The main sources of External public debt are IMF, World Bank, IDA and ADB etc. Loan from other countries and the Governments

(a) They are allowed to maintain cash reserve ratio at 3 per cent and statutory liquidity ratio at 25 per cent; and
(b) They also provide refinance facilities through NABARD.

Comprehensive Plan	Partial Plan
General planning which concerns itself with the major issues for the whole economy is known as comprehensive planning	Partial planning is to consider only the few important sectors of the economy

It is the ratio of money held by the public in currency to that they hold in bank deposits.

The paper currency standard refers to the monetary system in which the paper currency notes issued by the Treasury or the Central Bank or both circulate as unlimited legal tender.

The value of total output of goods and services produced in an economy in a year

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

i. Modern technology being capital intensive requires lesslabourers and contributes to technological unemployment.
ii. Now a days, invention and innovations lead to the adoption of new techniques there by the existing workers are retrenched

S.No	Descriptive Statistics	Inferential Statistics
1	It describes the population under study	It draws the conclusion for the population-based on the sample result.
2	It presents the data in a meaningful way through charts, diagrams, graphs, other than describing in words	It uses hypotheses, testing and predicting on the basis of the outcome
3	It gives the summary of data	It tries to understand the population beyond the sample.

1. Accurate and reliable data are not adequate, as farm output in the subsistence sector is not completely informed.
2. Different languages, customs, etc., also create problems in computing estimates.

(i) The Physical Quality of Life Index PQLI is considered a better indicator of economic welfare.
(ii) It includes standard of living, life expectancy at birth and literacy.

When receipts exceed payments, the BoP is said to be favourable. That is, R / P > 1.

(i) Under static multiplier the change in investment and the resulting change in income are simultaneous. There is no time lag.
(ii) There is also no change in MPC as the economy moves from one equilibrium position to another.

Positive Multiplier
When an initial increases in an injection (or a decrease in a leakage ) leads to a greater final increase in real GDP.
Negative Multiplier
When an initial increases in an injection (or an increase in a leakage ) leads to a greater final decrease in real GDP.

The SDGs links three dimensions of sustainable development: economic development, social inclusion and environmental sustainability.

France	Sweden
United States	Japan

Macro economics suffers from certain limitations. They are:
1. There is a danger of excessive generalisation of the economy as a whole 
2. It assumes homogeneity among the individual units.
3. There is a fallacy of composition. What is good of an individual need not be good for nation and viceversa. And, what is good for a country is not good for another country and at another time.
4. Many non - economic factors determine economic activities; but they do not find place in the usual macroeconomic books

i) The SDR (Special Drawing Right) was created for supplementary 'The World Reserve Currency (asset).
ii) Create global liquidity.

(i) Short term plans are also known as 'controlling plans'. 
(ii) They encompass the period of one year, therefore, they are also known as 'annual plans'.

(i) Quantitative Method
(ii) Qualitative Method

(i) Planning is an integral part of a socialist economy.
(ii) In socialist economy all decisions are undertaken by the Central Planning Authority.

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

(i) Statistics as a science of estimates and probabilities.
(ii) Statistics is the collection, organisation, presentation, analysis and interpretation of numerical data.

Gross National Product is the total total market value of all final goods and services produced within a nation in a particular year, plus income earned by its citizens (abroad) minus income of non residents located in that country.

Global warming is the current increase in temperature of the earth's surface (both land and water) and its atmosphere.

(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

(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) It means multiplication of loans and advances.
(ii) The power of Commercial banks to create deposits through expanding their loans and advances is known as Credit Creation.

(i) Plastic money refers to the hard plastic cards used everyday in place of actual bank notes.
(ii) They aim at removing the need for carrying cash to make transactions.
(iii) (E.g.) Cash cards, Credit cards, Debit cards, Pre-paid Cash cards, Store cards, Forex cards and Smart cards.

Accelerator is the ratio between induced investment and an initial change in consumption.
(β) = \(\frac{ΔI}{ΔC}\)

(i) Aggregate (desired) consumption expenditure (C)
(ii) Aggregate (desired) private savings (S)
(iii) Net tax payments (T)
(iv) Personal (desired) transfer payments to the foreigners (Rf)
AS = C + S + T + Rf

(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

Economies can be classified into different types based on the Status of Development are
1. Developed
2. Underdeveloped
3. Undeveloped and
4. Developing economies

Accepting Deposits
It implies that commercial banks are mainly dependent on public deposits.
There are two types of deposits, which are discussed as follows
(i) Demand Deposits
It refers to deposits that can be withdrawn by individuals without any prior notice to the bank. In other words, the owners of these deposits are allowed to withdraw money anytime by writing a withdrawal slip or a cheque at the bank counter or from ATM centres using debit card.
(ii) Time Deposits
It refers to deposits that are made for certain committed period of time. Banks pay higher interest on time deposits. These deposits can be withdrawn only after a specific time period by providing a written notice to the bank.

The important concepts used in macro economics are presented below:
(i) GATS is the first multilateral set of rules covering trade in services like banking, insurance, transportation, communication, etc.,
(ii) All members countries are supposed to extend MFN (Most Favoured Nation) status to all other countries without any discrimination
(iii) Transparency should be maintained by publishing all relevant laws and regulations over services.

(i) Basis of the Credit System: Money is the basis of the Credit System. Business transactions are either in cash or on credit.
(ii) Money facilitates distribution of National Income: The task of distribution of national income was exceedingly complex under the barter system.
(iii) Money helps to Equalize Marginal Utilities and Marginal Productivities: Consumer can obtain maximum utility only if he incurs expenditure on various commodities in such a manner as to equalize marginal utilities accruing from them.
(iv) Money Increases Productivity of Capital: Money is the most liquid form of capital. In other words, capital in the form of money can be put to any use.

(i) John Maynard Keynes was one of the most influential economists of the 20th century.
(ii) He was born in Cambridge in1883. In addition to his work as an economist he held position as civil servant a director of the Bank of England, and leader of British delegation of negotiators at the Bretton Woods conference at points in his career.
(iii)  Economic theory based on his idea is known as Keynesian economics, and remain highly influential today, particularly in the field of macroeconomics.

The following chart depicts how an economic model is done.

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

GDP (Expenditure)	GDP (Factor Incomes)	GDP (Value of Output)
1. Consumption  2. Government 3. Spending 4. Investment spending 5. Change in value of stocks 6. Exports 7. Imports 8. GDP (Known as aggregate demand)	(i) Income from People in jobs and in self employment (eg. wages and Salaries) (ii) Profit of private sector business (iii) Rent income from the ownership of land	(i) Value added from each of the main economic sectors (ii) These sectors are (iii) Primary (iv) Secondary (v) Manufacturing (vi) Quaternary
Government spending	Profits of private sector business

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.

i. Solid waste:
It includes all kinds of rubbish like paper, plastic containers, bottles, cans, food, used cars, broken electronic goods, municipal waste, and hospital waste.
ii. Pesticides and Fertilizers:
Many farming activities engage in the application of fertilizers, pesticides and insecticides for higher crop yield which pollute land.
iii. Deforestation:
Humans depend on trees for many things including life. Trees absorb carbon dioxide from the air and release Oxygen, which is needed for life. Forest helps replenish soils and help retain nutrients being washed away. Deforestation is led to land pollution.

(i) When a loan is taken from abroad or from an international organisation it is called external public debt.
(ii) The main sources of external public debt are IMP, World Bank, IDA and ADB etc.
(iii) Loan from other countries and the governments.

(i) Factor endowment of a country may change over time.
(ii) The efficiency of the same factor may differ in the two countries. For example: America may be labour scarce in terms of no. of workers

(i) The Second Five Year Plan (1951- 56) aimed at rapid industrialization with particular emphasis on the development of basic and heavy industries.
(ii) It was during the second plan period, the Goverriment embraced the goal of democratic socialism

(i) Lack of Coordination: The greatest drawback of mixedism is lack of coordination between public sector and private sector. As both work with divergent motives, it creates many coordination related problems.
(ii) Competitive Attitude: It is expected that both government and private should work with a complementary spirit towards the welfare of the society, but in reality they are competitive in their activities.
(iii) Inefficiency: Most of the public sector enterprises remain inefficient due to lethargic bureaucracy, red tapism and lack of motivation.
(iv) Fear of Nationalization: In a mixed economy, the fear of nationalization discourages the private entrepreneurs in their business operations and innovative initiatives.
(v) Widening Inequality: Ownership of resources, laws of inheritance and profit motive of people widens the gap between rich and poor.

(i) The general objective of Econometrics is to give empirical content to economic theory
(ii) The specific objectives are :
(i) It helps to explain the behaviour of a forthcoming period that is forecasting economic phenomena.
(ii)  It helps to prove the old and established relationships among the variables or between the variables.
(iii) It helps to establish new theories and new relationships.
(iv) It helps to test the hypotheses and estimation of the parameter.

Functional Planning:
(i) It refers to that planning which seeks to remove economic difficulties by directing all the planning activities within the existing economic and social structure.
Structural Planning:
(i) It refers to a good deal of changes in the socioeconomic framework of the country.
(ii) Under developed countries follow this type of planning.

a) Climate change
(i) Climate change refers to seasonal changes over a long period with respect to the growing accumulation of greenhouse gases in the atmosphere.
(ii) Industrial revolution has increased the concentration of carbon dioxide in the atmosphere by 40 %.
(iii) Several parts of the world have experienced warming of coastal waters, high temperatures, a marked change in rainfall patterns and an increased intensity and frequency of storms.
(iv) Sea levels and temperatures are expected to be rising.
b) Acid rain
(i) Acid rain is one of the results of air pollution.

(i) Primary deficit is equal to fiscal deficit minus interest payments. PD = Fiscal deficit (FD) - Interest Payment (IP)
(ii) It shows the real burden of the government and it does not include the interest burden on loans taken in the past.
(iii) It shows the borrowing requirement of the government exclusive of interest payments.

(i) It is a multinational legal or trade agreements between countries.
(ii) It is an agreement between more than two countries but not many.

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) NABARD acts as a refinancing institution for all kinds of production and investment credit to agriculture, small-scale industries, cottage and village industries, handicrafts, rural crafts and real artisans to promote integrated rural development.
2) It provides short-term, medium term and long-term credit to state co-operative Banks, RRBs, LDBs and other financial institutions approved by RBI.
3) NABARD gives long-term loans (20 Years) to State Government to enable them to subscribe to the share capital of co-operative credit societies.
4). It gives long-term loans to any institution approved by the Central Government or contribute to the share capital or invests in securities of any institution concerned with agriculture and rural development.
5) NABARD co-ordinates the activities of Central and State Governments, Planning Commission and all India and State level institutions entrusted with the development of small scale industries, village and cottage industries, rural crafts, industries in the tiny and decentralized sectors
6) It has the responsibility to inspect RRBs and CO-operative banks, other than primary co-operative societies.
7) It maintains a Research and Development Fund to promote research in agriculture and rural development

(i) Money supply means the total amount of money in an economy.
(ii) It refers to the amount of money which is in circulation in an economy at any given time.
(iii) Money supply determines the price level and interest rates.
(iv) Money supply viewed at a given point of time is a stock and over a period of time it is a flow.

(i) Hicks combined multiplier and accelerator to measure the total effect of initial investment on income.
(ii) Both induced consumption and induced investment are combined.
(iii) Also called leverage effect, it may lead the economy to a very high or low level of income propagation.
\(\mathrm{Y}=\mathrm{C}+\mathrm{I}_{\mathrm{A}}+\mathrm{I}_{\mathrm{P}}\)
Y = aggregate income
C = consumption expenditure
I_A = autonomous investment
I_B = induced private investment

(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.

(i) The total expenditure incurred by the society in a particular year is added.
(ii) It includes personal consumption expenditure (C), net domestic investment (I), Government expenditure on consumption and capital goods (G) and net exports (X - M).
\(\mathrm{GNP}=\mathrm{C}+\mathrm{I}+\mathrm{G}+(\mathrm{X}-\mathrm{M})\)
(iii) Second hand goods, purchase of shares and bonds, transfer payments and expenditure on intermediate goods must not be included.

(i) Red tapism and bureaucracy since, approval of many officials is needed.
(ii) Absence of incentive and so productivity is less.
(iii) Limited freedom of choice in the consumption of goods and services.
(iv) The state takes all major decisions. There is concentration and misuse of power.

Balanced Budget	Unbalanced Budget
1. In case of balanced budget, the proposed govt. expenditure is equal to the estimated govt. receipts in the budget year.	1. In case of unbalanced budget, the proposed expenditure and the estimated receipt are unequal during the budget year.
2. Balanced budget reduces unproductive and extravagant expenditure of the govt	2. Unbalanced (deficit) budget helps the govt. to incur unproductive and extravagant expenditure.
3. It is ineffective during economic instability.	3. It is effective during economic instability (surplus during inflation and deficit during deflation).
4. It fails to achieve full employment from under-employment equilibrium	4. Unbalanced (deficit) budget is a powerful instrument to achieve full employment
5. It cannot solve the problems of underdeveloped countries (UDCs).	5. Unbalanced (deficit) budget is a powerful instrument of resource mobilisation for economic development of UDCs.

1. The money supply increases which places downward pressure on the interest rate.
                                               \(\downarrow \)
2. The lower interest rate stimulates planned investment and aggregate output.
                                               \(\downarrow \)
3. This in turn increases the amount of money demand.
                                                \(\downarrow \)
4. This in turn may cause interest rates to fall by less than they otherwise would had there been
                                                \(\downarrow \)
5. No feedback effect from the increased demand for money hence forth.

Let us take price as X and supply as Y

Compulation of Pearson's Correlation Coefficient
Price: X	Price: Y	XY	X2	Y2
10	40	400	100	1600
12	41	492	144	1681
14	48	672	196	2304
15	60	900	2250	3600
19	50	950	3610	2560
Σx=70	Σy=239	Σxy=3414	Σx2=1026	Σy2=11685

\(r=\frac { N\sum { XY-(\sum { X } )(\sum { Y } ) } }{ \sqrt { N\sum { { X }^{ 2 }-{ (\sum { X } ) }^{ 2 } } \sqrt { N\sum { { Y }^{ 2 }-{ (\sum { y } ) }^{ 2 } } } } } \)
\(r=\frac { (5x3414)-70x239) }{ \sqrt { (5x1026)-{ (70 })^{ 2 } } \sqrt { 5x11685-{ (239) }^{ 2 } } } \)
\(r=\frac { 17,070-16,730 }{ \sqrt { 230x } \sqrt { 1304 } } \)
\(r=\frac { 340 }{ 547.65 } =+0.621\)
Pirce of the product and supply for the product is positively correlated. When price of the product increases then the supply for the product also incresases.

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.

BASIS FOR COMPARISON	FIXED EXCHANGE RATE	FLEXIBLE EXCHANGE RATE
Meaning	Fixed exchange rate refers to a rate which the government sets and maintains at the same level.	Flexible exchange rate is a rate that varies according to the market forces.
Determined by	Government or central bank	Demand and Supply forces
Changes in currency price	Devaluation and Revaluation	Depreciation and Appreciation
Speculation	Takes place when there is rumor about change in government policy.	Operates to remove external instability by change in Forex rate.
Self adjusting mechanism	Operates through variation in supply of money, domestic interest rate and price.	No

(A) GNP_MP = Sum of net value added by all the industries
(i) value - added by industry A.
= Sale of goods to industry B + Sale of goods to industry C − Value of imports
Sale of goods to consumers = Rs. 400 + Rs. 200 + Rs. 1,000 − Rs. 100
= Rs. 1,590.
(ii) Value - added by industry B
= Sale of goods to industry C + Sale of goods to consumers.− Purchase of goods from industry  A
= Rs. 500 + Rs. 800 − Rs. 400
= Rs. 900.
(iii) Value - added by industry C
= Sale of goods to consumers + Exports − (purchase of goods from industry A+purchase of goods from industry B)
= Rs. 600 + Rs. 500 - Rs. 200 - Rs. 500
= Rs. 400.
Gross National Product at market prices, or
GNP_MP equals
Rs. 1,500 + Rs. 900 + Rs. 400
= Rs. 2,800
Gross National Product at factor cost or GNP_FC equals
GNP_MP − Indirect taxes + Subsidies
= Rs. 2,800 − Rs.100 + Rs. 50
= Rs. 2,750.
Net National Product at market prices, or NNP_MP equals.
GNP_MP − Depreciation
= Rs. 2,800 − Rs. 100
= Rs. 2,700.
Net National Product at factor cost or NNP_FC equals
NNP_MP - Indirect.taxes + Subsidies
= Rs. 2,700-Rs. 100 + Rs. 50
= 2,650.
as factors of production and include things such as land, labour, capital and entrepreneurship.
1. 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.
2. The factor cost refer to the cost of production that is incurred by a firm when producing  goods and services.
3. 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.
4. 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.
5. However, subsidies received are included in the factor cost as subsidies are direct inputs into the production.

Since Y = C + I we can write Y = a + bY + I.
This equation can be rearranged to yield
Y - bY = a + I
Y(1 - b) = a + I
We can then solve for Y in terms of I by dividing through by (1 - b):
Y = (a + I) (1/1 - b)
Now we can see that an increase in I will increase Y by
ΔY = ΔI x (1/1 - b)
Since b D MPC, the expression becomes
ΔY = ΔI x 1/(1 - MPC)
Therefore, the multiplier is 1/1 - MPC or 1/MPS.

1. Private Ownership of Property and Law of Inheritance: The basic feature of capitalism is that all resources namely, land, capital, machines, mines etc. are owned by private individuals. The owner has the right to own, keep, sell or use these resources according to his will. The property can be transferred to heirs after death.
2. Freedom of Choice and Enterprise: Each individual is free to carry out any occupation or trade at any place and produce any commodity. Similarly, consumers are free to buy any commodity as per their choice
3. Profit Motive: Profit is the driving force behind all economic activities in a capitalistic economy. Each individual and organization produce only those goods which ensure high profit. Advance technology, division of labour, and specialisation are followed. The golden rule for a producer under capitalism is ‘to maximize profit.’
4. Free Competition: There is free competition in both product and factor market. The government or any authority cannot prevent firms from buying or selling in the market. There is competition between buyers and sellers.
5. Price Mechanism: Price mechanism is the heart of any capitalistic economy. All economic activities are regulated through price mechanism i.e, market forces of demand and supply.
6. Role of Government: As the price mechanism regulates economic activity, the government has a limited role in a capitalistic economy. The government provides basic services such as, defense, public health, education, etc.
7. Inequalities of Income: A capitalist society is divided into two classes – ‘haves’ that is those who own property and ‘have-nots’ who do not own property and work for their living. The outcome of this situation is that the rich become richer and poor become poorer. Here, economic inequality goes on increasing.

Introduction
The concept of multiplier Was first developed by R.F. Khan in terms of employment. J.M Keynes redefined it as investment multiplier.
Definition
Multiplier is defined as the ratio of the change in national income to change in investment.
\(K=\Delta Y / \Delta I\)
The value of multiplier depends on MPC.
\(\mathrm{K}=\frac{1}{1-\mathrm{MPC}} \text { since } \mathrm{MPC}+\mathrm{MPS}=1\)
\(k=\frac{1}{N 118}\)
Multiplier is inversely related to MPS and directly with MPC.
If MPC is, 0.75, MPS is 0.25 then K=4.00
\(\frac{1}{1-0.75} \text { or } \frac{1}{0.25}=4\)

MPC	MPS	k
0.00	1.00	1
0.10	0.90	1.11
0.50	0.50	2.00
0.75	0.25	4.00

Working
(i) Suppose government undertakes investment expenditure equal to र100 cr on public works.
(ii) Income of labourers and suppliers of materials increases by र100 cr
(iii) If MPC is 0.8 that is 80 %. र80 cr is spent on consumption र20 cr salved
(iv) Suppliers of goods get an income of र80 cr. They spend र64 cr (ie 80% of र80 cr).
(v) In this manner consumption expenditure and increase in income act in a chain like manner.