(i) Industrial Finance Corporation of India (IFCI)
(ii) Industrial Credit and Investment Corporation of India (ICICI)
(iii) Industrial Development Bank of India (IDBI)

The banks can borrow from the RBI by keeping eligible securities as collateral at the time of need or crisis, when there is no other source.

1. SAAR - 1985
2. ASEAN - 1967
3. BRICS - 2001

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

The amount that households, firms, the governments and the foreign purchasers would like to spend on domestic output.

1. Karl Pearson’s Method is popularly known as Pearson’s coefficient of correlation denoted by the symbol ‘r’.
2. The coefficient of correlation ‘r’ measures the degree of linear relationship between two variables say X and Y. The Formula for computing Karl Pearson’s Coefficient of correlation is:
\(\frac { N\sum { XY } -(\sum { X } )(\sum { Y } ) }{ \sqrt { N{ \sum { X } }^{ 2 }-{ (\sum { X } ) }^{ 2 } } \sqrt { { N\sum { Y } }^{ 2 }-{ (\sum { Y } ) }^{ 2 } } } \)

(i) Domestic trade
(ii) Home trade
(iii) Intra-regional trade

(i) Indoor Air Pollution refers to toxic contaminants that we encounter in our daily lives in our homes, schools, and workplaces.
(ii) For example, cooking and heating with solid fuels on open fires or traditional stoves results in high levels of indoor air pollution.

This means that increased income is unlikely to lead to fall in either consumption or saving. Thus with increased income both consumption and saving increase.

France	Sweden
United States	Japan

Deficit budget is one where the estimated government expenditure is more than expected revenue
Government s estimated Revenue < Government's proposed Expenditure.

(i) Monetary and fiscal policy
(ii) Technological progress
(iii) Resource availability.

Simple circular flow model is explained without the other components of national income namely savings or investment(I), public expenditure by government (G) and expenditure on net exports(X-M).

i) Production or Value added method.
ii) Income method or Factor Earning method.
iii) Expenditure Method or outlay method.

MEC depends on two factors namely
(i) Prospective yield of capital asset
(ii) Supply price of capital

Keynes theory of employment was based on the view of the short run. According to him, the factors of production such as capital goods, supply of labour, technology and efficiency of labour remain unchanged while determining the level of employment.

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

The more or less regular upward and downward movement of economic activity over a period of years.

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

(i) Central planning authority is the controlling authority in a socialistic economy.
(ii) All the decisions are under taken by the central planning authority.
(iii) It means all factors of production are nationalized and managed by public authority.

(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.

Economic Growth	Economic Development
Deals with the problems of develop ed countries	Deals with the problems of UDCs (Under Developed Countries)
Change is gradual and stead	Change is discontinuous and s spontaneous
Means more output	Means not only more output but also its composition.
Concerns Quantitative aspects i.e. increase in per capita income	Quantitative as well as Qualitative
Narrow Concept	Wider Concept Development = Growth + Change.

(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.

(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

The rate at which goods of one country are exchanged for that of another country i.e. ratio of export price and import price.

(i) To maintain an expert staff to study all questions on agricultural credit.
(ii) To provide expert advice to Central and State Government, State Co-operative Banks.
(iii) To finance the rural sector through eligible institutions and to co-ordinate them.

(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

APC is the ratio of consumption expenditure to any particular level of income
APC = \(\frac{C}{Y}\)

 

(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

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.

\(\mathrm{GNP}=\mathrm{C}+\mathrm{I}+\mathrm{G}+(\mathrm{X}-\mathrm{M})+(\mathrm{R}-\mathrm{P})\) 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.

BASIS FOR COMPARISON	IMF	WORLD BANK
Meaning	An international organization maintaining the global monetary system is the International Monetary Fund.	A global organization established to finance and advice the developing nations, in order to make them economically developed is World Bank
Focus on	Economic Stability	Economic Growth
Organizational Structure	It is a single organization with four credit lines	It has two major institutions, namely International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA).
Operations	Provides assistance	Facilitates lending
Objective	To deal with all the issues related to the financial sector and macro economics.	To lessen poverty and promote the long term development of the economy.

S.No	(X)	D=X-A(A=57)	(X-\(\bar { X } \))2
1	43	-14	196
2	48	-9	87
3	65	8	64
4	57	0	0
5	31	-26	679
6	60	3	9
7	37	-20	400
8	48	-9	81
9	78	21	441
10	59	2	4
N-9		\(\sum { d } =44\)	\(\sum { d }^2 =1952\)

\(\sigma =\sqrt { \frac { { \sum { d } }^{ 2 } }{ n } -\frac { { (\sum { d } ) }^{ 2 } }{ (n) } } =\sqrt { \frac { 1952 }{ 10 } -\frac { { (-44) }^{ 2 } }{ (10) } } \)
\(=\sqrt { 195.2-19.36 } =\sqrt { 175.84 } =13.26\) 

(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.

X	(X-\(\bar { X } \))	(X-\(\bar { X } \))2
13	-10	100
28	-8	64
28	-5	25
31	-2	4
38	5	25
40	7	49
46	13	169

\(SD=\sqrt { \frac { \sum { { (x)-\bar { X } ) }^{ 2 } } }{ n } } =7.89\)

231		436
\(\bar { X } \)	=	231/7=33

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

(i) Total production of 64 agriculture commodities is estimated. The output of each crop is measured by multiplying the area sown by the average yield per hectare.
(ii) The total output of each commodity is valued at market prices.
(iii) The aggregate value of total output of these 64 commodities is taken to measure the gross value of agricultural output.
(iv) The net value of the agricultural output is measured by making deductions for the cost of seed, manures and fertilisers, market charges, repairs and depreciation from the gross value

1. Reduction in Inequalities: No one is allowed to own and use private property to exploit others.
2. Rational Allocation of Resources: The central planning authority allocates the resources in a planned manner. Wastages are minimised and investments are made in a pre planned manner.
3. Absence of Class Conflicts: As inequalities are minimum, there is no conflict between rich and poor class. Society functions in a harmonious manner.
4. End of Trade Cycles: Planning authority takes control over production and distribution of goods and services. Therefore, economic fluctuations can be avoided.
5. Promotes Social Welfare: Absence of exploitation, reduction in economic inequalities, avoidance of trade cycles and increase in productive efficiency help to promote social welfare.

(i) There are two countries and two commodities (2 X 2) model.
(ii) Labour is the only factor of production.
(iii) Labour units are homogeneous.
(iv) Price of commodity is measured by the amount of labour required to produce it.

(1) Primary production
(2) Population Pressures
(3) Underemployment
(4) Economic backwardness
(5) Capital deficiency
(6) Foreign trade orientation

(i) Capital formation
(ii) Creation of credit
(iii) Channelizing the funds
(iv) Encouraging rights type of industries
(v) Banks monetize debt
(vi) Finance to government
(vii) Employment generation
(viii) Bank promote entrepreneurship.

(i) The paper currency standard reffers to the monetary system in which the paper currency notes issued by the treasury of the Central Bank.
(ii) Paper currency is not convertible into any metal.
(iii) Its value is determined independent of the value of gold or any other commodity.
(iv) It also known as managed currency standard.

(i) Models in Mathematical Economics are developed based on Economic Theories, while Econometric Models are developed based on Economic Theories to test the validity of Economic Theories in reality through the actual data.
(ii) Regression Analysis in Statistics does not concentrate more on error term while Econometric Models concentrate more on error terms  

(i) The cause for vicious circle of poverty is demand and supply.
(ii) On the supply side, the low level of real income leads to low level of saving and investment and to deficiency of capital.
(iii) Deficiency of capital leads to low productivity and back to low income.
(iv) On the demand-side, low level of real income leads to low demand so investment is less, therefore deficiency of capital, low productivity and low income.

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.

Defence
1. The Government protects the people from external aggression and internal disorder.
2. Through police and military forces it renders protective services.
Judiciary:
1. It provides adequate judicial structure to render justice to all citizens.
Enterprises
1. The regulation and control of private enterprise comes under the government.
Social Welfare:
1. The state provides education, social security, social insurance, health and sanitation for the people.
Infrastructure
1. Modern States build the base for the economic development of the country by creating social and economic infrastructure.
Macro-economic policy
1. The Government follows fiscal policy and monetary policy to achieve macro economic goals.
Social Justice
1. During the process of growth certain sections of the economy gain at the cost of others.
2. Government intervenes with fiscal measures to redistribute income.
Control of Monopoly
1. State intervenes through control of monopolies and restrictive trade practices to curb concentration of economic power.

The main functions of SAARC are as follows.
1) Maintenance of the cooperation in the region.
2) Prevention of common problems associated with the member nations.
3) Ensuring strong relationship among the member nations.
4) Removal of the poverty through various packages of programmes.
5) Prevention of terrorism in the region.

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.

S. No.	Money Market	Capital Market
(1)	Short term funds are loaned and borrowed	Long term funds are loaned and borrowed
(2)	It deals with purchase, sale and transfer of short term credit instruments.	It raises capital by dealing in shares, bonds mortgages and other long term investments.
(3)	Commercial banks, acceptance houses, Non Banking Financial Institutions and the Central Bank deals with short term funds	Instruments traded in capital market comprise of equity shares, preference. shares, Debentures, bonds and other long term securities.

Demand-Pull Inflation:
(i) Demand and supply decide the inflation level.
(ii) If the demand is high for a product and supply is low, the price of the products increase.
Cost-Push Inflation:
(i) When the cost of raw materials and other inputs rises inflation results.
(ii) Increase in wages paid to labour also leads to inflation.

(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) 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.

1. The average income of a person of a country in a particular year is called Per Capita Income.
2. Per capita income is got by dividing national income by population.
Per capita income =\(\cfrac { National\ income }{ Population } \)

There are only two sectors - household sector and firm sector.
(i) Household Sector
1. It supplies the factors of production and gets income from the firm sector
2. It buys goods and services with its entire income.
(ii) Firms:
1. It hires factors of production from the household sector.
2. It gets revenue by selling goods and services to the household sectors.
3. The production and sales are equal.
Y = C + I
Y is income
C is consumption
I is investment

1. Capitation tax
2. Duties in respect of succession to agricultural land.
3. Duties of excise on certain goods produced or manufactured in the State, such as alcoholic liquids, opium, etc.
4. Estate duty in respect of agricultural land.
5. Fees in respect of any of the matters in the State List, but not including fees taken in any Court.
6. Land Revenue.
7. Rates of stamp duty in respect of documents other than those specified in the Union List.
8. Taxes on agricultural income.
9. Taxes on land and buildings.
10. Taxes on mineral rights, subject to limitations impose by Parliament relating to mineral development.
11. Taxes on the consumption or sale of electricity.
12. Taxes on the entry of goods into a local area for consumption, use or sale therein.
13. Taxes on the sale and purchase of goods other than newspapers.
14. Taxes on the advertisements other than those published in newspapers.
15. Taxes on goods and passengers carried by road or on inland waterways.
16. Taxes on vehicles.
17. Taxes on animals and boats.
18. Taxes on professions, trades, callings and employments.
19. Taxes on luxuries, including taxes on entertainments, amusements, betting and gambling.
20. Tolls.

History:
(i) Formed on April 1, 1935 in accordance with the RBI Act, 1934
(ii) Nationalized on January 1, 1949 (Fully owned by GOI)
(iii) Headquarter moved from Calcutta to Mumbai in 1937
(iv) Osborne Smith was the first Governor of RBI
Administration:
(i) It is the Central Bank/ Regulator for all bank in India
(ii) Also called “Lender of Last Resort”
(iii) Governors and 4 Deputy Governors along with a central board of directors appointed by the GOI.
Functions:
(i) Issues currency
(ii) Banker to the government. {It collects receipts of funds and makes payments on behalf of the government}
(iv) Regulator of Indian Banking system
(v) Custodian of Forex
(vi) Controller of credit

Adam Smith argued that all nations can be benefitted when there is free trade and specialisation in terms of their absolute cost advantage
The Theory
(i) According to Adam Smith, the basis of international trade was absolute cost advantage.
(ii) Trade between two countries would be mutually beneficial when one country produces a commodity at an absolute cost advantage over the other country which in turn produces another commodity at an absolute cost advantage over the first country.
Assumptions
1. There are two countries and two commodities (2 x 2 model).
2. Labour is the only factor of production
3. Labour units are homogeneous
4. The cost or price of a commodity is measured by the amount of labour required to produce it.
5. There is no transport cost.
Illustration
Absolute cost advantage theory can be illustrated with the help of the following example.

(iii) From the illustration, it is clear that India has an absolute advantage in the production of wheat over China and China has an absolute advantage in the production of cloth over India
(iv) Therefore, India should specialize in the production of wheat and import cloth from China. China should specialize in the production of cloth and import wheat from India
(v) This kind of trade would be mutually beneficial to both India and China.

	Billions of Dollars
GDP	8,000
Receipts of factor income from the rest of the world	250
Payment of factor income to the rest of the world	300
Depreciation	900
Indirect taxes minus subsidies	500
Corporate profits minus dividends	500
Social insurance payments	700
Personal interest income received from the government and consumers	300
Transfer payments to persons	1100
Personal taxes	1000

GNP = 8000 + 250 – 300 = 7950
NNP = 7950 – 900 = 7050
NI = 7050 – 500 = 6550
PI = 6550 – 500 – 700 + 300 + 1100
= 6750
DI = 6750 – 1000
= 5750

(i) In a four-sector economy, in addition households, firms and government, a fourth sector namely, external sector is included.
(ii)  In the real life, only four-sector economy exists. This model is composed of four sectors namely,
1. Households
2. Firms
3. Government
4. External Sector
The external sector comprises exports and imports. It is illustrated in the Flow Chart

In four-sector economy, expenditure for the entire economy include domestic expenditure (C + I + G) and net exports (X - M). Therefore,
Y = C + I + G + (X - M)

(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

MPC	MPS	K
1.00	1.00	1
0.10	1.90	1.11
0.50	0.50	2.00
0.75	0.25	4.00
0.90	0.10	10.00
1.00	0.00	∝

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

7 pillars of effective governance:
NITI AAYOG

Pro-People	Fulfills aspirations of society as well as individuals
Pro-Activity	in anticipation response to citizen needs
Participation	involvement of citizenry
Empowering	Women in all aspects
Inclusion of all	SC, ST, OBC, minorities, gareeb, gaon, kisaan
Equality	of opportunity for the youth
Transparency	making government visible and responsive.

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.
 

 

Y	C	S
120	120	0
180	170	10
240	220	20