Three of the most important ways of classifying correlation are:
(i) Based on the direction of change of variables
Positive Correlation:
(i) The correlation is said to be positive if the values of two variables move in the same direction.
(ii) Ex. Y = a + bx
Negative Correlation:
(i) When the values of variables move in the opposite directions.
(ii)  Ex. Y = a - bx
(ii) Based on the number of variables studied.
Simple Correlation:
(i) If only two variables are taken for study.
Multiple Correlations:
(i) If three or more than three variables are studied simultaneously.
\(\operatorname{Ex}: Q_{d}=f\left(P, P_{v}, P, t, y\right)\)
Partial Correlation:
(i) If there are more than two variables but only two variables are considered keeping the other variables constant, then the correlation is said to be Partial Correlation.
(iii) Based on the constancy of the ratio of change between the variables
Linear Correlation:
(i) When on the amount of change in one variable tends to bear a constant ratio to the amount of change in the other.
(ii) Ex. Y = a + bx²
Non Linear:
(i) The amount of change in one variable does not bear a constant ratio to the amount of change in the other variables.
(ii) Ex. Y = a + bx²

Human Resources:
(i) Human power increases productivity and thus national income.
(ii) A healthy, educated and skilled labour force is the most important productive asset.
Technical Know-how:
(i) As the scientific and technological knowledge advances, more sophisticated techniques steadily raise the productivity in all sectors.
Political Freedom:
(i) Development is linked with political freedom.
(ii) Dadabhai Naoroji said the drain of wealth from India under British rule is the major cause of increase in poverty in India.
Social Organization:
(i) Mass participation in development programs is a pre condition for accelerating development
(ii) When some groups enjoy the benefits of growth and majority of the poor do not participate in the process of development it is called crony capitalism.
Corruption free administration:
(i) Tax evasion breeds corruption and prevents progress.
Desire for development:
(i) If the level of consciousness is low and the people have accepted poverty as their fate, there is little scope for development.
Moral, ethical and social values:
(i) If people are dishonest, market cannot function.
Casino Capitalism:
(i) If people spend larger propotion of their income on entertainment liquor, illegal activities, production suffers. This is called casino capitalism.
Patrimonial Capitalism:
(i) If assets are inherited by children, they would not work hard because they do not know the value of the assets. So, production is low.

1. Man's life is interconnected with various other living and non-living things.
2. Life also depends on social, political, ethical, philosophical and other aspects of economic system.
3. The life of human beings is shaped by his living environment.
4. The relationship between the economy and the economy is explained in the "Material Balance Model" developed by Alen Kneese and R.V. Ayres.
5. Households and firms are connected to environment, and they are interconnected too.
6. Households and firms depend on nature for resources.
7. They send out residuals of consumption and production to nature.
8. Nature assimilates all forms of waste.
9. Thus the economy and environment are interconnected.

Defence
1. The Government protects the people from external aggression and internal disorder.
2. Through police and military forces it renders protective services.
Judiciary:
1. It provides adequate judicial structure to render justice to all citizens.
Enterprises
1. The regulation and control of private enterprise comes under the government.
Social Welfare:
1. The state provides education, social security, social insurance, health and sanitation for the people.
Infrastructure
1. Modern States build the base for the economic development of the country by creating social and economic infrastructure.
Macro-economic policy
1. The Government follows fiscal policy and monetary policy to achieve macro economic goals.
Social Justice
1. During the process of growth certain sections of the economy gain at the cost of others.
2. Government intervenes with fiscal measures to redistribute income.
Control of Monopoly
1. State intervenes through control of monopolies and restrictive trade practices to curb concentration of economic power.

1. Basic Credit Facility
2. Extended Fund Facility
3. Compensatory Financing Facility
4. Buffer Stock Facility
5. Supplementary Financing Facility
6. Structural Adjustment Facility

S.No	Classical Theory of International Trade	Modern Theory of International Trade
1	International trade is on the basis of labour theory of value.	International trade is on the basis of general theory of value.
2	It presents a one factor (labour) model.	It presents a multi factor (labour and capital) model.
3	It attributes the differences in the comparative costs to differences in the productive efficiency of workers in the two countries.	It attributes the differences in comparative costs to the differences in factor endowments in the two countries.

1. Credit Creation means the multiplicátion of loans and advances.
2. Every loan creates its own deposits.
3. It is assumed that all banks are obliged to keep the ratio between cash and its deposits at a minimum of 20 %.
4. The banks do not keep any excess reserves.
5. There are no drains in the supply of money.
6. Now, when a customer deposits Rs.1000 in a bank, the bank creates a deposit of Rs.1000 in his favour.
7. Bank deposits have increased by Rs.1000.
8. It is required to keep only a cash reserve of 20 %, i.e. Rs.800 is excess cash reserve.
9. The bank lends out this Rs.800 to the public.
10. The debtor deposits this money with another bank B.
11. Bank B is creating a deposit of Rs.800.
12. Bank B has also excess cash reserve of Rs.640.
13. It could in turn, lend out Rs.640.
14. The total deposits will now grow into Rs.1000 + 800 + 640 +........ till ultimately the excess cash reserve ends.
15. When this stage is reached, the total of the above will be Rs.5000.
16. Money Multiplier \( \frac{1}{20 \%}=\frac{1}{20} \times 100=5\)
Credit creation = 1000 x 5 = Rs.5000

Currency Deposit Ratio (CDR):
It is the ratio of money held by the public in currency to that they hold in bank deposits.
Reserve deposit Ratio (RDR):
Reserve Money consists of vault cash in banks and deposits of commercial banks with RBI.
Cash Reserve Ratio (CRR):
It is the fraction of deposits the banks must keep with RBI.
Statutory Liquidity Ratio (SLR):
It is the fraction of the total demand and time deposits the commercial bank must keep with itself.

S. No	Autonomous Investment	Induced Investment
2.	Independent	Planned
3.	Income inelastic	Income elastic
4.	Welfare motive	Profit motive

(i) There is no possibility for over production or unemployment.
(ii) If there exist unutilized resources, it is profitable to employ them up to full employment.
(iii) There is automatic price mechanism, so no need for government intervention
(iv) Interest flexibility brings about equality between saving and investment.
(v) Money acts as the medium of exchange.

1. The average income of a person of a country in a particular year is called Per Capita Income.
2. Per capita income is got by dividing national income by population.
Per capita income =\(\cfrac { National\ income }{ Population } \)

(i) Automatic working without any government intervention.
(ii) Efficient use of resources.
(iii) Incentives for hard work.
(iv) Production and productivity are high, so there is economic progress.
(v) Consumers sovereignty exist.
(vi) Increased saving and investment leads to higher capital formation.
(vii) Development of new technology.