i. Subjective factors are the internal factors related to psychological feelings.
ii. According to Keynes, the subjective factors do not change in the short run and hence consumption function remains stable in the short period.

i) The USA
ii) West Germany
iii) Australia and
iv) Japan

(i) The consumption function or propensity to consume refers to income consumption relationship.
(ii) It is a "functional relationship between two aggregates viz., total consumption and gross national, income".

"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) Circular flow of income is a model of an economy showing connections between different sectors of an economy.
(ii) It shows flows of income, goods and services and factors of production between economic agents such as firms, households, government and nations.

When the inflation is very moderate, it acts as an incentive to traders and producers. The profit due to rising prices encourages and induces business class to increase their investments in production, leading to generation of employment and income.
(i) However, hyper-inflation results in a serious depreciation of the value of money and it discourages savings.
(ii) When the value of money undergoes considerable depreciation, this may even drain out the foreign capital.
(iii) With reduced capital accumulation, the investment will suffer a serious set-back which may have an adverse effect on the volume of production.

(i) Monetary and Fiscal policies: Cheap money policy and liberal tax policy pave the way for greater profit margin and so MEC is likely to be high.
(ii) Political environment: Political stability, smooth administration, maintenance of law and order help to improve MEC.
(iii) Resource availability: Cheap and abundant supply of natural resources, efficient labour and stock of capital enhance the MEC.

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. As the individuals are accustomed to a particular standard of living, they continue to spend the same amount on consumption even though the current income is reduced.
b) Consumption is influenced by demonstration effect. The consumption standards of low income groups are influenced by the consumption standards of high income groups. In other words, the poor people want to imitate the consumption pattern of rich. This results in spending beyond their income level.

1. Status of Development: Developed, underdeveloped, undeveloped and developing economies.
2. System of Activities: Socialistic and Mixed Economies.
3. Scale of Activities: Small and Large Economies.
4. Nature of Functioning: Static and Dynamic Economies.
5. Nature of Operation: Closed and Open Economies.
6. Nature of Advancement: Traditional and Modern Economies.
7. Level of National Income: Low Income, Middle Income and High Income Economiesapitalistic 

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 =\(\cfrac { National\ income }{ Population } \)

(a) Kumar is cyclically unemployed. He has lost his job as a result of the general economic recession.
(b) Sathish is frictionally unemployed. Job openings exist for him. It is merely a case of tracking down a position.
(c) Latha is structurally unemployed. Unemployment due to technological change in an industry is classified as structural.
(d) Devi, is frictionally unemployed. Job openings exist for her.

1. There are a number of inputs that are included into a production process when producing goods and services. These inputs are commonly known as factors of production and include things such as land, labour, capital and entrepreneurship.
2. Producers of goods and services incur a cost for using these factors of production. These costs are ultimately added onto the price of the product.
3. The factor cost refer to the cost of production that is incurred by a firm when producing goods and services.
4. Examples of such production costs include 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.
5. The factor cost does not include the taxes that are paid to the government since taxes are not directly involved in the production process and, therefore, are not part of the direct production cost.
6. However, subsidies received are included in the factor cost as subsidies are direct inputs into the production.