Paid by a shopkeeper or retailer, who then shifts the tax burden to customers by charging sales tax on goods and services.

Debit card is a card allowing the holder to transfer money electronically from their bank account when making a purchase.

(i) The Disputes Settlement Body puts an end to procedural delays.
(ii) It is mandatory to settle any dispute within 18 months.
(iii) The disputes are resolved through multilateral trading system.

Short Term Plan	Medium Term Plan	Long Term Plan
Short - term up to 1 year	Medium-term 3 - 7 years	Long - term over 10 year
Short - term planning concerns the plans in a time period of 1 year - operational planning.	Medium – term planning is considered for a time period of 5 years – tactical planning.	Long – term planning is considered for a time period over 10 years – strategic planning.

(i) The demand-side of the vicious circle of poverty is that the low level of real income leads to a low level of demand which, in turn, leads to a low rate of investment and hence back to deficiency of capital, low productivity and low income.
(ii) Low Income ⟶ Low Demand Low Investment ⟶ Low Productivity ⟶ Low Income

A: Recession
B: Recovery
C: Prosperity
D: Depression

Aggregate Supply = C + S + T + Rf = Aggregate income generated in the economy

1. Cyclical unemployment exists during the downturn phase of trade cycle in the economy.
2. In a business cycle during the period of recession and depression, income and output fall leading to widespread unemployment.

1. Statistics is not suitable to the study of qualitative phenomenon
2. Statistical laws are not exact:
3. Statistics table may be misused:
4. Statistics is only one of the methods of studying a problem.

(i) Foreign Institutional Investment (FII) is an investment in hedge funds, insurance companies, pension funds and mutual funds.
(ii) Foreign institutional investment is a common term in the financial sector of India
(iii) For example, a mutual fund in the United States can make investment in an Indiabased company

(i) A housewife renders a number of useful services like preparation of meals, serving, tailoring, mending, washing, cleaning, bringing up children, etc.
(ii) She is not paid for them and her services are not directly included in national income. Such services performed by paid servants are included in national income.
(iii) They are called unpaid services.

Duesenberry has made two observations regarding the factors affecting consumption.
a. The consumption expenditure depends not only on his current income but also past income and standard of living.
b. Consumption is influenced by demonstration effect. The consumption standards of low income groups are influenced by the consumption standards of high income groups.

Pollution is the introduction of contaminants into the natural environment that causes and and verse change, in the form of killing of life, toxicity of environment, damage to ecosystem and aesthetics of our surroundings.

Positive Multiplier	Negative Multiplier
When an intial increases in an injection leads to a greater final increase in real GDP.	When an intial increases in an injection leads to a greater final decrease in real GDP.

Net Domestic Product = GDP - Depreciation.

Liquidity preference is based on three motives. They are,
(i) Transaction motive
(ii) Precautionary motive
(ii) Speculative motive

ATM was first introduced in 1967.

(i) The economic activity in a capitalist economy will have its periodic ups and down.
(ii) The study of these ups and downs is called the study of Business cycle or Trade cycl or Industrial Fluctuation.

Globalisation is nothing but connect the nations together through international trade and aiming at global development.

(i) In economic system both private and public sectors co-exist.
(ii) It work together towards economic development.

Globalism : An economic system where the economic activities of a nation are inter connected and inter dependent on each other nation.

The branch of statistics concerned with using sample data to make an inference about a population of data is called Inferential Statistics.

There are two major types of statistics.
(i) Descriptive statistics
(ii) Inferential statistics

Basic and collective needs of the people - health, education, sanitation, water, food, housing facilities.

(i) Environment means "all the conditions, circumstances, and influences surrounding and affecting the development of an organism or group of organisms".
(ii) It also means that the complex of physical, chemical and biotic factors that act upon an organism or an ecological community ultimately determine its form and survival.

Income tax, wealth tax, corporate tax, capital gains tax.

(i) Availability of variety of goods for consumption.
(ii) Generation of more employment.
(iii) Industrialization of backward nations.
(iv) Division of labour and specialisation.

(i) The Central Bank purchases and sells Government securities and proper eligible securities like bills and securities of private concerns.
(ii) This is called Open Market operation.

(i) The value of the monetary unit is directly linked with a certain weight of gold.
(ii) The purchasing power of a unit of money is maintained equal to the value of a fixed weight of gold.

APC is the ratio of consumption expenditure to any particular level of income
APC = \(\frac{C}{Y}\)

 

(i) It arises due to imbalance between supply of labour and demand for labour.
(ii) It is because of immobility of labour, lack of necessary skills, breakdown of machinery, shortage of raw materials.
(iii) The persons who lose jobs and in search of jobs are also included.

(i) "Full employment is the absence of involuntary unemployment." - Keynes
(ii) "Full employment is that level of employment at which any further increase in spending would result in an inflationary spiral of wages and prices" - Lerner

It is the total income received by the individuals of a country before payment of direct tax.
Personal Income = National Income
- (Social Security Contribution and undistributed corporate profits)
+ Transfer payments

(i) Capitalism is a system where the means of production are privately owned.
(ii) Market determines the economic activities (e.g.) The USA, Japan.

Adam Smith classified public expenditure on the basis of functions of government in the following main groups.
a) Protection Functions
This group includes public expenditure incurred on the security of the citizens, to protect from external invasion and internal disorder, e.g., defence, police, courts etc.
b) Commercial Functions
This group includes public expenditure incurred on the development of trade and commerce, e.g., development of means of transport and communication etc.
c) Development Functions
This group includes public expenditure incurred for the development infrastructure and industry.

Agency Functions implies that commercial banks act as agents of customers by performing various functions.
(i) Collecting Cheques Banks collect cheques and bills of exchange on the behalf of their customers through clearing house facilities provided by the central bank.
(ii) Collecting Income Commercial banks collect dividends, pension, salaries, rents, and interests on investments on behalf of their customers. A credit voucher is sent to customers for information when any income is collected by the bank.
(iii) Paying Expenses Commercial banks make the payments of various obligations of customers, such as telephone bills, insurance premium, school fees, and rents. Similar to credit voucher, a debit voucher is sent to customers for information when expenses are paid by the bank.

(i) Money as a Store of value: Savings done in terms of commodities were not permanent. But, with the invention of money, this difficulty has now disappeared and savings are now done in terms of money.
(ii) Money as a Standard of Deferred Payments: Borrowing and lending were difficult problems under the barter system. In the absence of money, the borrowed amount could be returned only in terms of goods and services.
(iii) Money as a Means of Transferring Purchasing Power: The field of exchange also went on extending with growing economic development. The exchange of goods is now extended to distant lands.

X	d=X-320
305	-15
320	0
332	12
350	30
	27

\(\bar { X } \)	=	A+	\(\frac { \sum { d } }{ n } \)
	=	320+	27
			4
	=	320+6.75
	=	326.75

1. There are only two nations and two commodities (2 x 2 model)
2. Labour is the only element of cost of production.
3. All labourers are of equal efficiency
4. Labour is perfectly mobile within the country but perfectly immobile between countries.
5. Production is subject to the law of constant returns
6. Foreign trade is free from all barriers.
7. No change in technology.
8. No transport cost.
9. Perfect competition.
10. Full employment.
11. No government intervention

i. Atmospheric Noise:
Atmospheric noise or static is caused by lightning discharges in thunderstorms and other natural electrical disturbances occurring in the atmosphere.
ii. Industrial Noise:
Industrial noise refers to noise that is created in the factories. Sound becomes noise it becomes unwanted. Heavy industries like shipbuilding, iron, and steel have long been associated with Noise-Induced Hearing Loss (NIHL).
iii. Man-made Noise:
The main sources of man-made noise pollution are ships, aircraft, seismic exploration, marine construction, drilling, and motor boats.

(i) The World Bank is said to be successful in achieving its primary objectives of reconstruction and development of war ravaged nations.
(ii) It is noted that the bank's membership has increased from the initial number of 30 countries to 68 countries in 1960 to 151 countries in 1988.
(iii) The Bank grants medium and long term loans (i, e, payable over a period of 15 - 20 years) for reconstruction and development purpose to the member countries.
(iv) Initially the World Bank's loans were mainly directed at the European countries for financing their programmes of reconstruction.
(v) The World Bank grants loans to member countries only for productive purposes particularly for agriculture irrigation, power and transport.
(vi) The International Development Association (IDA) the Soft Loan Window of the Bank provides loans to UDCs at very low rate of interest.

(i) There are two countries and two commodities (2 X 2) model.
(ii) Labour is the only factor of production.
(iii) Labour units are homogeneous.
(iv) Price of commodity is measured by the amount of labour required to produce it.

(i) In the output or product method, the measures of GDP are calculated by adding the total value of the output (of goods and services) produced by all activities during any time period, such as a year.
(ii) The major challenge of this method is the problem of double counting.

S.No	Economic Development	Economic Growth
(i)	Related to Underdeveloped Countries	Related to developed (or) advanced countries.
(ii)	Rising of income levels in poor countries.	Rising of income levels in rich countries
(iii)	It is discontinuous and spontaneous changes in the station if any state	It is gradual and steady changes in the long run.

(i) Effective demand denotes money actually spent by the people on products of industry.
(ii) The money which entrepreneurs receive is paid in the form of rent, wages, interest and profit.
(iii) Therefore effective demand equals national income.
(iv) An increase in the aggregate effective demand would increase the level of employment. A decline in total effective demand would lead to unemployment. Therefore,
(v) Thus the total employment of a country can be determined with the help of total demand of a country.

(i) Besides verification it is used for the prediction of one value, in relation to the other given value.
(ii) Regression coefficient is an absolute figure. If we know the value of the independent variable, we can find the value of the dependent variable.
(iii) It has wider application, as it studies linear and nonlinear relationship between the variables.
(iv) It is widely used for further mathematical treatment.

1. Sir M. Vishveshwarya (1934) made the first attempt in laying foundation for economic planning in India through his book, "Planned Economy of India". It was a 10 year plan.
2. Jawaharlal Nehru (1938) set-up "National Planning Commission" by a committee but due to the World War II it did not materialize.
3. In 1940,8 leading industrialists of Bombay presented a 15 Year Bombay Plan.
4. In 1944 S. N Agarwal gave the Gandhian Plan focusing on the agriculture and rural economy.
5. M.N. Roy in 1945 drafted People's Plan aiming at mechanisation of agricultural production.
6. In 1950 J.P. Narayan advocated Sarvodaya Plan which was inspired by Gandhian Plan and with the idea of Vinoba Bhave.
7. It gave importance to agriculture, small and cottage industries.
8. After considering all the plans in the same year Planning Commission was set up to formulate Five Year Plan in India by Jawaharlal Nehru.
9. Nehru was the first Chairman of Planning Commission, Government of India.

Discharge of sewage and waste water:
(i) Sewage, garbage and liquid waste of households, agricultural runoff and effluents from factories are discharged into lakes and rivers.
(ii) These wastes contain harmful chemicals and toxins which make the water poisonous for aquatic animals and plants.
Dumping of solid wastes:
(i) The dumping of solid wastes and litters in water bodies cause huge problems.
Discharge of industrial wastes:
(i) Industrial waste contains asbestos, lead, mercury, grease oil and petrochemicals.
Oil Spill:
(i) Sea water gets polluted due to oil spilled from ships and tankers.
Acid Rain:
(i) When the acidic particles caused by air pollution mix with water vapour, it results in acid rain.
Global warming:
(i) The increase in water temperature affects aquatic plants and animals.
Eutrophication:
(i) The increased level of nutrients in water depletes oxygen in water and this negatively affects fish and other aquatic animal population.

Canon of Ability
1. The Government should impose tax in such a way that the people have to pay taxes according to their ability.
2. Rich person should pay more tax.
Canon of Certainty
1. There is no uncertainty regarding the rate of tax or the time of payment.
Canon of Convenience
1. The method of tax collection and the timing of the tax payment should be convenient to the people.
Canon of Economy
1. The Government should impose only those taxes whose collection costs are very less and cheap.

Inclusive growth, Trade issues, Global governance, Shared Prosperity, International peace and security.

Pure Theory of Trade
(i) This component explains the causes for foreign trade, composition, direction and volume of trade, determination of the terms of trade and exchange rate, issues related to balance of trade and balance of payments.
Policy Issues
(i) Policy issues such as free trade vs. protection, methods of regulating trade, capital and technology flows, use of taxation, subsidies and dumping, exchange control and convertibility, foreign aid, external borrowings and foreign direct investment, measures of correcting disequilibrium in BoP are covered.
International Cartels and Trade Blocs
(i) Economic integration, cartels, customs unions, monetary unions, trade blocs, economic unions and multinational corporation are covered
International Financial and Trade Regulatory Institutions
(i) Financial institutions like IMF, IBRD, WTO are part of International Economics.

S. No.	Money Market	Capital Market
(1)	Short term funds are loaned and borrowed	Long term funds are loaned and borrowed
(2)	It deals with purchase, sale and transfer of short term credit instruments.	It raises capital by dealing in shares, bonds mortgages and other long term investments.
(3)	Commercial banks, acceptance houses, Non Banking Financial Institutions and the Central Bank deals with short term funds	Instruments traded in capital market comprise of equity shares, preference. shares, Debentures, bonds and other long term securities.

(i) It is the slowing down the rate of inflation by controlling the amount of credit (bank loan, hire purchase) available to consumers without causing more unemployment.
(ii) It is defined as the process of reversing inflation without creating unemployment or reducing output in the company.

S. No Accelerator Effect Multiplier Effect 1. First developed by R. F. Khan redefined by Keynes Developed by J.M. Clark. Further developed by Hicks, Samuelson 2. It is the ratio of the change in national income to a change in investment.
\(K=\frac{\Delta Y}{\Delta I}\) It is the ratio between induced investment and an initial change in
consumption
\(\beta=\frac{\Delta \mathrm{I}}{\Delta \mathrm{C}}\)

(i) In the Keynesian model, output is determined mainly by aggregate demand.
(ii) The aggregate demand is the amount of money which entrepreneurs expect to get by selling the output produced by the labourers employed.
(iii) Aggregate demand (spending) is the amount that households, firms, the governments and the foreign purchasers would like to spend on domestic output
Aggregate demand has four components:
1. Consumption demand (C)
2. Investment demand (I)
3. Government expenditure (G)
Net Export ( export - import) (X - M)
AD = C + I + G + (X - M)

(i) It is the total of income payment made to factors of production.
(ii) From the money value of NNP at market price, we deduct indirect tax and add subsidy.
(iii) \(\mathrm{NNP}_{\mathrm{FC}}=\mathrm{NNP}_{\mathrm{MP}}-\) Indirect taxes + Subsidies

There are only two sectors - household sector and firm sector.
(i) Household Sector
1. It supplies the factors of production and gets income from the firm sector
2. It buys goods and services with its entire income.
(ii) Firms:
1. It hires factors of production from the household sector.
2. It gets revenue by selling goods and services to the household sectors.
3. The production and sales are equal.
Y = C + I
Y is income
C is consumption
I is investment

History:
(i) Formed on April 1, 1935 in accordance with the RBI Act, 1934
(ii) Nationalized on January 1, 1949 (Fully owned by GOI)
(iii) Headquarter moved from Calcutta to Mumbai in 1937
(iv) Osborne Smith was the first Governor of RBI
Administration:
(i) It is the Central Bank/ Regulator for all bank in India
(ii) Also called “Lender of Last Resort”
(iii) Governors and 4 Deputy Governors along with a central board of directors appointed by the GOI.
Functions:
(i) Issues currency
(ii) Banker to the government. {It collects receipts of funds and makes payments on behalf of the government}
(iv) Regulator of Indian Banking system
(v) Custodian of Forex
(vi) Controller of credit

1. \(r=\frac { N\sum { XY-(\sum { X } )(\sum { Y } ) } }{ \sqrt { { N\sum { X } }^{ 2 }-{ (\sum { X } ) }^{ 2 } } \sqrt { { N\sum { Y } }^{ 2 }-{ (\sum { Y } ) }^{ 2 } } } \)
'r' is calculated by Direct Method without taking deviation of terms either from actual mean or assumed mean.
2. r is calculated by taking the Deviation from acutual mean.
\(r=\frac { \sum { xy } }{ { N\sum { X } }^{ 2 }-{ \sum { Y } }^{ 2 } }Where X=(X-\bar { X } ),Y=(\bar { X } )\)
3. 'r' is calculated by taking assumed mean
\(r=\frac { N\sum { dxdy-(\sum { dx } )(\sum { dy } ) } }{ \sqrt { { N\sum { dx } }^{ 2 }-{ (\sum { dx } ) }^{ 2 } } \sqrt { { N\sum { dy } }^{ 2 }-{ (\sum { dy } ) }^{ 2 } } } \)
Where dx refers to deviations of x series from assumed mean (x-x̅), dy refers to
deviations of y series from an assumed mean of (y-y)
1. Σdxdy = Sum of product of the deviations x and y series from their assumed means.
2. Σdx2 = Sum of the squares of the deviations of x series from an assumed mean
3. Σdy2= Sum of the squares of the deviations of y series from an assumed mean
4. Σdx = Sum of the deviation of x series from an assumed mean of x
5. Σdy = Sum of the deviation of y series from an assumed mean of y

Economic development is measured on the basis of four criteria

Gross National Product (GNP):
(i) GNP is the total market value of all final goods and services produced within a nation in a particular year, plus income earned by its citizens (including income of those located abroad), minus income of non-residents located in that country.
(ii) GNP is one measure of the economic condition of a country, under the assumption that a higher GNP leads to a higher quality of living, all other things being equal.
GNP per capita:
(i) This relates to increasing in the per capita real income of the economy over the long period
(ii) This indicator of economic growth emphasizes that for economic development the rate of increase in real per capita income should be higher than the growth rate of population.
Welfare:
(i) Economic development is regarded as a process whereby there is an increase in the consumption of goods and services by individuals.
(ii) From the welfare perspective, economic development is defined as a sustained improvement in health, literacy, and standard of living
Social Indicators:
(i) Social indicators are normally referred to as basic and collective needs of the people
(ii) The direct provision of basic needs such as health, education, food, water, sanitation, and housing facilities check social backwardness.

S/N	Basic need	Indicators
1	Health	Life expectancy at birth
2	Education	Literacy signifying primary school enrolment as a percent of the population.
3	Food	Calorie Supply per head
4	Water supply	Infant mortality and percentage of the population with access to potable water
5	Sanitation	Infant mortality and percentage of the population with access to sanitation.

The following are some of the concepts used in measuring national income.
1. GDP
2. NNP
3. NNP at factor cost
4. Personal Income
5. Disposable Income
6. Per capita Income
7. Real Income
8. GDP deflator
Gross Domestic Product (GDP)
GDP is the total market value of final and services produced within the country during a year. This is calculated at market prices and is known as GDP at market prices.
Net Domestic Product (NDP)
1. NDP is the value of net output of the economy during the year. Some of the country’s capital equipment wears out or becomes outdated each year during the production process. Gross National Product (GNP)
2. GNP is the total measure of the flow of final goods and services at market value resulting from current production in a country during a year, including net income from abroad.
Net National Product (NNP)(at Market price)
Net National Product refers to the value of the net output of the economy during the year. NNP is obtained by deducting the value of depreciation, or replacement allowance of the capital assets from the GNP.
NNP at Factor cost
NNP refers to the market value of output. Whereas NNP at factor cost is the total of income payment made to factors of production.
Personal Income
Personal income is the total income received by the individuals of a country from all sources before payment of direct taxes in a year. Personal income is never equal to the national income, because the former includes the transfer payments whereas they are not included in national income
Disposable Income
1. Disposable Income is also known as Disposable personal income. It is the individuals income after the payment of income tax. This is the amount available for households for consumption. Per Capita Income.
2. The average income of a person of a country in a particular year is called Per Capita Income. Per capita income is obtained by dividing national income by population.
Real Income
Nominal income is national income expressed in terms of a general price level of a particular year in other words, real income is the buying power of nominal income.
GDP deflator
GDP deflator is an index of price changes of goods and services included in GDP. It is a price index which is calculated by dividing the nominal GDP in a given year by the real GDP for the same year and multiplying it by 100.

(1) Income   (Y)	(2) Consumption       (C)	(3) Investment      (l)	(4) Aggregate Demand AD = C + 1 = Column(2) + Column(3)
0	30	(a)	50
300	300	20	320
400	390	20	410
500	480	20	500
600	570	20	(e)

 Using AD = C + II,
(a) 50 = 30 + 20
(b) 320 = 300 + 20
(c) 410 = 390 + 20 Deriving the consumption function:
Autonomous consumption = 30 (from the first row where Y = 0).
To find the mpc, calculate a change in C (e.g. 390 – 300 = 90), and divide by the corresponding change in Y (400 – 300 = 100).
So the mpc = ΔC/ΔY = 90/100 = 0.9 Hence, the consumption function is C = 30 + 0.9Y To fill in
(d) C = 30 + 9(600) = 30 + 540 = 570.
(e) follows from 590 = 570 + 20.
f. Equilibrium is where Y = AD, which is at 500 (see shaded row).

(i) War and preparation for war:
Waging war has become one of the important causes for incurring debts by the governments.
(ii) Social obligation:
Modern states are considered to be 'welfare states' and they have to undertake many social obligations like public health, sanitation, education, insurance, transport and communications etc.
(iii) Economic development deficit:
(1) The government has to undertake many projects for economic development of the country.
(2) Construction of railways, power projects, irrigation projects, heavy industries etc. Employment: Most of the governments of modern days face the problem of unemployment and has become the duty to solve this by making huge public expenditure.
(v) Controlling inflation:
The government can withdraw excess money from circulation, by raising public debt and thus prevent prices from rising.
(vi) Fighting depression:
During the depression phase, private investment is lacking.

(i) Cyclical Fluctuation:
Cyclical disequilibrium in different countries is caused by their cyclical fluctuations their phases and magnitude.
(ii) Structure Change:
Its caused by the structural changes brought by huge development and investment programmes in the developing countries.
(iii) Development Expenditure:
(1) Its caused by rapid economic development which results in income and price effects.
(2) The less developed countries in the early stage of development are not self sufficient.
(iv) Consumerism:
Balance of payments position of a country is adversely affected by a huge increase in consumption.
v) Demonstration Effect:
Deficit in the balance of payments of developing countries is also caused by demonstration effect.
vi) Borrowing:
International borrowing and investment may cause a deficit in the balance of payments.
(vii) Global Politics:
The rich countries need to sell their weapons to promote their economy and generate employment.

Demerits of Capitalism:
1. Concentration of Wealth and Income :
Capitalism causes concentration of wealth and income in a few hands and thereby increases inequalities of income.
2. Wastage of Resources Large amount of resources are wasted on competitive advertising and duplication of products.
3. Class Struggle: Capitalism leads to class struggle as it divides the society into capitalists and workers.
4. Business Cycle: Free market system leads to frequent violent economic fluctuations and crises.
5. Production of non essential goods: Even the harmful goods are produced if there is possibility to make profit.

Introduction
A systematic development of the simple accelerator model was made by J.M.Clark, It was further developed by Hicks, Samuelson and Harrod.
Definition
Accelerator coefficient is the ratio between induced investment and an initial change in consumption \(\beta=\frac{\Delta \mathrm{I}}{\Delta \mathrm{C}}\)
Operation
Suppose that in order to produce 1000 consumer goods, 100 machines are needed. Working life of a machine is 10 yrs i.e, every year 10 machines have to be replaced. This is called replacement demand
(i) Suppose that demand for consumer goods rises by 10 % (i.e, from 1000 to 1100)
(ii) This results in increase in demand for 10 more machines
(iii) The total demand for machines is 20 i.e, 10 % increase in demand for consumer goods causes 100 % increase in demand for machine (from 10 to 20 )

Explanation
 (i) SS is the saving curve.
(ii) II is the investment curve.
(iii) At point E₁ the economy is in equilibrium with OY₁ income.
(iv) S and I are equal at O₂.
(v) Now I increased from OI₂ to OI₄.
(vi) This increases income from OY₁ to OY₃ at E₂ equilibrium.
(vii) If the increase in investment by I₂I₄ is purely exogenous, then the increase in income by Y₁Y₃ would be due to multiplier.
(viii) But in this diagram it is assumed that exogenous investment is only by I₂I₃ and induced investment is by I₃I₄.
(ix) Therefore, the increase in income by Y₁Y₂ is due to the multiplier effect and the increase in income by Y₂Y₃ is due to the accelerator effect.