Commerce Accountancy Business Studies Microeconomics Macroeconomics Statistics for Economics India

Important Formulas in Macroeconomics | Class 12

N nupurjain3

Read Discuss

Chapter: Introduction

1. Net Investment
Net Investment = Gross Investment – Depreciation

2. Net Indirect Tax

Net Indirect Tax = Indirect Taxes – Subsidies

3. Market Price
Market Price = Factor Cost + Net Indirect Taxes

OR

Sign in to GeeksforGeeks with Google

= Factor Cost + (Indirect Taxes – Subsidies)

4. Net factor Income from Abroad (NFIA)

Piyush Verma
Net Factor Income from Abroad = Factor income earned from abroad – Factor income paid
mrpiyushv@gmail.com

abroad
# NIKkI
nickverma94125@gmail.com
OR
 Net Factor Income from Abroad = Net Compensation of Employees + Net Income from
Property and Entrepreneurship + Net Retained Earnings

5. National Income (using NFIA)

National Income = Domestic Income + NFIA

6. Depreciation
Depreciation = Gross Value – Net Value

7. Leakages in Different Types of Economies

Leakages in Different Types of Economies

Two-Sector Economy (with Financial Market) Savings

Two-Sector Economy (without Financial Market) No Leakages

Three-Sector Economy Savings + Taxes

Four-Sector Economy Savings + Taxes + Imports

8. Injections in Different Types of Economies

Injections in Different Types of Economies

Two-Sector Economy (with Financial

Investment
Market)

Two-Sector Economy (without Financial

No Injection
Market)

Three-Sector Economy Investment + Government Expenditure

Investment + Government Expenditure +

Four-Sector Economy
Exports

Chapter: National Income Accounting

1. National Income and Related Aggregates
Gross Domestic Product at Factor Cost (GDPFC)

GDPFC = GDPMP – Net Indirect Taxes

Net Domestic Product at Market Price (NDPMP)

NDPMP = GDPMP – Depreciation

Net Domestic Product at Factor Cost (NDPFC) or Domestic Income

NDPFC = GDPMP – Net Indirect Taxes – Depreciation

Gross National Product at Market Price (GNPMP)

GNPMP = GDPMP + Net Factor Income from Abroad

Gross National Product at Factor Cost (GNPFC)

GNPFC = GNPMP – Net Indirect Taxes

Net National Product at Market Price (NNPMP)

NNPMP = GNPMP – Depreciation

Net National Product at Factor Cost (NNPFC) or National Income

NNPFC = GNPMP – Net Indirect Taxes – Depreciation

2. Domestic Income
Income from Domestic Product accruing to Private Sector = NDPFC – Income from Property
and Entrepreneurship accruing to Government Administrative Departments – Savings of
Non-Departmental Enterprises

3. Private Income
Private Income = Factor Income earned (within domestic territory + from rest of the world) +
Transfer Income received (within domestic territory + from rest of the world)

OR

= Income from Domestic Product Accruing to Private Sector + NFIA + Interest on National
Debt + Current Transfers from Government + Net Current Transfer from Rest of the World

4. Personal Disposable Income

Personal Disposable Income = Personal Income – Personal Taxes Miscellaneous Receipts of
Government

OR

= Personal Consumption Expenditure + Personal Savings

5. National Disposable Income

National Disposable Income = National Income + Net Indirect Taxes + Net Current Transfers
from the rest of the world

OR

= National Consumption Expenditure + National Savings

6. Gross National Disposable Income

Gross National Disposable Income = Net National Disposable Income + Depreciation

7. Product or Value Added Method of calculating National Income

GDPMP using Value Added Method

∑GVAMP = GDPMP

Value Added

Value Added = Value of Output – Intermediate Consumption

Value of Output when the whole output is sold in a financial year

Value of Output = Sales

Value of Output when the whole output is not sold in a financial year

Value of Output = Sales + Change in Stock

Change in Stock = Closing Stock – Opening Stock

Value of Output

Value of Output = (Quantity × Price) + Change in Stock

National Income using Value Added Method

National Income or NNPFC = GDPMP – Depreciation – Net Indirect Taxes + NFIA

OR
 = Domestic Income or NDPFC + NFIA

8. Expenditure Method of calculating National Income

GDPMP using Expenditure Method

GDPMP = ∑ Final Expenditure

∑ Final Expenditure = Private Final Consumption Expenditure (PFCE) + Government Final

Consumption Expenditure (GFCE) + Gross Domestic Capital Formation (GDCF) + Net Exports
(NX)

Private Final Consumption Expenditure (PFCE)

PFCE = Household Final Consumption Expenditure + Non-profit Private Institutions Final

Consumption Expenditure

Government Final Consumption Expenditure (GFCE)

GFCE = Intermediate Consumption of Government + COE paid by Government +Direct

purchases from abroad for embassies and consulates located abroad – Sale of goods and
services produced by general government

Gross Domestic Capital Formation (GDCF)

GDFC = Gross Fixed Capital formation + Inventory Investment

or

= Gross Business Fixed Investment + Gross Residential Construction Investment + Gross

Public Investment + Inventory Investment

Net Exports (X – M)

Net Exports = Exports – Imports or (X-M)

National Income using Expenditure Method

National Income or NNPFC = ∑Final Expenditure or GDPMP – Depreciation – Indirect taxes +

NFIA

OR

= Domestic Income or NDPFC + NFIA

9. Income Method of calculating National Income

 Profit

Profit = Corporate Tax + Dividend + Retained Earnings

Operating Surplus

Operating Surplus = Rent + Royalty + Interest + Profit

or

= Value of Output – Intermediate Consumption – Compensation of Employees – Mixed

Income – Consumption of Fixed Capital – Net Indirect Taxes

National Income using Income Method

NNPFC = NDPFC + NFIA

Where,

NDPFC = Compensation of Employees + Profit + Rent & Royalty + Interest + Mixed income

10. National Income at Constant Price

11. Nominal GDP or GDP at Current Price

12. Real GDP or GDP at Constant Price

13. GDP Deflator

Chapter: Money and Banking

1. Measures of Money Supply

M1

M1 = Currency and coins with public + Demand deposits of commercial banks + Other
deposits with Reserve Bank of India

M2

M2 = M1 + Savings Deposits with Post Office Saving Bank

 M3

M3 = M1 + Net Time Deposits with Banks

M4

M4 = M3 + Total Deposits with Post Office Saving Bank

2. Money Multiplier

Chapter: Determination of Income and Employment

1. Aggregate Demand
Aggregate Demand (AD) = C + I + G + (X – M)

= Private Consumption Expenditure + Investment Expenditure + Government Expenditure +

Net Exports (Exports – Imports)

2. Aggregate Supply
Aggregate Supply (AS) or National Income (Y) = Consumption (C) + Saving (S)

3. Consumption Function
C = f(Y)

Where,

C = Consumption

f = Functional Relationship

Y = National Income

4. Average Propensity to Consume (APC)

5. Marginal Propensity to Consumer (MPC)

6. Saving Function
S = f(Y)

Where,

S = Saving
f = Functional Relationship

Y = National Income

7. Average Propensity to Save (APS)

8. Marginal Propensity to Save (MPS)

9. Relationship between APC ad APS

APC + APS = 1

10. Relationship between MPC and MPS

MPC + MPS = 1

11. Values of APC, APS, MPC, and MPS

Value APC APS MPC MPS

MPC can never MPS can never

APC can never be APS can be less
Negative be less than be less than
less than zero, than zero when
(less than zero, as can zero, as can
because of the C>Y; i.e., before
zero) never be more never be more
presence of Break-even Point.
than than

APC can never be APS can be zero MPC can never MPS can never
Zero zero, because of when C=Y; i.e., at be zero, when be zero, when
the presence of Break-even Point.

APS can never by

APC can be one MPC can never MPS can never
one as savings can
One when C=Y; i.e., at be zero, when be zero, when
never be equal to
BEP
income

More APC can be more APS can never be MPC can never MPS can never
than One than one when more than one as be less than be less than
C>Y; i.e., before savings can never zero, as can zero, as can
Break-even Point.
 Value APC APSthan
be more MPC
never be more neverMPS
be more
income than than

12. Equation of Consumption Function

Where,

C = Consumption

b = MPC

Y = Income

13. Equation of Saving Function

Where,

S = Saving

1-b = MPS

Y = Income

14. Marginal Efficiency of Investment (MEI)

15. Two Approaches for Determination of Equilibrium Level

Aggregate Demand-Aggregate Supply Approach (AD-AS Approach): Equilibrium will
be achieved when,

AD = AS

Saving-Investment Approach (S-I Approach): Equilibrium will be achieved when,

S=I

16. Investment Multiplier

OR
 OR

The maximum value of the Multiplier is ∞ when MPC = 1

The minimum value of Multiplier is 1 when MPC = 0

Chapter: Government Budget and the Economy

1. Measures of Government Deficit

Revenue Deficit

Revenue Deficit = Revenue Expenditure – Revenue Receipts

Fiscal Deficit

Fiscal Deficit = Total Expenditure – Total Receipts (except borrowings)

OR

= (Revenue Expenditure + Capital Expenditure) – (Revenue Receipts + Capital Receipts

excluding Borrowings)

OR

= (Revenue Expenditure – Revenue Receipts) + (Capital Expenditure – Capital Receipts

excluding Borrowings)

OR

= Revenue Deficit + (Capital Expenditure – Capital Receipts excluding Borrowings)

Primary Deficit

Primary Deficit = Fiscal Deficit – Interest Payment

Chapter: Balance of Payments

1. Balance of Trade
Balance of Trade = Exports of Goods – Imports of Goods

2. Balance on Current Account

3. Balance on Capital Account

Last Updated : 06 Apr, 2023

Similar Reads
Basic Concepts of Introduction to Macroeconomics
Macroeconomics
 Class 12 Maths Formulas Some Important Compounds of
Transition Elements

Important Terms pertaining to Some Commercially Important

Coordination Compounds Alcohols

Class 12 RD Sharma Solutions - Class 12 RD Sharma Solutions -

Chapter 9 Continuity - Exercise 9.1 | Chapter 33 Binomial Distribution -
Set 2 Exercise 33.1 | Set 1

Class 12 NCERT Solutions- Class 12 RD Sharma Solutions -

Mathematics Part I - Chapter 3 Chapter 23 Algebra of Vectors -
Matrices - Exercise 3.2 | Set 1 Exercise 23.6 | Set 1

Related Tutorials
Economics Commerce

Income Tax Management

Maths

Previous Next

Article Contributed By :
nupurjain3
N nupurjain3

Vote for difficulty

Easy Normal Medium Hard Expert

Improved By : sumitgumber28
Article Tags : Class 12, Commerce, Macroeconomics

Improve Article Report Issue

A-143, 9th Floor, Sovereign Corporate

Tower, Sector-136, Noida, Uttar Pradesh -
201305
feedback@geeksforgeeks.org

Company Explore
About Us Job-A-Thon Hiring Challenge
Legal Hack-A-Thon
Careers GfG Weekly Contest
In Media Offline Classes (Delhi/NCR)
Contact Us DSA in JAVA/C++
Advertise with us Master System Design
Master CP

Languages DSA Concepts

 Python Data Structures
Java Arrays
C++ Strings
PHP Linked List
GoLang Algorithms
SQL Searching
R Language Sorting
Android Tutorial Mathematical
Dynamic Programming

DSA Roadmaps Web Development

DSA for Beginners HTML
Basic DSA Coding Problems CSS
Complete Roadmap To Learn DSA JavaScript
DSA for FrontEnd Developers Bootstrap
DSA with JavaScript ReactJS
Top 100 DSA Interview Problems AngularJS
All Cheat Sheets NodeJS
DSA Roadmap by Sandeep Jain Express.js
Lodash

Computer Science Python

GATE CS Notes Python Programming Examples
Operating Systems Django Tutorial
Computer Network Python Projects
Database Management System Python Tkinter
Software Engineering OpenCV Python Tutorial
Digital Logic Design Python Interview Question
Engineering Maths

Data Science & ML DevOps

Data Science With Python Git
Data Science For Beginner AWS
Machine Learning Tutorial Docker
Maths For Machine Learning Kubernetes
 Pandas Tutorial Azure
NumPy Tutorial GCP
NLP Tutorial
Deep Learning Tutorial

Competitive Programming System Design

Top DSA for CP What is System Design
Top 50 Tree Problems Monolithic and Distributed SD
Top 50 Graph Problems Scalability in SD
Top 50 Array Problems Databases in SD
Top 50 String Problems High Level Design or HLD
Top 50 DP Problems Low Level Design or LLD
Top 15 Websites for CP Top SD Interview Questions

Interview Corner GfG School

Company Wise Preparation
Preparation for SDE
Experienced Interviews
Internship Interviews
Competitive Programming
Aptitude Preparation
CBSE Notes for Class 8
CBSE Notes for Class 9
CBSE Notes for Class 10
CBSE Notes for Class 11
CBSE Notes for Class 12
English Grammar

Commerce UPSC
Accountancy Polity Notes
Business Studies Geography Notes
Economics History Notes
Management Science and Technology Notes
Income Tax Economics Notes
Finance Important Topics in Ethics
Statistics for Economics UPSC Previous Year Papers

SSC/ BANKING Write & Earn

SSC CGL Syllabus Write an Article
SBI PO Syllabus Improve an Article
SBI Clerk Syllabus Pick Topics to Write
 IBPS PO Syllabus Write Interview Experience
IBPS Clerk Syllabus Internships
Aptitude Questions
SSC CGL Practice Papers

@geeksforgeeks , Some rights reserved