Automatic stabilizers exist when revenue and expenditure items in the budget automatically change with the state of the economy in such a way as to stabilize GDP.

(i) Money market is the mechanism through which sthort term funds are loaned and borrowed.
(ii) It designates financial instittutions which handle the purchase, sale and transfer of short term credit instruments.

A credit card is a payment card issued to users (cardholders) to enable the cardholder to pay a merchant for goods and services based on the cardholder’s promise to the card issuer to pay them for the amounts so paid plus the other agreed charges.

i) Establishment of monetary reserve fund
ii) Monetary discipline and cooperation
iii) Special interest in the problems of UDCs

a. Value of M1 = 800 + = Rs. 2100 billion. 1000 + 100 + 200
b. Value of M2 = 2100 = Rs. 2700 billion. (M1) + 300 + 100 + 200

M1 = Currency, coins and demand deposits
M2 = M1 + Savings deposits with post office savings banks
M3 = M2 + Time deposits of all commercial and cooperative banks.
M4 = M3 + Total deposits with Post offices.

i. According to Keynes there is wageprice rigidity.
ii. In the real world it is not possible to reduce the wages on account of government policy and due to the existence of trade unions.
iii. So the wages are more or less rigid rather than flexible

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.

i. Statistics Regression: Yi = β0 + β1Xi
ii. Econometrics Regression: Yi = β0 + β1Xi +  Ui

“The mutual penetration of quantitative econometric theory and statistical observation is the essence of econometrics”.

Foreign Portfolio Investment (FPI) means the entry of funds into a nation where foreigners deposit money in a nation’s bank or make purchase in the stock and bond markets, sometimes for speculation. FPI is part of capital account of BPO.

GNP = NNP + depreciation; depreciation
= gross investment - net investment (dollar 1 trillion - dollar 500 billion)
Therefore GNP = dollar 7 trillion + dollar 500 billion
= dollar 7.5 trillion.

Market Price = MP = FC + Indirect Taxes - Subsidies
Factor Cost = FC = MP - Indirect Taxes + Subsidies

i) difference in the endowments of factors of production between countries, and
ii) differences in the factor proportions required in production.

The combined effect of the multiplier and the accelerator is also called the leverage effect which may lead the economy to very high or low level of income propagation.
Symbolically,
Y= C + IA + IP
Y = Aggregate income.
C = Consumption expenditure
IA = autonomous investment
IP = induced private investment

“The accelerator coefficient is the ratio between induced investment and an initial change in consumption."

1. Vehicle exhaust smoke
2. Fossil fuel based power plants
3. Exhaust from Industrial Plants and Factories
4. Construction and Agricultural activities
5. Natural Causes
6. Household activities

Externality may be defined as "the cost or benefit imposed by the consumption and production activities of the individual on the rest of the society not directly involved in these activity and towards which no payment in made".

i) IBRD is (International Bank for Reconstruction and Development) otherwise called as 'The World Bank'.
ii) It was established in 1945 under the Bretton Woods conference in 1944.

According to Adam smith, there are four canons or maxims of taxation. They are as follows.
(i) Economical
(ii) Equitable
(iii) Convenient
(iv) Certain
(v) Efficient and flexible

Human capital means education and training that make human beings more productive.

(i) Human resource
(ii) Technical Know - how
(iii) Political freedom

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

(i) Socialism refers to a system of total planning.
(ii) Public ownership and state control on economic activities.

(i) Regression means going back and it is a mathematical measure showing the average relationship between two variables.
(ii) It indicates the cause and effect relationship between the variables and establishes functional relationship.

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.

Economic Growth	Economic Development
Deals with the problems of develop ed countries	Deals with the problems of UDCs (Under Developed Countries)
Change is gradual and stead	Change is discontinuous and s spontaneous
Means more output	Means not only more output but also its composition.
Concerns Quantitative aspects i.e. increase in per capita income	Quantitative as well as Qualitative
Narrow Concept	Wider Concept Development = Growth + Change.

1. Use of noise barriers
2. Newer roadway for surface transport
3. Traffic control
4. Regulating times for heavy vehicles
5. Installations of noise barriers in the work place
6. Regulation of Loudspeakers

(i) An ecosystem includes all living things (plants, animals and organisms) in a given area, interacting with each other and also with their non-living environments (weather, earth, sun, soil, climate, atmosphere).
(ii) It is the foundation of the Biosphere and determine the health of the earth.

(i) The income of the government through all sources is public revenue.
(ii) Public revenue deals with the methods of raising public revenue such as tax and non-tax, the principles of taxation, rates of taxation, impact, incidence and shifting of taxes and their effects.

(i) "Public finance is one of those subjects that lie on the border linè between Economics and Politics. It is concerned with income and expenditure of public authorities and with the adjustment of one to the other". . - Huge Dalton
(ii) Public finance is an investigation into the nature and principles of the state revenue and expenditure - Adam Smith

The SAARC Secretariat was established in Kathmandu (Nepal) on 16^th January 1987.

(i) Free trade area is the region around a trade bloc whose member countries have signed a free-trade agreement.
(ii) Such agreements involve cooperation between at least two countries to reduce trade barriers. e.g. SAFTA, EFTA.

The rate at which goods of one country are exchanged for that of another country i.e. ratio of export price and import price.

(i) International trade refers to the trade or exchange of goods and services between two or more countries.
(ii) It is a trade among different countries or trade across political boundaries.

(i) It aims to control and regulate the purposes for which credit is granted by commercial banks.
(ii) It is of 2 types: variable portfolio ceiling and variable capital asset ratio

(i) Central bank is the monetary authority that manages a state's currency, money supply, and interest rate
(ii) It oversees the commercial banking system

Stagflation is a combination of stagnant economic growth, high unemployment and high inflation.

(i) Money is, what money does - Walker:
(ii) Money can be anything that is generally acceptable as a means of exchange and at the same time acts as a measure and a store of value. - Crowther.

MPS is the ratio of change in saving to a change in income
MPS = \(\frac{ΔS}{ΔY}\)

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

 

The major feature of rural unemployment is the existence of unemployment in the form of disguised unemployment and seasonal unemployment.

(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

GDP deflator is an index of price changes of goods and services included in GDP.
\(\text{GDP deflator}=\frac { Nominal\ GDP }{ Real\ GDP } \times 100\)

"The labour and capital of a country acting on its natural resources produce annually a certain net aggregate of commodities, material and immaterial including services of all kinds. This is the true net annual income or revenue of the country or national dividend". - Alfred Marshall

(i) A Model is a simplified representation of real situation.
(ii) Economists use models to describe economic activities, their relationships and their behaviour.

An Economy is refered to any system or area where economic activities are carried out.