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
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
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
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
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 > Percentage Method
- 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
The Theory of the Firm Under Perfect Competition
- Concept of Market
- Market Equilibrium
- Determination of Market Equilibrium
- Effects of Changes (Shifts) in Demand on Equilibrium Price and Equilibrium Quantity
- 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: 12 minutes
CBSE: Class 12
Meaning of Money Creation
- Banks create money through the process of giving loans and advances to the public.
- Public keeps a part of its money as cash and deposits the remaining with commercial banks.
- Commercial banks lend a major portion of these deposits.
CBSE: Class 12
Role of the Banking System
- Banking system works with a central bank (Reserve Bank of India) and other banks (scheduled and non-scheduled).
- Commercial banks hold a part of their deposits as reserves with the central bank.
- Banks issue currency through their operations; these deposits are used for giving loans and advances.
CBSE: Class 12
Balance Sheet of a Bank
Basic Terms
- A balance sheet is a statement of assets and liabilities (plus net worth) of a firm or bank.
- Assets = Reserves + Loans.
- Liabilities = Deposits.
- Net Worth = Assets – Liabilities.
Types of Assets and Liabilities
Assets
-
Reserves: cash held in the vault + deposits of commercial bank with RBI.
-
Loans: amount lent by commercial bank to its customers.
Liabilities
- Deposits: amount deposited by public in the bank; bank has to refund this on demand.
CBSE: Class 12
Example
Suppose there is only one bank in the country and Ms. Fernandes deposits Rs 100 in this bank. The bank keeps this entire Rs 100 as reserves with RBI.
Balance Sheet of the Bank
| Assets | Amount | Liabilities | Amount |
|---|---|---|---|
| Reserves | Rs 100 | Deposits | Rs 100 |
| Net Worth | Rs 0 | ||
| Total | Rs 100 | Total | Rs 100 |
If there is no currency in circulation, total money supply in the economy is Rs 100 (Currency + Deposits = 0 + 100 = 100).
CBSE: Class 12
Money Creation Process
- Public deposits money with commercial banks.
- Part of deposits is kept as reserves with RBI and in bank vault.
- Remaining portion of deposits used by banks to give loans and advances.
- Through this process of accepting deposits and giving loans, banks create money in the economy.
CBSE: Class 12
Key Points: Money Creation by Banking System
- Money is created by banks when they give loans and advances to the public.
- Public deposits a part of its cash with commercial banks; banks use major part of these deposits for lending.
- Banks operate with a central bank (RBI) and hold a part of deposits as reserves with it.
- A bank’s balance sheet records its assets (reserves and loans) and liabilities (deposits).
- Deposits are liabilities because the bank must repay them to depositors on demand.
- Reserves include cash in vault plus deposits with RBI, while loans are amounts lent to customers.
