(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) By reducing tariff rates on raw materials components and capital goods it was able to import more for meeting her developmental requirements.
ii) India gets market access in several countries without any bilateral agreement.

(i) Payfent towards past debts:
If a portion of the additional income is used for repayment of old loan, the MPC is reduced.
(ii) Non availability of consumer goods:
The multiplier theory assumes instantaneous supply of consumer goods following demand. But there is often a time lag.
(iii) Full employment situation:
Under conditions of full employment, resources are almost fully employed.
(iv) So additional investment will lead to inflation only rather than generation of additional real income.

(i) In the output or product method, the measures of GDP are calculated by adding the total value of the output (of goods and services) produced by all activities during any time period, such as a year.
(ii) The major challenge of this method is the problem of double counting.

(i) The WorlthBank in its World Development Report classified various countries on the basis of Gross National Income (GNI) per capita.
(ii) Various countries on the basis of Gross National Income (GNI) per capita.

(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.

Discharge of sewage and waste water:
(i) Sewage, garbage and liquid waste of households, agricultural runoff and effluents from factories are discharged into lakes and rivers.
(ii) These wastes contain harmful chemicals and toxins which make the water poisonous for aquatic animals and plants.
Dumping of solid wastes:
(i) The dumping of solid wastes and litters in water bodies cause huge problems.
Discharge of industrial wastes:
(i) Industrial waste contains asbestos, lead, mercury, grease oil and petrochemicals.
Oil Spill:
(i) Sea water gets polluted due to oil spilled from ships and tankers.
Acid Rain:
(i) When the acidic particles caused by air pollution mix with water vapour, it results in acid rain.
Global warming:
(i) The increase in water temperature affects aquatic plants and animals.
Eutrophication:
(i) The increased level of nutrients in water depletes oxygen in water and this negatively affects fish and other aquatic animal population.

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.

(i) Seasonal unemployment
1. In agriculture and agro based industries like sugar production activities are carried out only in some seasons.
2. These industries offer employment only during that season in a year.
3. People remain unemployed during the off season.
4. Seasonal unemployment takes place from demand side also (e.g.) ice cream industry, holiday resorts.
(ii) Frictional unemployment
1. It arises due to imbalance between supply of labour and demand for labour.
2. It is because of immobility of labour, lack of necessary skills, break down of machinery, shortage of raw materials
3. The persons who lose jobs and in search of jobs also come under frictional unemployment
(iii) Educated unemployment
1. Educated people are underemployed or unemployed when qualification does not match the job.
2. Faulty education system, lack of employable skills, mass student turnout and preference for white collar jobs are highly responsible for educated unemployment.

Capitalism:
(i) The means of production are privately owned.
(ii) Manufacturers produce goods and services with profit motive.
(iii) Individual can take up any occupation and develop any skill. E.g. USA.
Socialism:
(i) All resources are owned and operated by the government.
(ii) Public welfare is the main motive.
(iii) There is equality in the distribution of income and wealth. E.g. China
Mixedism:
(i) Both private and public sectors co-exist and work together.
(ii) Resources are owned by individuals and the government. E.g. India

The revenue obtained by the government from sources other than tax is called Non-Tax Revenue. The sources of non-tax revenue are
1. Fees
Fees are another important source of revenue for the government. A fee is charged by public authorities for rendering a service to the citizens. Unlike tax, there is no compulsion involved in case of fees.
2. Fine
A fine is a penalty imposed on an individual for violation of law. For example, violation of traffic rules, payment of income tax after the stipulated time etc.
3. Earnings from Public Enterprises
The Government also gets revenue by way of surplus from public enterprises. Some of the public sector enterprises do make a good amount of profits. The profits or dividends which the government gets can be utilized for public expenditure.
4. Special assessment of betterment levy
It is a kind of special charge levied on certain members of the community who are beneficiaries of certain government activities or public projects. For example, due to a public park or due to the construction of a road, people in that locality may experience an appreciation in the value of their property or land.
5. Gifts, Grants and Aids
A grant from one government to another is an important source of revenue in the modern days. The government at the Centre provides grants to State governments and the State governments provide grants to the local government to carry out their functions.
6. Escheats
It refers to the claim of the state to the property of persons who die without legal heirs or documented will.

BASIS FOR COMPARISON	ECONOMIC GROWTH	ECONOMIC DEVELOPMENT
MEANING	Economic Growth is the positive change in the real output of the country in a particular span of time.	Economic Development involves a rise in the level of production in an economy along with the advancement of technology, improvement in living standards and so on.
CONCEPT	Narrow	Broad
SCOPE	Increase in the indicators like GDP, per capita income, etc.	Improvement in life expectancy rate, infant mortality rate, literacy rate, and poverty rates
TERM	Short term process	Long term process
APPLICABLE TO	Developed Economies	Developing Economies
HOW IT CAN BE MEASURED?	Upward movement in national income.	An upward movement in real national income.
WHICH KIND OF CHANGES ARE EXPECTED?	Quantitative changes	Qualitative and quantitative change
TYPE OF PROCESS	Automatic	Manual
WHEN IT ARISES?	In a certain period of time	Continuous process.

P = \(\frac { MV+{ M }^{ 1 }{ V }^{ 1 } }{ T } \)
P = \(\frac { (1000\times 3)+(500\times 2) }{ 4000 } \)
= Rs. 1 Per good
Value of money (1/p) = 1
If the supply of money is double
P = \(\frac { (2000\times 3)+(1000\times 2) }{ 4000 } \)
= Rs. 2 Per good
Value of money (1/p) = 1/2
Thus, when money supply in doubled, i.e., increases from Rs. 4000 to 8000, the price level is doubled. i.e., from Re. 1 per good to Rs. 2 per good and the value of money is halved, i.e., from 1 to 1/2.
P = \(\frac { (500\times 3)+(250\times 2) }{ 4000 } \)
= Rs. 1 Per good
Value of money (1/p) = 1/2
Thus, when money supply is halved, i.e., decreases from Rs. 4000 to 2000, the price level is halved, i.e., from 1 to 1/2, and the value of money is doubled, i.e., from 1 to

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

Introduction:
(i) Sustainable development is concerned with the welfare of the present and future generation.
(ii) It aims at satisfying the luxury wants of the rich and the basic necessities of the poor.
Definition:
(i) Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.
Goals:
(i) It is crucial to harmonize three core elements such as economic growth, social inclusion and environmental protection.
(ii) A set of 17 goals for the world's future can be achieved before 2030 with three unanimous principles fixed by United Nations such as Universality, Integration and Transformation.
1) End poverty in all its forms everywhere.
2) End hunger, achieve food security and improved nutrition and promote sustainable agriculture.
3) Ensure healthy lives and promote wellbeing for all at all ages.
4) Ensure inclusive and quality education for all and promote lifelong learning.
5) Achieve gender equality and empower women and girls.
6) Ensure access to water and sanitation for all.
7) Ensure access to affordable, reliable, sustainable and modern energy for all.
8) Promote inclusive and sustainable economic growth, employment and decent work for all.
9) Build resilient infrastructure, promote, sustainable industrialization and foster innovation.
10) Reduce inequality within and among countries.
11) Make cities inclusive, safe, resilient and sustainable.
12) Ensure sustainable consumption and production pattern.
13) Take urgent action to combat climate change and its impacts
14) Conserve and sustainably use the oceans, seas and marine resources.
15) Sustainably manage forests, combat desertification, stop and reverse land degradation, stop biodiversity loss.
16) Promote just, peaceful and inclusive societies.
17) Revitalize the global partnership for sustainable development.

Introduction:
(i) The modern state is a welfare state. In a welfare state government has to perform several functions i.e. social, economic and political.
(ii) These activities lead to increasing public expenditure.
Population Growth
(i) The growth in population needs huge investment in health and education, law and order. Young population need increasing expenditure on education & youch services.
(ii) Aging population needs transfer payments - old age pension, social security.
Defence Expenditure
(i) Defence expenditure increases due to modernisation of defence equipment.
Government Subsidies
(i) Government provides subsidies on food, fertilizers, interest on priority sector lending, exports, education.
(ii) Because of the huge subsidies public expenditure increased manifold.
(iii) Corporate sectors also receive subsidies.
Debt Servicing
(i) Government has borrowed heavily from internal and external sources.
(ii) So government has to make huge amounts of repayment towards debt servicing.
Development Projects
(i) Various development projects like irrigation, iron and steel, heavy machinery, power, telecommunications involve huge investment.
Urbanisation
(i) The urban population is 43 %.
(ii) There are more than 54 cities above one million population.
(iii) The increase in urbanization needs heavy expenditure on law and order, civic amenities.
Industrialisation
(i) In a planned economy, the government starts basic and heavy industries which need huge capital and have long gestation period.
(ii) UDCs also need strong infrastructures like transport, communication, power, fuel.
Increase in grants in aid to state and union territories
(i) There is increase in grants-in-aid to state and union territories to meet natural disasters.

Introduction:
1. India is the founding member of the WTO.
2. India favours multilateral trade approach and enjoys MFN status.
3. India benefited from WTO on following grounds:
4. By reducing tariff rates on raw materials, components and capital goods, it was able to import more for meeting her developmental needs.
5. India's imports go on increasing.
6. India gets market access in several countries without any bilateral trade agreements.
7. Advanced technology has been obtained at cheaper cost.
8. India is in a better position to get quick redressal from the trade disputes.
9. Indian exporters benefited from wider market information.

(i) The equilibrium rate of exchange is determined in the foreign exchange market according to the general theory of value, by the interaction of demand and supply,
(ii) Y axis represents exchange rate, be cos value of rupee in terms of dollars
(iii) X axis represents demand and supply of forex.
(iv) E is the equilibrium point where DD intersects SS. The exchange rate is P₂.

Introduction
The functions of commercial banks are broadly classified into primary, and secondary functions
1) Primary Functions:
Accepting Deposits
Demand Deposits
1. It refers to deposits that can be withdrawn by individuals without any prior notice to the bank.
2. Depositors can withdraw money at any time by writing a withdrawal slip or a cheque or from ATM centres
Time Deposits
1. It refers to deposits that are made for certain committed period of time.
2. It has higher interest.
3. Deposits can be withdrawn only after a specific time period
Advancing Loans
1. Banks grant loans to individuals and businesses in the form of overdraft, cash credit and discounting bills of exchange.
2) Secondary Functions
Agency Functions
1. Commercial banks act as agents of customers by performing various functións.
Collecting Cheques
1. Banks collect cheques and bills of exchange on behalf of their customers through clearing house facilities provided by the central bank.
Collecting Income
1. Banks collect dividends, pension, salaries, rents and interests on investment on behalf of their customers.
2. A credit voucher is sent to customers for information when any income is collected by the bank.
Paying Expenses
1. Telephone bills, insurance premium, school fees and rents can be paid through banks.
2. A debit voucher is sent to customers for information when expenses are paid by the bank.
3) General Utility Functions
Providing Locker Facilities
1. Locker is provided for safe custody of jewellery, shares, debentures and other valuable items.
2. This minimizes the risk of loss due to theft at home.
Issuing Traveller's Cheques
1. Banks issue traveller's cheques to individuals for travelling outside the country.
2. These cheques are safe and easy way to protect money.
Dealing in Foreign Exchange
1. Banks provide foreign exchange to businessmen dealing in exports and imports.
2. But they need to take the permission of the Central Bank for dealing in foreign exchange.
4) Transferring Funds
1. Funds are transferred by means of draft, telephonic transfer and electronic transfer.
5) Letter of Credit
1. Commercial banks issue letters of credit to their customers to certify their credit worthiness.
Underwriting Securities
1. As public have full faith in the credit worthiness of banks, public do not hesitate in buying the securities underwritten by banks.
Electronic Banking
1. It includes services, such as debit cards, credit cards and Internet banking.
6) Other Functions
Money Supply
E.g: A bank lends Rs.5 lakh to an individual and opens a demand deposit in the name of that individual.
1. Bank makes a credit entry of 25 lakh in that account.
2. This leads to creation of demand deposits in that account.
3. Thus, without printing additional money, the supply of money is increased.
Credit Creation
1. It means the multiplication of loans and advances
2. Banks receive deposits from the public and use these deposits to give loans.
3. However, loans offered are many times more than the deposits received by banks.
Collection of Statistics
1. Banks collect and publish statistics relating to trade, commerce and industry and advice customers and public authorities on financial matters.

Introduction
A systematic development of the simple accelerator model was made by J.M.Clark, It was further developed by Hicks, Samuelson and Harrod.
Definition
Accelerator coefficient is the ratio between induced investment and an initial change in consumption \(\beta=\frac{\Delta \mathrm{I}}{\Delta \mathrm{C}}\)
Operation
Suppose that in order to produce 1000 consumer goods, 100 machines are needed. Working life of a machine is 10 yrs i.e, every year 10 machines have to be replaced. This is called replacement demand
(i) Suppose that demand for consumer goods rises by 10 % (i.e, from 1000 to 1100)
(ii) This results in increase in demand for 10 more machines
(iii) The total demand for machines is 20 i.e, 10 % increase in demand for consumer goods causes 100 % increase in demand for machine (from 10 to 20 )

Explanation
 (i) SS is the saving curve.
(ii) II is the investment curve.
(iii) At point E₁ the economy is in equilibrium with OY₁ income.
(iv) S and I are equal at O₂.
(v) Now I increased from OI₂ to OI₄.
(vi) This increases income from OY₁ to OY₃ at E₂ equilibrium.
(vii) If the increase in investment by I₂I₄ is purely exogenous, then the increase in income by Y₁Y₃ would be due to multiplier.
(viii) But in this diagram it is assumed that exogenous investment is only by I₂I₃ and induced investment is by I₃I₄.
(ix) Therefore, the increase in income by Y₁Y₂ is due to the multiplier effect and the increase in income by Y₂Y₃ is due to the accelerator effect.

Introduction
Under the Keynes theory of employment, a simple two sector economy consisting of the household sector and the business sector is taken to understand the equilibrium between ADF and ASF.
Explanation
1. AD and AS reach equilibrium at E. The employment level is N_o
2. At ON₁employment, the aggregate supply is N₁R₁. But the aggregate demand is M₁N₁.
3. The expected level of profit is M₁R₁.
4. To attain this level of profit, entrepreneurs will employ more labourers, till they reach point E i.e. ON_o.
5. Beyond ON_o, the aggregate demand curve is below the aggregate supply curve showing loss.
6. So they will never employ more than ON_o labour.
7. The equilibrium level of employment need not be the full employment level (N_o).
8. The difference between N_o - N₁ is the level of unemployment.
Conclusion
Thus the concept of effective demand becomes significant in explaining the under employment equilibrium.

Introduction:
National income can be measured by the social accounting method. Under this method, the transactions among various sectors such as firms, households, government are recorded and their interrelationships traced.
Firms:
undertake productive activities. They employ factors of production to produce goods and services.
Households:
Households are consuming entities. They represent the factors of production, who receive payment for services rendered by them to firms. (i) Households consume the goods produced by the firms. There is a circular flow of money between these two groups.
Government:
The Government sector refers to the economic transactions of public bodies at all levels-centre, state and local. Their purchases may be financed through taxation, public borrowings. The government provides public health, education. They satisfy the collective wants of society. But Post Offices and railways are separated from the Government sector and included as "Firms".
Rest of the world:
It relates to international economic transactions - income, export, import external loan transaction, and allied overseas investment income and payments.
Capital sector:
(i) Capital sector refers to saving and investment activities. It includes the transactions of banks, insurance corporations, financial houses. These are not included under "Firms".
(ii) The economy is also divided into primary, secondary tertiary and quaternary sectors.
Conclusion:
The social accounting framework is useful for economists as well as policy makers, because it represents the major economic flows and statistical relationships among various sectors of the economic system. It is possible to forecast the trends of economy more accurately.

1. In an economy, the fundamental economic activities are production and consumption.
2. These are several other activities.
3. The ultimate aim is to achieve growth.
4. The exchange activity supports production and consumption.
5. These activities are influenced by economic and non economic activities.
6. The economic activities include transportation, banking, advertising, planning.
7. The non-economic activities are environment, education, health, entertainment.
8. The external activities are import, export, international relations, emigration, immigration, foreign investment, foreign exchange earnings.
9. All these activities influence the entire functioning of the economy.

ED = Y = C + I = Output = Employment

The investment function refers to investment - interest rate relationship. There is a functional and inverse relationship between rate of interest and investment.
I = f (r)
I = Investment (Dependent variable)
r = Rate of interest (Independent variable)

There are three major types of economic systems.
1. Capitalistic Economy (Capitalism),
2. Socialistic Economy (Socialism) and
3. Mixed Economy (Mixedism)

(i) Predominance of primary sector.
(ii) Low per capita income

The Government of India passed in 1951 the State Financial Corporation Act and SFCs were setup in many states.

(i) Environment means "all the conditions, circumstances, and influences surrounding and affecting the development of an organism or group of organisms".
(ii) It also means that the complex of physical, chemical and biotic factors that act upon an organism or an ecological community ultimately determine its form and survival.

The SAARC Secretariat was established in Kathmandu (Nepal) on 16^th January 1987.

(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.

1. No single buyer or seller can affect the price.
2. Full employment
3. People are motivated by self interest Market forces determine everything right.
4. Perfect competition exists in labour and product market.
5. There is wage price flexibility.
6. Money acts as medium of exchange.
7. Long run analysis.
8. No overproduction or unemployment.

(i) NDP = GDP - Depreciation.
(ii) NNP = GNP - Depreciation.
(iii) The difference between NDP and NNP is the net factor income from abroad.
(iv) In NDP it is excluded but in NNP it is included.