(i) The term fiscal is derived from Greek word which means basket and symbolizes the public purse.
(ii) Hence the subject ‘Public Finance’ has been newly termed ‘Fiscal Economics’.

(i) The bank rate is the rate at which the Central Bank of a country is prepared to re-discount the first class securities.
(ii) It means the bank is prepared to advance loans on approved securities to its member banks.

The Bretton Woods system gave birth to three international organisations of paramount importance for International Economic affairs
These are:
1. The World Trade Organization (WTO) (the successor of the General Agreement on Tariffs and Trade)
2. The International Monetary Fund (IMF)
3. The World Bank Group These are generally perceived as the three main organisations regulating the international economic order.

The UDCs are characterized by a predominance of primary sector i.e. agriculture, low per capita income, widespread poverty, wide inequality in the distribution of income and wealth, over population, low rate of capital formation, high rate of unemployment, technological backwardness, dualism, etc.

The following are the criticisms against Say’s law:
1. According to Keynes, supply does not create its demand. It is not applicable where demand does not increase as much as production increases.
2. Automatic adjustment process will not remove unemployment. Unemployment can be removed by increase in the rate of investment

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

1. Statistics is necessary for the formulation of policies to start new course, according to the changing environment.
2. There are many educational institutions owned by public and private engaged in research and development work to test the past knowledge and evolve new knowledge.
3. These are possible only through statistics.

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

1. Multiplier highlights the importance of investment in income and employment theory.
2. The process throws light on the different stages of trade cycle.
3. It also helps in bringing the equality between S and I.
4. It helps in formulating Government policies.
5. It helps to reduce unemployment and achieve full employment.

i. The multiplier assumes that those who earn income are likely to spend a proportion of their additional income on consumption.
ii. But in practice, people tend to spend their additional income on other items. Such expenses are known as leakages.

(i) PC
(ii) Microwave oven
(iii) Television
(iv) CD player
(v) Radio
(vi) Fan
(vii) Cell phones
(viii) Electric Iron
(ix) Washing machine

1. North Korea
2. China
3. Venezuela

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

Net Domestic Product (NDP) is also arrived from GDP by making adjustment with regard to depreciation 
GDP - Depreciation = NDP

(i) Gross Domestic Product (GDP) is the total value of output (goods and services) produced by the factors of production located within the country's boundary in a year.
(ii) The factors of production may be owned by anyone-citizens or foreigners.
GDP = GNP - Net income earned from abroad

The down payment is raised and the number of installments reduced for the credit sal

An increase in business activities after the lowest point. (ie) depression

(i) Creeping inflation is slow-moving and very mild.
(ii) The rise in prices will not be perceptible but spread over a long period.
(iii) This is also known as mild inflation or moderate inflation.

There are three models of circular flow of income. They are,
(i) Two sector model
(ii) Three sector model
(iii) Four sector model

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

(i) Based on characteristics there are quantitative and qualitative data.
(ii) Qualitative data is classified as nominal data and rank data.
(iii) Based on the data sources there are primary data and secondary data.

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

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

(i) Both are source of public revenue.
(ii) Tax is a compulsory payment but the tax payer cannot claim any specific benefit by paying a tax.
(iii) Fee does not involve compulsion.
(iv) Government provides certain services (e.g.) driving license and charges a fee for it.

(i) The balance between the values of goods and services exchanged between two countries.
(ii) It is a trade in both visible and non visible items.

A Commercial bank is a financial institution that accepts deposits and advances loans and are profit motivated.

(i) Surplus goods were exchanged for money which in turn was exchanged for other needed goods.
(ii) Goods like furs, skins, salt, rice, wheat, utensils, weapons were used as money

It is the proportion of disposable income which individuals spend on consumption.

(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) Effective demand is the money spent on consumption of goods and services and on investment.
(ii) Employment and output depends on the level of effective demand
(iii) When effective demand increases, employment will increase.
(iv) Effective demand is determined by aggregate supply and aggregate demand.

\(\mathrm{GNP}=\mathrm{C}+\mathrm{I}+\mathrm{G}+(\mathrm{X}-\mathrm{M})+(\mathrm{R}-\mathrm{P})\) or \(\mathrm{GNP}_{\mathrm{MP}}=\mathrm{GDP}_{\mathrm{MP}}\) + Net Factor income from Abroad.

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

(i) The IMF established Structural Adjustment Facility (SAF) in March 1986 to provide additional balance of payments assistance on concessional terms to the poorer member countries.
(ii) In December 1987, the Enhanced Structural Adjustment Facility (ESAF) was set up to augment the availability of concessional resources to low income countries.
(iii) The purpose of SAF and ESAF is to force the poor countries to undertake strong macroeconomic and structural programmes to improve their balance of payments positions and promote economic growth

n = pk (or) p = n / k
Where
n is the total supply of money
p is the general price level of consumption goods
k is the total quantity of consumption units the people decide to keep in the form of cash.
because it is measured in terms of consumer goods.
According to Keynes, peoples desire to hold money is unaltered by monetary authority. So, price level and value of money can be stabilized through regulating quantity of money (n) by the monetary authority.
Later, Keynes extended his equation in the following form:
n = p (k + rk') or p = n/(k + rk')
Where,
n = total money supply
p = price level of consumer goods
k = peoples' desire to hold money in hand (in terms of consumer goods) in the total income of them
r = cash reserve ratio
k' = community’s total money deposit in banks, in terms of consumers goods.

There are three types based upon the number of variables studied as
a) Simple Correlation
b) Multiple Correlation
c) Partial Correlation
Simple Correlation:
If only two variables are taken for study then it is said to be simple correlation. Ex. Y= a + bx
Multiple Correlations:
If three or more than three variables are studied simultaneously, then it is termed as multiple correlation.
Ex: Determinants of Quantity demanded
Qd = f (P, Pc, Ps, t, y)
Where Qd stands for Quantity demanded, f stands for function.
P is the price of the goods,
Pc is the price of competitive goods
Ps is the price of substituting goods
t is the taste and preference
y is the income.
Partial Correlation:
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

(1) Value of final consumer goods and services produced in a year to satisfy the immediate wants of the people which is referred to as consumption (C);
(2) Gross private domestic investment in capital goods consisting of fixed capital formation, residential construction and inventories of finished and unfinished goods which is called as gross investment (I);
(3) Goods and services produced or purchased by the government which is denoted by (G) ; and
(4) Net exports of goods and services, i.e., the difference between value of exports and imports of goods and services, known as (X - M)
(5) GNP at market prices means the gross value of final goods and services produced annually in a country plus net factor income from abroad (C + I + G + (X - M) + (R - P)).

(i) Surface water pollution:
Hazardous substances coming into contact with this surface water, dissolving or mixing. Physically with the water can be called surface water pollution.
(ii) Ground water pollution:
Ground water contamination occurs when man-made products such as gasoline, oil and chemical get into the ground water.
(iii) Microbiological pollution:
(1) Natural pollution caused by micro - organism like viruses and bacteria.
(2) This natural pollution causes both aquatic and human illness.

(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 Average Propensity to Consume = \(\frac{C}{Y}\)
(ii) The Marginal Propensity to Consume = \(\frac{ΔC}{ΔY}\)
(iii) The Average Propensity to Save = \(\frac{S}{Y}\)
(iv) The Marginal Propensity to Save = \(\frac{ΔS}{ΔY}\)

(i) Development means, people must have higher incomes, better education, better health care and nutrition, less poverty and more equality of opportunity.
(ii) According to Michael P. Todaro and Stephen C. Smith, "development must beconceived of as multidimensional process involving major changes in social structure, popular attitudes and national institutions, as well as the acceleration of economic growth, the reductions of inequality and the eradications of poverty".

The following are the criticisms against Say's law:
(i) According to Keynes, supply does not create its demand. It is not applicable where demand does not increase as much as production increases.
(ii) Automatic adjustment process will not remove unemployment. Unemployment can be removed by increase in the rate of investment.
(iii) Money is not neutral. Individuals hold money for unforeseen contingencies while businessmen keep cash reserve for future activities.

Macro economics suffers from certain limitation. They are
(i) There is a danger of excessive generalisation of the economy as a whole.
(ii) It assumes homogeneity among the individual units.
(iii) 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.

Central Statistical Office (CSO)
(i)  It is responsible for co-ordination of statistical activities in the country and for evolving and maintaining statistical standards.
(ii) It compiles National Accounts, conducts Annual Survey of Industries and Economic Census, compiles Index of Industrial Production and Consumer Price Indices.
(iii) It deals with social statistics, training, international co-operation, Industrial Classification, etc.
National Sample Survey
Organisation
NSSO has four divisions:
(i) Survey Design and Research Division
(ii) Field Operations. Division
(iii) Data Processing Division
(iv) Co-ordination and Publication Division
The Programme Implementation Wing has 3 Divisions:
(i) Twenty Point Programme
(ii) Infrastructure Monitoring and Project Monitoring
(iii) Member of Parliament Local Area Development Scheme.
1. There is National Statistical Commission and one autonomous Institute, i.e., Indian Statistical Institute.

1. Sir M. Vishveshwarya (1934) made the first attempt in laying foundation for economic planning in India through his book, "Planned Economy of India". It was a 10 year plan.
2. Jawaharlal Nehru (1938) set-up "National Planning Commission" by a committee but due to the World War II it did not materialize.
3. In 1940,8 leading industrialists of Bombay presented a 15 Year Bombay Plan.
4. In 1944 S. N Agarwal gave the Gandhian Plan focusing on the agriculture and rural economy.
5. M.N. Roy in 1945 drafted People's Plan aiming at mechanisation of agricultural production.
6. In 1950 J.P. Narayan advocated Sarvodaya Plan which was inspired by Gandhian Plan and with the idea of Vinoba Bhave.
7. It gave importance to agriculture, small and cottage industries.
8. After considering all the plans in the same year Planning Commission was set up to formulate Five Year Plan in India by Jawaharlal Nehru.
9. Nehru was the first Chairman of Planning Commission, Government of India.

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.

Introduction:
(i) The process of repaying a public debt is called redemption.
(a) Sinking Fund
(i) The Government establishes a separate fund into which every year a fixed amount of money is credited.
(ii) By the time the debt matures, the fund accumulates enough amount to pay off the principal along with interest.
(a) Conversion
(i) An old loan is converted into a new loan.
(ii) A high interest public debt is converted into a low interest public debt.
(c) Budgetary Surplus
(i) When the Government has a surplus budget, it can be used for repaying the debt.

(i) South Asian Association for Regional Co-operation (SAARC)
(ii) Association of South East Asian Nations (ASEAN)
(iii) BRICS; Free Trade Area, Customs Union, Common Market and Economic Union.

Net Barter Terms of Trade
1. This was developed by Taussig in 1927.
2. The ratio between the prices of exports and of imports is called net barter terms of trade.
3. Viner calls it commodity terms of trade.
4. \(\mathrm{T}_{\mathrm{n}}=\left(\mathrm{P}_{\mathrm{x}} / \mathrm{P}_{\mathrm{m}}\right) \times 100\)
5. Tn is Net Barter Terms of Trade
6. Px is Index number of export prices
7. Pm is Index number of import prices
8. This measures the gain from International Trade.
9. If T_n is greater than 100, it is terms of trade which means that for a rupee of export, more of imports can be received by a country.
Gross Barter Terms of Trade
1. Developed by Taussig in 1927 as an improvement over the net terms of trade.
2. It is an index of relationship between total physical quantity of imports and the total physical quantity of exports.
\(\mathrm{Tg}=\left(\mathrm{Q}_{\mathrm{m}} / \mathrm{Q}_{\mathrm{x}}\right) \times 100\)
3. Q_m is Index of import quantities
4. Q_x is Index of export quantities
5. If for a given quantity of export, more quantity of import can be consumed by a country, the terms of trade are favourable.

(i) A non-banking financial institution or company is a financial institution that does not have a full banking license or is not supervised by the central bank.
(ii) They receive deposits and give loans.
(iii) They mobilize people's savings and use the funds to finance expenditure on investment activities.
(iv) The undertake borrowing and lending in the money and capital markets.
(v) They are classified into Stock Exchange and Other Financial institutions.
(vi) Under other financial institutions come Finance Companies, Finance Corporations, Chit Funds, Building Societies, Issue Houses, Investment Trusts, Unit Trusts and Insurance Companies.

(i) The Marshall equation is
M = KPY where
(ii) M is the quantity of money
(iii) Y is the aggregate real income of the community
(iv) P is purchasing power of money
(v) K is the fraction of the real income which the public desires to hold in the form of money.
P= M / KY
(vi) The value of money is 1 / P = KY / M.

(i) Payment towards past debts
(ii) Purchase of existing wealth
(iii) Import of goods and services
(iv) Non availability of consumer goods
(v) Full employment situation

(i) In the Keynesian model, output is determined mainly by aggregate demand.
(ii) The aggregate demand is the amount of money which entrepreneurs expect to get by selling the output produced by the labourers employed.
(iii) Aggregate demand (spending) is the amount that households, firms, the governments and the foreign purchasers would like to spend on domestic output
Aggregate demand has four components:
1. Consumption demand (C)
2. Investment demand (I)
3. Government expenditure (G)
Net Export ( export - import) (X - M)
AD = C + I + G + (X - M)

(i) A country with a high national income enjoys greater economic welfare and higher standard of living.
(ii) But the per capita income as an index of economic welfare has some limitations.
(iii) Welfare depends on the composition of goods and services. If more capital goods over consumer goods are produced welfare will be lesser.
(iv) Higher GDP with greater air, water, soil pollution will affect welfare.
(v) Production of war goods will increase output but not welfare.
(vi) If more women and children are employed or workers are forced to work for long hours economic welfare is affected.
(v) Therefore the Physical Quality of Life Index is a better indicator of economic welfare than national income.

1. Duties in respect of succession to property other than agricultural land.
2. Estate duty in respect of property other than agricultural land.
3. Taxes on railway fares and freights.
4. Taxes other than stamp duties on transactions in stock exchanges and future markets.
5. Taxes on the sale or purchase of newspapers and on advertisements published therein
6. Terminal taxes on goods or passengers carried by railways, sea or air.
7. Taxes on the sale or purchase of goods other than newspapers where such sale or purchase taxes place in the course of inter-State trade or commerce.

Procedure for Computing the Correlation Coefficient: (For Direct and Deviation from actual mean method).
Step- 1 Calculate the mean of two series ‘X’’Y’
Step- 2 Calculate the deviations ‘X’ and Y in two series from their respective mean.
Step- 3 Square each deviations of ‘X’ and ‘Y’ then obtain the sum of the Squared deviation,
Step- 4 Multiply each deviation under X with each deviation under Y and obtain the product of ‘xy’. Then obtain the sum of the product of X, Y. Then obtain the sum of the product of x,y is Σxy.
Step- 5 Substitute the value in the formula.

Introduction
(i) The early 1990s witnessed reforms in the economic policy. This helped to open up Indian markets to FDI
(ii) FDI in India has increased over the years
(iii) In India, FDI has been advantageous in terms of free flow of capital, improved technology, management expertise and access to international markets
The major sectors benefited from FDI in India are:
(i) financial sector (banking and nonbanking)
(ii) insurance
(iii) telecommunication
(iv) hospitality and tourism
(v) pharmaceuticals and
(vi) software and information technology
FDI is not permitted in the industrial sectors like
(i) Arms and ammunition
(ii) atomic energy,
(iii) railways,
(iv) coal and lignite and
(v) mining of iron, manganese, chrome, gypsum, sulphur, gold, diamonds, copper etc.,
Latest trend of FDI in India
i. FDI inflow in India has increased from ＄97 million in 1990-91 to ＄5,535 million in 2004-2005.
ii. It amounted to ＄32,955 million in 2011-2012.
iii. UNCTAD’s World Investment Report 2018 reveals that FDI to India declined to ＄40 billion in 2017 from ＄44 billion in 2016

The important concepts used in macro economics are presented below:
(i) Stock and Flow Variables: Variables used in economic analysis are classified as stock and flow. Both stock and flow variables may increase or decrease with time.
(ii) Stock refers to a quantity of a commodity measured at a point of time. In macro economics, money supply, unemployment level, foreign exchange reserves, capital etc are examples of stock variables.
(iii) Flow variables are measured over a period of time. National Income, imports, exports, consumption, production, investment etc are examples of flow variables.
(iv) Economic Models: A model is a simplified representation of real situation. Economists use models to describe economic activities, their relationships and their behaviour. A model is an explanation of how the economy, or part of the economy, works. Most economic models are built with mathematics, graphs and equations, and attempt to explain relationships between economic variables. The commonly used economic models are the supply demand models and circular flow models and Smith models

(i) The propensity to consume refers to the portion of income spent on consumption.
MPC = \(\frac{ΔC}{ΔY}\)
(K) = \(\frac{1}{1-MPC}\)
(ii) The multiplier is the reciprocal of one minus marginal propensity to consume.
(iii) Multiplier is 1/MPS
(iv) The multiplier is therefore define as reciprocal of MPS.
(v) Multiplier is inversely related to MPS and directly with MPC.
Numerically, if MPC is 0.75, MPS is 0.25 and K is 4.
Using formula K = \(\frac{1}{1-MPC}\)
⇒\(\frac{1}{1-0.75}\) = 1/0.25 = 4
∴ Multiplier (K) = 4

C = 100 + 0.8Y;
I = 10
Y = C + I
= 100 + 0.8 Y +9p00

0.2Y = 1000
∴ Y = 1000
Here, C = 100 + 0.8y
= 100 + 1000 = 900
S = 100 = I
After I is raised by 10, now I = 110
Y = 100 + 0.8y + 110
0.2y = 210 
y = \(\frac{210}{0.2}\) = 1050
Here, C = 100 = 0.8 (1050) = 940,
S = 110 = I
(i) It implies the variables in axis-and axis are equal.
(ii) The MPC is assumed to be at 0.8. (C = 100 + 0.8y)
(iii) The aggregate demand (C + I) curve intersects 45° line at point E.
(iv) The new aggregate demand curve is
C + I = 100 + 0.8Y + 100 + 10
Y = \(\frac{210}{0.2}\)
C = 940; S = 110 = Z

(i) Income by Income Method. Income method approaches National Income from the distribution side.
(ii) National income is calculated by adding up all the incomes generated in the course of producing national product.
(iii) Factor incomes are grouped under labour income, capital income and mixed income.
(iv) national income is calculated as domestic factor income plus net factor incomes from abroad. In short,
Y = w + r + i + π + (R-P)
w = wages
r = rent
i = interest
π = profits
R = Exports
P = Imports
(v) This method is adopted for estimating the contributions of the remaining sector, viz.
(vi) Data on income from abroad (the rest of) the world sector or foreign sector are obtained from the account of the balance of payment of the country.
Items no to be included:
(1) Transfer payments are not to be included in estimation of national income.
(2) The receipts from the sale of second hand goods should not be treated as part of national income.
Item to be included:
(1) Imputed value of rent for self occupied house or offices is to be included.
(2) Imputed value of services provided by owners of production unit (family labour) is to be included.

1. Human Resources
(i) Human resource is named as human capital because of its power to increase productivity and thereby national income. There is a circular relationship between human development and economic growth.
(ii) If labour is efficient and skilled, its capacity to contribute to growth will be high. For example Japan and China.
2. Technical Know-how: As the scientific and technological knowledge advances, more and more sophisticated techniques steadily raise the productivity levels in all sectors.
3. Political freedom: The process of development is linked with the political freedom.
4. Social organization: People show interest in the development activity only when they feel that the fruits of development will be fairly distributed. Mass participation in development programs is a pre-condition for accelerating the development process.
5. Corruption free administration:
Corruption is a negative factor in the growth process. Unless the countries rootout corruption in their administrative system, the crony capitalists and traders will continue to exploit national resources. The tax evasion tends to breed corruption and hamper economic progress.
6. Desire for development:
The pace of economic growth in any country depends to a great extent on people's desire for development.
7. Moral, ethics and social values:
(i) These determine the efficiency of the market.
(ii) If people are not honest, market cannot function.
8. Casino Capitalism:
If People spend larger proportion of their income and time on entertainment liquor and other illegal activities, productive activities may suffer.
9. Patrimonial Capitalism:
If the assets are simply passed on to children from their parents, the children would not work hard, because the children do not know the value of the assets. Hence productivity will be low.

Law
According to Keynes, "men are disposed as a rule and on the average to increase their consumption as their income increases but not by as much as the increáse in their income".
Propositions
1. When income increases, consumption expenditure also increases, but by a smaller amount
(a) When income increases from 120 to 180; consumption also increases from 120 to 170 but the increase in consumption is less than the increase in income, 10 is saved.
2. The increased income will be divided in some proportion between consumption expenditure and saving
(a) When income increases to 180 and 240, it is divided between consumption (170 and 220) and saving (10 and 20)
3. Incrcascs in income always lead to in incrcase in both consumption and saving
(a) Increases in income to 180) and 240; lead to increased consumption 170 and 220; increased saving 10 and 20.
(b) It is clear from the widening area below the C curve and the saving gap between 45^o line and C curve.