Deviations from actual mean.

S.No	X	(x-x)	(x-\(\bar { x } \))2
1	25	25-25=0	0
2	15	15-25=10	100
3	23	23-25=-2	1
4	42	42-25=17	289
5	27	27-25=2	4
6	25	25-25=0	0
7	23	23-25=-2	4
8	25	25-25=0	0
9	20	20-25=-5	25
N-9	225	0	126

\(\bar { X } =\frac { 225 }{ 9 } =25\)
\(\sigma =\sqrt { \frac { { \sum { (x-\bar { X } ) } }^{ 2 } }{ N } } \)
\(=\sqrt { \frac { 426 }{ 9 } } \)
\(=\sqrt { 47.33 } \)
\(\sigma =6.88\) 

1. Predetermined and well-defined objectives or goals.
2. For economic planning deliberate control and direction of the economy by a central authority, e.g., the state.
3. Optimum utilization of natural resources and capital which may be scarce and labor that may be abundant.
4. The objectives are to be achieved within a given interval of time – 5 years, 7 years, etc.
5. The performance of the economic functions of increasing production, maximizing employment and controlling population growth so that production outstrips population growth.

(i) Money as a medium of exchange: This is considered as the basic function of money. Money has the quality of general acceptability, and all exchanges take place in terms of money.
(ii) Money as a measure of value: The second important function of money is that it measures the value of goods and services.

(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)).

Short - Run Factors
(i) Demand for the product: If the market for a particular good is expected to grow and its costs are likely to fall, the rate of return from investment will be high. If entrepreneurs expect a fall in demand for goods and a rise in cost, the investment will decline.
(ii) Liquid assets:
If the entrepreneurs are holding large volume of working capital, they can take advantage of the investment opportunities that come in their way. The MEC will be high.
(iii) Sudden changes in income:
The MEC is also influenced by sudden changes in income of the entrepreneurs. If the business community gets windfall profits, or tax concession the MEC will be high and hence investment in the country will go up. On the other hand, MEC falls with the decrease in income.

S.No xx \(x-\bar{x} \) \((x-\bar{x})^{2}\) 1 14 14 - 15 = -1 1 2 22 22 - 15 = 7 49 3 9 9 - 15 = -6 36 4 15 15 - 15 = 0 0 5 20 20 - 15 = 5 25 6 17 17 - 15 = 2 4 7 12 12 - 15 = 2  9 8 11 11 - 15 = 4 16 N = 8 120   140 \(\bar{x} =\frac{120}{8}=15 \)
\(\sigma =\sqrt{\frac{\sum(x-\bar{x})^{2}}{n}} \)
\(=\sqrt{\frac{140}{8}} \)
\(=\sqrt{17.5} \)
=4.18
Ans: 4.18

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.

FDI has the following objectives.
(i) Sales Expansion
(ii) Acquisition of resources
(iii) Diversification
(iv) Minimization of competitive risk

(i) Aggregate supply refers to the value of total output of goods and services produced in an economy in a year ie national product or income.
(ii) The components of aggregate supply are:
(iii) Aggregate (desired) consumption expenditure (C)
(iv) Aggregate (desired) private savings (S)
(v) Net tax payments (T)
(vi) Personal (desired) transfer payments to the foreigners (Rf)
AS = C + S + T + Rf
In this figure 2 aggregate supply curves are drawn for the assumption of fixed money wages and variable wages.

Explanation
(i) Z Curve is linear (fixed money wages)
(ii) Z₁ curve is non-linear (wage rate increases with employment)
(iii) When full employment level of Nf is reached output cannot be increased by employing more men.
(iv) So aggregate supply curve becomes inelastic (Vertical straight line).
(v) In reality aggregate supply curve will be like Z₁ .
(vi) If prices are high and wages low, the producers will employ more labourers.
(vii) 4YAggregate supply is an important factor in determining the level of economic activity.

S.No.	Capitalism	Globalism
1	Also called free economy or laissez faire or market economy where the role of the government is minimum	Also called extended capitalism. It connects nations together through international trade
2	Market determines economic activities within a nation	It aims at global development Manfred
3	Adam Smith is the father of the capitalism	D. Steger (2002) coined the term

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.

Money Supply in India
Money supply is a stock variable. RBI publishes information for four alternative
measures of Money supply, namely M1, M2, M3 and M4.
M1 = Currency, coins and demand deposits
M2 = M1 + Savings deposits with post office savings banks
M3 = M2 + Time deposits of all commercial and cooperative banks
M4 = M3 + Total deposits with Post offices.
M1 and M2 are known as narrow money
M3 and M4 are known as broad money
Determinants of Money Supply
1. Currency Deposit Ratio (CDR); It is the ratio of money held by the public in currency to that they hold in bank deposits.
2. Reserve deposit Ratio (RDR); Reserve Money consists of two things (a) vault cash in banks and (b) deposits of commercial banks with RBI.
3. Cash Reserve Ratio (CRR); It is the fraction of the deposits the banks must keep with RBI.
4. Statutory Liquidity Ratio (SLR); It is the fraction of the total demand and time deposits of the commercial banks is the form of specified liquid assets.

Classification of public expenditure are as follows:
1. Classification on the Basis of Benefit:
(a) Public expenditure benefiting the entire society, e.g., the expenditure on general administration, defense, education, public health, transport.
(b) Public expenditure conferring a special benefit on certain people and at the same time common benefit on the entire community, e.g, administration of justice etc.
(c) Public expenditure directly benefiting particular group of persons and indirectly the entire society, e.g. social security, public welfare, pension, unemployment relief etc. (d) Public expenditure conferring a special benefit on some individuals, e.g., subsidy granted to a particular industry.
2. Classification on the Basis of Function:
(a) Protection Functions: This group includes public expenditure incurred on the security of the citizens, to protect from external invasion and internal disorder, e.g., defence, police, courts etc.
(b) Commercial Functions: This group includes public expenditure incurred on the development of trade and commerce, e.g., development of means of transport and communication etc.

Introduction:
1. Externality refers to external effects or spillover effects resulting from production or consumption on the third parties.
Definition:
1. It may be defined as "the cost or benefit imposed by the consumption and production activities of the individuals on the rest of the society not directly involved in these activity and towards which no payment is made".
Types:
1. Beneficial externalities are called "positive externalities".
2. Adverse externalities are called "negative externalities".
Positive Consumption Externality
1. When some residents of a locality hire a private security agency to patrol their area, the other residents of the area also benefit from better security without bearing cost.
Negative Consumption Externality
1. A person smoking cigarette gets satisfaction but this act causes dissatisfaction to the non-smokers who are driven to passive smoking.
Positive Production Externality
1. The ideal location for beehives is orchards.
2. While bees make honey, they also help in the pollination of apple blossoms.
3. The benefits. accrue to both producers (honey and apple).
4. This is called reciprocal untraded interdependency.
Negative Production Externality
1. They include pollution generated by a factory that imposes costs on others.
2. The emissions and effluents of a factory cause air and water pollution.
3. Water becomes contaminated and unfit for drinking (e.g.) Tanneries.
4. The innocent community bears the external cost for which it is not compensated.

(i) Fiscal Policy is implemented through fiscal instruments also called 'fiscal tools' or fiscal levers - Government expenditure, taxation and borrowing are the instruments of fiscal policy.
Taxation:
(i) Taxes transfer income from the people to the Government.
(ii) Taxes are direct or indirect.
(iii) An increase in tax reduces disposable income.
(iv) So tax should be raised to control inflation.
(v) During depression, taxes are to be reduced.
Public Expenditure:
(i) Public expenditure raises wages and salaries of the employees and so aggregate demand for goods rises.
(ii) So, public expenditure is raised during recession and reduced during inflation.
Public debt:
(i) When Government borrows by floating a loan, there is transfer of funds from the public to the Government.
(ii) At the time of interest payment and repayment of public debt, funds are transferred from Government to public.

Investment for productive purposes
(i) World Bank helps in reconstruction and development of territories of member nations through investment for productive purposes.
(ii) It encourages the development of productive facilities and resources in less developed countries.
Balanced growth of international trade
(i) Promoting the long range balanced growth of trade at international level and the maintaining equilibrium in BoPs of member nations by encouraging international investment.
Provision of loans and guarantees
(i) Arranging the loans or providing guarantee on loans by various other channels and execute important projects.
Promotion of foreign private investment
(i) This is done by means of guarantees on loans and other investment made by private investors.
(ii) The Bank supplements private investment by providing finance for productive purpose out of its own resources or from borrowed funds.
Technical services
(i) The World Bank facilitates different kinds of technical services to the member countries through Staff College and experts.

Cyclical Disequilibrium
Cyclical Disequilibrium occurs because of:
(i) Two countries may be passing through different phases of business cycle.
(ii) The elasticities of demand may differ between countries.
Secular Disequilibrium
(i) It occurs because of long-run and deep rooted changes in an economy as it advances from one stage of growth to another.
(ii) In the initial stages of development, domestic investment exceeded domestic savings and imports exceeded exports, as it happened in India since $1951.
Structural disequilibrium
(i) Structural changes in line economy may also cause BoP disequibrium
(ii) Structural changes include development of alternative sources of supply, development of better substitutes, exhaustion of protective resources or changes in transport routes and costs.

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
J.M Keynes has divided factors influencing the consumption function into two namely Subjective factors and Objective factors
Subjective Factors
These factors are internal and related to psychological feelings. Keynes lists 8 motives which lead individuals to refrain from spending
Motive of precaution
To build a reserve against unforeseen contingencies. (eg.) Accidents
Motive of foresight
The desire to provide for anticipated future needs. (eg.) Old age
Motive of calculation
The desire to enjoy interest and appreciation.
Motive of improvernent
(i) The desire to enjoy for improving standard of living.
(ii) Motive of financial independence
(iii) Motive of enterprise - desire to do forward trading
(iv) Motive of pride - desire to leave a fortune
(v) Motive of avarice - miserly instinct
(vi) The government institutions, business corporations and firms may also consume mainly because of:
Motive of enterprise
The desire to get resources to carry out further capital investment without debt.
Motive of liquidity
The desire to secure liquid resources to meet emergency
Motive of improvement
The desire to secure a rising income and to demonstrate successful management
Motive of financial prudence
The desire to ensure adequate financial provision against depreciation, obsolescence and to discharge debt.
Objective Factors
They are the external factors which are real and measurable. They can be easily changed in the long run;
Income Distribution
According to VKRV Rao if incone is equally distributed propensity to consume increases
Price level
When price falls, real income rises; people consume more and save more.
Wage level
Consumption expenditure increases with a rise in wages.
Interest rate
Higher interest rate will encourage people to save more money and reduces consumption.
Fiscal Policy
When government reduces tax, disposable income rises and propensity to consume increases.
Consumer credit
The availability of consumer credit at easy installments will encourage people to buy consumer durables like car, fridge, computer
Demographic factors
(i) Size of family, stage in family life cycle, place of residence and occupation affect the consumption pattern
Duesenberry hypothesis
(i) Consumption expenditure depends on current income, past income and standard of living
(ii) As individuals are accustomed to a particular standard of living, they continue to spend the same amount on consumption
(iii) Consumption of the poor people is influenced by the rich. This is called Demonstration effect.
Windfall gain and loss
Unexpected changes in the stock market leads to gain or loss, so consumption function shifts upward or downward.
Conclusion
According to Keynes only the subjective factors do not change in the short-run, so consumption function remains stable in the short period.

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.

(i) National income is of great importance for the economy of a country.
(ii) National income helps us to know the relative importance and contribution of each sector. We could find how income is produced, how it is distributed, how much is spent, saved or taxed.
(iii) National income data is used to formulate monetary policy, fiscal policy and other policies.
(iv) Data regarding gross income, output, saving and consumption is uscd in economic planning.
(v) National income data is used to build economic models in short run and long run.
(vi) It is used to make international comparison, inter regional comparison and inter temporal comparison of growth of the economy during different periods.
(vii) If income is equally distributed, the per capita income will reflect the economic welfare of the country.

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.

(i) A financial intermediary is a bank or other institution that serves as a link between lenders and borrowers.
(ii) They typically accept savings deposits from consumers and then lend money to consumers and businesses to finance purchases of goods and services or for investment purposes.

i. Cyclical Unemployment
ii. Seasonal Unemployment
iii. Frictional Unemployment
iv. Educated Unemployment
v. Technical Unemployment
vi. Structural Unemployment
vii. Disguised Unemployment

The term investment means purchase of stocks and shares, debentures, government bonds and equities.

Financial planning is nothing but techniques of planning in which resources are allocated in terms of money

Economic policies are necessary to solve the basic problems to overcome the obstacles and to achieve growth.

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

(i) To accelerate the economic growth, social progress and cultural development in the region.
(ii) To promote regional peace and stability and adherence to the principles of the UN Charter.

Stagflation is a combination of stagnant economic growth, high unemployment and high inflation.

(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

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