Topics
National Income and Related Aggregates
- Macroeconomics Vs Microeconomics
- Representative Goods and Sectors
- Macroeconomic Agents and Government Role
- Emergence of Macroeconomics
- Context of the Present Book of Macroeconomics
- Meaning of Economic Wealth and Final Goods
- Stocks, Flows, and Depreciation
- Capital Formation, Trade-off & Circular Flow of Income
- Circular Flow of Income and Methods of Calculating National Income
- Output Method/Product Method
- Expenditure Method
- Income Method
- Factor Cost, Basic Prices and Market Prices
- Some Macroeconomic Identities
- National Disposable Income
- Private Income
- National Income Aggregates
- Real GDP and Nominal GDP
- GDP and Welfare
Introductory Macroeconomics
Introduction
- A Simple Economy
- Central Problems of an Economy
- Concepts of Production Possibility Frontier
- Organisation of Economic Activities
- Positive and Normative Economics
- Macroeconomics Vs Microeconomics
Development Experience (1947-90) and Economic Reforms since 1991
- India's Economy Before Independence
- Low Level of Economic Development Under the Colonial Rule
- Agricultural Sector in India
- Industrial Sector
- Foreign Trade of India
- Demographic Condition
- Occupational Structure
- Infrastructure
- Post-Independence Economic Systems and Planning
- Five Year Plans (FYP)
- Agriculture
- Industry and Trade
- Trade Policy: Import Substitution
- The 1991 Economic Crisis and Reforms
- Background of the New Economic Policy
- Liberalisation
- Privatisation
- Globalisation
- World Trade Organisation (WTO)
- Impact of the Economic Reforms
Theory of Consumer Behaviour
- Consumer Behaviour: The Problem of Choice
- Basic Concepts of Microeconomics > Utility
- Cardinal Approach (Utility Analysis)
- Derivation of Demand Curve in the Case of a Single Commodity
- Ordinal Utility Analysis/Indifference Curve Analysis
Indian Economic Development
Current Challenges Facing Indian Economy
- Concept of Human Capital
- Sources of Human Capital
- Human Capital and Economic Growth
- Human Capital and Human Development
- State of Human Capital Formation in India
- Growth of Education Sector in India
- Challenges and Future Prospects in Education
- Rural Development in India
- Credit and Marketing in Rural Areas
- Agricultural Market System
- Diversification into Productive Activities
- Sustainable Development and Organic Farming
- The Nature and Importance of Work in Society
- Workers and Employment
- Participation of People in Employment
- Self-employed and Hired Workers
- Employment in Firms, Factories and Offices
- Growth and Changing Structure of Employment
- Informalisation of Indian Workforce
- Concept of Unemployment
- Government and Employment Generation
- Environment and Sustainable Development in India
- State of India’s Environment
- Concept of Sustainable Development
- Strategies for Sustainable Development
Money and Banking
- Concept of Money
- Functions of Money
- Demand for Money and Supply of Money
- Money Creation by Banking System
- Limits to Credit Creation and Money Multiplier
- Policy Tools To Control Money Supply
- Demand and Supply for Money : A Detailed Discussion
- The Transaction Motive
- The Speculative Motive
- Various Measures of Supply of Money
- Narrow and Broad Money
- Demonetisation
Development Experience of India – a Comparison with Neighbours
Introductory Microeconomics
Production and Costs
- Production Function
- Basics of Production Theory
- Variation of Output in the Short-Run Returns to a Factor
- Relation Between Total, Average and Marginal Product
- Law of Variable Proportions
- Average and Marginal Physical Products
- Changes in Production
- Cost - Fixed Cost
- Cost -variable Cost
- Behaviour of Cost in the Short - Run
- Relationship Between Average Variable Cost and Average Total Cost and Marginal Cost
- Concept of Opportunity Cost
- Marginal Revenue
- Producer's Equilibrium
- Law of Supply
- Market Supply Schedule
- Distinguish between Stock and Supply
- Determinants of Supply
- Movements Along and Shifts in Supply Curve
- Measurement of Elasticity of Supply
- Methods of Measurement of National Income
- Cost Concepts > Marginal Cost
- The Law of Diminishing Marginal Product
- Shapes of Product Curves
- Costs in Long Run Period
- Returns to Scale
Determination of Income and Employment
- Aggregate Demand and Its Components
- Consumption
- Investment
- Determination of Income in Two-sector Model
- Determination of Equilibrium Income in the Short Run
- Macroeconomic Equilibrium with Price Level Fixed
- Effect of an Autonomous Change in Aggregate Demand on Income and Output
- The Multiplier Mechanism
- Paradox of Thrift
- Equilibrium Output and Employment
The Theory of the Firm Under Perfect Competition
- Concept of Market
- Market Equilibrium
- Determination of Market Equilibrium
- Effect of Simultaneous change in Demand and Supply on Equilibrium Price
- Perfect Competition
- Imperfect Competition
- Classification of Market Structure
- Oligopoly
- Market Forms - Perfect Oligopoly
- Market Forms - Imperfect Oligopoly
- Equilibrium Price
- Applications of Tools of Demand and Supply Price Control
- Price Ceiling
- Price Floor
- Revenue Concepts
- Profit Maximisation Objective
- Determinants of a Firm’s Supply Curve
- Market Supply Schedule
- Price Elasticity of Supply
Government Budget and the Economy
Market Equilibrium
- Simple Monopoly in the Commodity Market
- Other Non - Perfectly Competitive Markets
Balance of Payments
- Open Economy and Its Linkages
- Concept of Balance of Payments
- Current Account
- Capital Account
- Balance of Payments Surplus and Deficit
- Foreign Exchange Market
- Foreign Exchange Rate
- Determination of the Exchange Rate
- Merits and Demerits of Flexible and Fixed Exchange Rate Systems
- Managed Floating Exchange Rate System
Estimated time: 17 minutes
CBSE: Class 12
Meaning of Debt
- When the government runs a budget deficit, it borrows to finance the deficit.
- This borrowing adds to the stock of debt.
- As debt accumulates, the government must pay interest on it, which increases expenditure and may lead to further borrowing.
CBSE: Class 12
Debt as a Burden
- One argument: "Debt does not matter because we owe it to ourselves" - meaning internal debt is owed by one group of citizens to another.
- Foreign debt is a burden because the country must send goods abroad to pay interest.
- Government borrowing may shift the burden to future generations through higher taxes.
- However, if deficit-financed public investment (e.g., infrastructure) earns returns greater than the interest cost, future generations may be better off.
CBSE: Class 12
Views on Consumer Behaviour and Debt
| View | What It Says |
|---|---|
| Myopic (short-sighted) consumers | Tax cuts and budget deficits increase present consumption because consumers ignore future taxes. |
| Forward-looking consumers | Consumers expect future taxes and increased savings; present consumption does not rise. |
| Ricardian Equivalence (David Ricardo) | Borrowing and taxation are equivalent ways of financing government expenditure if consumers fully anticipate future tax liabilities. |
CBSE: Class 12
Deficits and Inflation
- A criticism of deficits is that they are inflationary.
- However, if there are unutilised resources in the economy, deficit spending increases output and may not be inflationary.
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Crowding Out
- Government borrowing can crowd out private investment if savings are limited.
- The government competes with the private sector for available funds, leaving less for private investment.
- However, if borrowing raises income and savings, the crowding-out effect may be reduced.
CBSE: Class 12
Deficit Reduction
Ways to reduce the government deficit:
- Increase taxes (greater reliance on direct taxes).
- Disinvestment (selling government stakes in PSUs).
- Reduce government expenditure through better planning and administration.
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Issues with Each Approach
- Indirect taxes are regressive in nature.
- The government spends about ₹3.65 to transfer ₹1 to the poor through food subsidy; cash transfers may be more efficient.
- FRBMA places limits on fiscal deficits and promotes fiscal discipline.
- Larger deficits do not always imply a more expansionary fiscal policy because deficits also change with the business cycle.
CBSE: Class 12
Key Points: Debt
- Budget deficits lead to borrowing, which adds to government debt and increases interest payments.
- Internal debt is less of a burden than foreign debt.
- Ricardian Equivalence states that borrowing and taxation are equivalent if consumers are forward-looking.
- Public investment financed through borrowing can benefit future generations if returns exceed interest costs.
- Crowding out occurs when government borrowing reduces funds available for private investment.
- Deficit reduction strategies include higher direct taxes, PSU disinvestment, and expenditure cuts.
- Deficits vary with the business cycle and do not always indicate an expansionary fiscal policy.
