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) It consists of capital receipts and capital expenditure.
(ii) In this case, the main sources of capital receipts are loans, advances etc.
(iii) On the other side capital expenditure can be categorised into plan capital expenditure and non-plan capital expenditure

The state assumes greater roles by creating economic and social overheads, ensuring stability both internally and externally, conserving resources for sustainable development and so on.

(i) State Financial Corporations (SFCs)
(ii) State Industrial Development Corporation (SIDCs)

The following are the major differences between IMF and World Bank:
(i) The International Monetary Fund is a controller of the world’s monetary system. World Bank is a global financial institution.
(ii) The IMF focuses on bringing economic stability, whereas the World Bank laid emphasis on economic growth of the developing nations

In 1963, IMF established compensatory financing facility to provide additional financial assistance to the member countries, particularly primary producing countries facing shortfall in export earnings

The term underdevelopment refers to that state of an economy where levels of living of masses are extremely low due to very low levels of Percapita income, resulting from low levels of productivity and high growth rate of population.

(i) According to Fisher, “other things remaining the same, as the quantity of money in circulation increases, the price level also increases in direct proportion and the value of money decreases and vice versa”.
(ii) If the quantity of money doubled, the price level also double and the value of money will be one half.

(i) Fiat money includes items that are designated as money that are intrinsically worthless.
(ii) Commodity money are things like gold or silver which have alternative uses other than money.
(iii) They can be used in dental fillings or as jewelry.

It is the fraction of the deposits the banks must keep with RBI.

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

David Ricardo, J.S.Mill, J.B.Say and A.C.Pigou. List some limitations of GDP as a measurement of social welfare.

i. Economics + Mathematics = Mathematical Economics
ii. Mathematical Economics + Statistical Data & Its Technique = Econometrics
iii. Economics + Statistics + Mathematics + Empirical Data = Econometrics

The Correlation is said to be negative when the values of variables move in the opposite directions. Ex. Y= a – bx
Ex 1: Price and demand for a commodity move in the opposite direction.

1. Evidence from history proves that during the reign of Chandra Gupta Maurya, there existed a system of maintaining vital statistics, incuding registration of births and deaths.
2. Such records can be found in Kautilya’s Arthashastra even before 300B.C.
3. The book “Ain-e-Akbari” (1596- 97) mentions the statistical and administrative surveys conducted during Akbar’s rule.

(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

The main features of GDP_MP are:
1. It includes only final goods and services produced in the domestic territory of a country;
2. It includes consumption of fixed capital (depreciation);
3. It is estimated at the prevailing prices.

There are three major types of economic systems.
(i)  The factor cost refer to the cost of production such as the cost of renting machines, purchasing machinery and land, paying salaries and wages, cost of obtaining capital, and the profit margins that are added by the entrepreneur

(i) Viner has devised another concept called ‘‘the single factoral terms of trade’’ as an improvement upon the commodity terms of trade.
(ii) It represents the ratio of exportprice index to the import-price index adjusted for changes in the productivity of a country’s factors in the production of exports
(iii) Symbolically, it can be stated as Tf = (Px / Pm) Fx.

i. Increase in consumer demand
ii. Films get close to fill capacity
iii. Films invest to meet rising demand.

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) The key objective of EE is to identify those particular tools or policy alternatives that will move the market towards the most efficient allocation of natural resources.
(ii) EE takes into consideration issues such as the conservation and valuation of natural resources, pollution control, waste management, and recycling.

1. The motive of precaution: To build up a reserve against unforeseen contingencies. Eg. Accidents, sickness.
2. The motive of foresight: The desire to provide for anticipated future needs. Eg. Old age.

(i) Flow variables are measured over a period of time.
(ii) National Income, imports, exports, consumption, production, investment etc are examples of flow variables

i) The WTO was established in 1995 as a successor to the GATT.
ii) It is a new international organization set up as a permanent body.
iii) It is designed to play the role of watch dog in the spheres of trade in goods and service foreign investment and intellectual property rights.

Public finance is a study of the financial aspects of government.

(i) Exchange control means the state intervention in the forex market.
(ii) It is a popular method employed to influence the balance of payment position of a country.

Autonomous investment is the expenditure on capital formation, which is independent of the change in income, rate of interest or the rate of profit.

(i) Nominal income is expressed in terms of a general price level of a particular year. In other words, real income is the buying power of nominal income.
(ii) The real income is derived as follows
National Income at constant price = National Income at current price \(\div\) P₁/P₀

Centralized planning means the power of planning and decision making are exclusively in the hand of top management

ATM was first introduced in 1967.

M₁ and M₂ are narrow money as they includes currency plus demand deposits in banks and other deposits.

i) Efficient use of Resources
ii) Automatic working
iii) Higher Rates of capital formation
iv) Development of new technology