Chapter: Introduction
Net Investment = Gross Investment – Depreciation
Net Indirect Tax = Indirect Taxes – Subsidies
Market Price = Factor Cost + Net Indirect Taxes
OR
= Factor Cost + (Indirect Taxes – Subsidies)
Net Factor Income from Abroad = Factor income earned from abroad – Factor income paid abroad
OR
Net Factor Income from Abroad = Net Compensation of Employees + Net Income from Property and Entrepreneurship + Net Retained Earnings
National Income = Domestic Income + NFIA
Depreciation = Gross Value – Net Value
7. Leakages in Different Types of Economies
Leakages in Different Types of Economies |
---|
Two-Sector Economy (with Financial Market) | Savings |
Two-Sector Economy (without Financial Market) | No Leakages |
Three-Sector Economy | Savings + Taxes |
Four-Sector Economy | Savings + Taxes + Imports |
8. Injections in Different Types of Economies
Injections in Different Types of Economies |
---|
Two-Sector Economy (with Financial Market) | Investment |
Two-Sector Economy (without Financial Market) | No Injection |
Three-Sector Economy | Investment + Government Expenditure |
Four-Sector Economy | Investment + Government Expenditure + Exports |
Chapter: National Income Accounting
- Gross Domestic Product at Factor Cost (GDPFC)
GDPFC = GDPMP – Net Indirect Taxes
- Net Domestic Product at Market Price (NDPMP)
NDPMP = GDPMP – Depreciation
- Net Domestic Product at Factor Cost (NDPFC) or Domestic Income
NDPFC = GDPMP – Net Indirect Taxes – Depreciation
- Gross National Product at Market Price (GNPMP)
GNPMP = GDPMP + Net Factor Income from Abroad
- Gross National Product at Factor Cost (GNPFC)
GNPFC = GNPMP – Net Indirect Taxes
- Net National Product at Market Price (NNPMP)
NNPMP = GNPMP – Depreciation
- Net National Product at Factor Cost (NNPFC) or National Income
NNPFC = GNPMP – Net Indirect Taxes – Depreciation
2. Domestic Income
Income from Domestic Product accruing to Private Sector = NDPFC – Income from Property and Entrepreneurship accruing to Government Administrative Departments – Savings of Non-Departmental Enterprises
3. Private Income
Private Income = Factor Income earned (within domestic territory + from rest of the world) + Transfer Income received (within domestic territory + from rest of the world)
OR
= Income from Domestic Product Accruing to Private Sector + NFIA + Interest on National Debt + Current Transfers from Government + Net Current Transfer from Rest of the World
4. Personal Disposable Income
Personal Disposable Income = Personal Income – Personal Taxes Miscellaneous Receipts of Government
OR
= Personal Consumption Expenditure + Personal Savings
5. National Disposable Income
National Disposable Income = National Income + Net Indirect Taxes + Net Current Transfers from the rest of the world
OR
= National Consumption Expenditure + National Savings
6. Gross National Disposable Income
Gross National Disposable Income = Net National Disposable Income + Depreciation
- GDPMP using Value Added Method
∑GVAMP = GDPMP
Value Added = Value of Output – Intermediate Consumption
- Value of Output when the whole output is sold in a financial year
Value of Output = Sales
- Value of Output when the whole output is not sold in a financial year
Value of Output = Sales + Change in Stock
Change in Stock = Closing Stock – Opening Stock
Value of Output = (Quantity × Price) + Change in Stock
- National Income using Value Added Method
National Income or NNPFC = GDPMP – Depreciation – Net Indirect Taxes + NFIA
OR
= Domestic Income or NDPFC + NFIA
- GDPMP using Expenditure Method
GDPMP = ∑ Final Expenditure
∑ Final Expenditure = Private Final Consumption Expenditure (PFCE) + Government Final Consumption Expenditure (GFCE) + Gross Domestic Capital Formation (GDCF) + Net Exports (NX)
- Private Final Consumption Expenditure (PFCE)
PFCE = Household Final Consumption Expenditure + Non-profit Private Institutions Final Consumption Expenditure
- Government Final Consumption Expenditure (GFCE)
GFCE = Intermediate Consumption of Government + COE paid by Government +Direct purchases from abroad for embassies and consulates located abroad – Sale of goods and services produced by general government
- Gross Domestic Capital Formation (GDCF)
GDFC = Gross Fixed Capital formation + Inventory Investment
or
= Gross Business Fixed Investment + Gross Residential Construction Investment + Gross Public Investment + Inventory Investment
Net Exports = Exports – Imports or (X-M)
- National Income using Expenditure Method
National Income or NNPFC = ∑Final Expenditure or GDPMP – Depreciation – Indirect taxes + NFIA
OR
= Domestic Income or NDPFC + NFIA
Profit = Corporate Tax + Dividend + Retained Earnings
Operating Surplus = Rent + Royalty + Interest + Profit
or
= Value of Output – Intermediate Consumption – Compensation of Employees – Mixed Income – Consumption of Fixed Capital – Net Indirect Taxes
- National Income using Income Method
NNPFC = NDPFC + NFIA
Where,
NDPFC = Compensation of Employees + Profit + Rent & Royalty + Interest + Mixed income
10. National Income at Constant Price
Chapter: Money and Banking
M1 = Currency and coins with public + Demand deposits of commercial banks + Other deposits with Reserve Bank of India
M2 = M1 + Savings Deposits with Post Office Saving Bank
M3 = M1 + Net Time Deposits with Banks
M4 = M3 + Total Deposits with Post Office Saving Bank
Chapter: Determination of Income and Employment
Aggregate Demand (AD) = C + I + G + (X – M)
= Private Consumption Expenditure + Investment Expenditure + Government Expenditure + Net Exports (Exports – Imports)
2. Aggregate Supply
Aggregate Supply (AS) or National Income (Y) = Consumption (C) + Saving (S)
3. Consumption Function
C = f(Y)
Where,
C = Consumption
f = Functional Relationship
Y = National Income
6. Saving Function
S = f(Y)
Where,
S = Saving
f = Functional Relationship
Y = National Income
9. Relationship between APC ad APS
APC + APS = 1
10. Relationship between MPC and MPS
MPC + MPS = 1
11. Values of APC, APS, MPC, and MPS
Value
| APC
| APS
| MPC
| MPS
|
---|
Negative (less than zero)
| APC can never be less than zero, because of the presence of
| APS can be less than zero when C>Y; i.e., before Break-even Point.
| MPC can never be less than zero, as can never be more than
| MPS can never be less than zero, as can never be more than
|
Zero
| APC can never be zero, because of the presence of
| APS can be zero when C=Y; i.e., at Break-even Point.
| MPC can never be zero, when
| MPS can never be zero, when
|
One
| APC can be one when C=Y; i.e., at BEP
| APS can never by one as savings can never be equal to income
| MPC can never be zero, when
| MPS can never be zero, when
|
More than One
| APC can be more than one when C>Y; i.e., before Break-even Point.
| APS can never be more than one as savings can never be more than income
| MPC can never be less than zero, as can never be more than
| MPS can never be less than zero, as can never be more than
|
12. Equation of Consumption Function
Where,
C = Consumption
b = MPC
Y = Income
13. Equation of Saving Function
Where,
S = Saving
1-b = MPS
Y = Income
14. Marginal Efficiency of Investment (MEI)
15. Two Approaches for Determination of Equilibrium Level
- Aggregate Demand-Aggregate Supply Approach (AD-AS Approach): Equilibrium will be achieved when,
AD = AS
- Saving-Investment Approach (S-I Approach): Equilibrium will be achieved when,
S = I
16. Investment Multiplier
OR
OR
The maximum value of the Multiplier is ∞ when MPC = 1
The minimum value of Multiplier is 1 when MPC = 0
Revenue Deficit = Revenue Expenditure – Revenue Receipts
Fiscal Deficit = Total Expenditure – Total Receipts (except borrowings)
OR
= (Revenue Expenditure + Capital Expenditure) – (Revenue Receipts + Capital Receipts excluding Borrowings)
OR
= (Revenue Expenditure – Revenue Receipts) + (Capital Expenditure – Capital Receipts excluding Borrowings)
OR
= Revenue Deficit + (Capital Expenditure – Capital Receipts excluding Borrowings)
Primary Deficit = Fiscal Deficit – Interest Payment
Balance of Trade = Exports of Goods – Imports of Goods
Share your thoughts in the comments
Please Login to comment...