports & femposrbs of goods. - Qsade jo kevices includes Lcfos, income & ~~ |. rronsactons. aby Stembances & grands id by +e gol. om by poivele cih'zens Wing. alo. —> NOT FOR SALE - For self purpose only* Components of Cusrsient Aecount” Gurwen Aaount Brade ia goods “Bade in Seowices Branko, id Payments L. expoorks of Net Nef 9 ! goods: factor Nen-factosy : L Drcome. Treame, __ Comsits of Sm posts o he at | ots, ore mrbanes a let income ye Laem Shipping, & arenes Compennation Banking , insusrance, AL employees. a i ie -fousism, Scbfoane Drices, Nef jnvertment a Sneome. Cusrent Accouts Balanced Cusorent — Crsmeh Aacout Susiplus Arecount Deheit J J 1 Receipts > Payments Receiphs = Payments Receiphsac Posy ments —> BoT (Balance of >) + Te difbsrence bekoeen the value of exposts & value of impos-s of goods of a county jn a gen "Pertiod of bme. - Bot ia said +o be in balance when expoorts of 90048 ane eypnal to the imposs of. gods. NOT FOR SALE - For self purpose onl:>Net Znisibles - The diffestence behoeer the value of exposits & value of impostts ore courtony ° a given pestiod of hme. — Grvisibles includes sesrviceg teranfess & Lows of income that toke place tefoeen difesrent countsties. — Capital Account a Coprtel account recands all tokernetione) fetansachons of assets. ( money, Atocks, bond, govt. debt. ete) Components of Capital Recount Capita] Account TOO OT Lnveslments External Extenal + Bororowing A Assistance, I Direct Posh Dovestment as 9. exctesinal ©9- govt. aid, Commesic: al . | i a ae Hilo eg. FDOT. % Frr, Shoot -dom 4 eqyity capital, olBahome a Giletesal fonns. stémested Funds. (srepayment of loans, pure haces of anaty (receipt of loans Brom abooad, sale of assets /shanes in NOT FOR SALE - For self purpose only Faneisn companius)—> Fewrelgn Exchange Masket al FOREX) A global maaket toss exchanging national CUusten cies with one anothes. The m4jon Participants in the fesreign exchange maskel ase commesicial bank3, foseign exchange boroket8 and often authosited dealers A omone any authoanties. = Fenex Rate : the Patice of one cLoBrency 0 coms oF another. — Appreciation: When tHe Potice of domestic ceray So teams of fomeign cusrsreney ( dollaes) inesiezses. — Depsreciation: When the ppice of cemeste coony ¢n dems of foneign cup-brency Ceolhn) decreases. —> Fixed Exchange Keteg : The govesnment bxex te exchange sate af 2 pasteles level. _ Devaluation :- When some government aeckon incsteases the exchange state (Hereby, making domestic currency cheopesr) ~ Revaluation :- (hen the government Aeco1aaseg the exchange se ( making demeshe cuscnency casthen) NOT FOR SALE - For self purpose only