ww..

w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

N Neett N Neett
lalai .i. l a
l i
a .i. l a
l i
a
assaa aaddaassaa
aaddaassaa
ww. P
. P w
w .P.P
w
www w
www

et
N Nett
e N Neett
lalai.i. l a
l i
a .i. l a
l i
a
assaa aaddas
a aa
s
ad
a a
d s
a aa
s
PP P P

.N
w
w . . ww. .
w
www w
www

N Neett lai 12th i.iN Nee t t

l a
l i
a .i. l a
l a . l a
l i
a
assaa aad
ECONOMICSdaasaa
s GUIDE aaddaassaa
ww. P
. P w
w . P
. P
w
www w
www
sa
2022 - 2023

N Neett N Neett
l a
l i
a .i. l a
lai .i. l a
l i
a
assaa ssaa saa
s
da

ad
adaa aaddaa
ww. P
. P w
w . P
. P
w
www w
www
Pa

N Neett N Neett
l a
l i
a .i. l a
la i.i. l a
l i
a
assaa ssaa s aa
s
Prepared by

aaddaa ad
a a
d a
w
w .P. P Mrs.A.Vennila
w
w. P
. P
w
www Principal w
www
Mydeen Matric. Hr. Sec. School,
tt Melacauvery – Kumbakonamt t– 612 002.
i N
.i. Nee i .
i N
. Ne e i
lala l a
l a l a
l a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

Chapter – 1
N Nee t t INTRODUCTION TO MACRONNECONOMICS ee tt
lalai .i. l a
l i
a .i. l a
l i
a
assaa 1. Define Macro Economics. aaddaassaa aa
Two Marks s
ddaa s
. PP .P Paa
Macro Economics w
–w ww. w w
w .
ww is derived from the Greek word ‘Makros’ meaningw
 The word ‘Macro’
Definition:
ww
‘large’.
 Hence, Macro Economics is the study of the economy as a whole.

et
N N tt
2. Define the term ‘Inflation’.
ee N Neett
lalai.i. Inflation – Definition:
l a
l i
a .i. l a
l i
a
assaa aa aa
 Inflation refers to steady increase in general price level.
d a
dass d a
d s
a s
 Estimating the general price level by constructing various price index numbers such as wholesale Price.
PPaa P Paa

.N
ww.
 Index, Consumer Price Index, etc, are needed.
. ww. .
3. What is meantw
w
byw w‘Economy’?
an w
w w
w
Economy – Meaning:
 An economy is referred to any system or area where economic activities are carried out.

N

Ne ett
Each economy has its own character.
lai N Neett
l a
l i
a .i. 
a i .i.
Accordingly, the functions or activities also vary.
l l a l a
l i
a
assaa 4. Classify the economics based onaad aa aa

d as s ddaass
An economy, the fundamental economic activities are production and consumption.
a
. PP
. based on Status of Development: www.
status of development.
. P
Paa
Classification of thew
w w w w
a) Developed, w w
economics
w w
sa
b) Underdeveloped,
c) Undeveloped and developing economies.

N Neett N N e e tt
l a
l i
a .i‘Economic
.
5. Define ‘Economic Model’.
l a
lai .i. l a
l i
a
assaa  AEconomists ofssaasituation. s aa
s
Model’:
da

a d da
model is a simplified representation
a a real
aa dd a a
. P P
.of how the economy, or part of the economy, works.
use models to describe
ww
 A model is an explanation w w . P
. P
economic activities, their relationships and their behaviour.

 Most economic ww are built with mathematics, graphs and equations,

wwmodels w
wwandwattempt to explain
relationships between economic variables.
Pa

6. What do you mean by Capitalism?

N N ee t t – Meaning: NN e ett
l a
l i
a .i. Adam Smith is the ‘Father of Capitalism. lalai.i.
Capitalism
l a
l i
a
assaa  In capitalism, there is total freedom
a a d
and s
da a saaownership of means of production.
private
aad da a s saa
w w P P
7. ‘Circular Flow of Income’ -.Define.
.Definition: w w . P
. P
 The circularw www
flow of income is a model of an economy - showingw
‘Circular Flow of Income’ –
w ww
connections between different
sectors of an economy.
 Factors of production between - economic agents such as firms, house- holds, government and

N Neett
nations.
N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

N N e et t Chapter – 2 - NATIONAL INCOME

N N e ett
lalai .iDefine
. National Income? l a
l ai .i. l a
l i
a
assaa National Income – Definition: aaddaassaa
1.

aa d da as saa
 w w . P P .P P
the.total money value of all final goods and services produced
w w . in a country
www w
National Income means
during a particular period of time (one year). www w
2. Write the formula for calculating GNP.

et
N Nett
Formula for calculating GNP
e N Neett
lalai.i. l a
l i
a .i.
 GNP is the total measure of the flow of final goods and services at market value resulting from
l a
l i
a
current production in a country during a year, including net income from abroad.

assaa aadd s
a aa
s
 GNP= (C + I+ G + (X - M) + (R - P)).
ad
a d s
a aa
s
 GNP at Market Prices = GDP at Market Prices + Net Factor income from Abroad.
a a
PP P P

.N
w
w . . ww. .
w
www
3. What is the difference between NNP and NDP?
w
www
Difference between NNP and NDP
NNP: NDP:

N Neett
1. NNP refers to the market value of output.
lai N Neett
1. NDP is the value of net output of the economy during
the year

l a
l i
a .i. a i .i.
2. NNP at factor cost is the total of income
l l a l a
l i
2. The country’s capital equipment wears out of becomes
a
assaa aa aa
payment made to factors of production. outdated each year during the production process.

ddaass ddaass
. P
. Paa . P
. Paa
www w w
w
www
4. Trace the relationship between GNP and NNP?
www
sa
Relationship between GNP and NNP
GNP NNP

N Ne et t1. Total money value of final goods

and services produced in a country
N
produced
N e e t ta country in a country during a
1. Total money value of final goos and services
in

l a
l i
a .
i . during a particular year (one year).
l a
lai .i.
particular year (one year).
l a
l i
a
assaa 5. What do you mean by the term ‘Personal s saa ss aa
da

a a dda a a a dd aa
ww . P
. P Income’?
w w . P
. P
 w
Personal income wisw
‘Personal Income’ – Meaning:
w w w w
the total income received by the individuals of a country wfrom all sources before
payment of direct taxes in a year.
Pa

NN et t – Definition:
6. Define GDP deflator.
e N N e ett
l a
l i
a .i. GDP deflator is an index of price changes of goods
GDP deflator
l a
lai.i. services. l a
l i
a
assaa  GDP aa aa
and
deflator = Nominal GDP x 100 ss s s
a ad daa ad
a a
d a
Real GDP
w w . P P
. in measuring national income? www. . P
P
w
7. Why is self consumption
Self consumption
w in measuring national income because, www
wwdifficult
difficult

 Farmers keep a large portion of food and other goods produced on the farm for self consumption.
 The problem is whether that part of the produce which is not sold in the market can be included in

N Neett national income or not.

N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

Chapter – 3
N Neet t THEORIES OF EMPLOYMENT AND
N Ne et tINCOME
lalai .i. l a
l ai .i. l a
l i
a
assaa 1. Give the meaning of full employment?ass
a ad d a aa
a adda assaa
.
Meaning of Full Employment
ww PP
. as the absence of involuntary unemployment.
w w .P.P
w w
 Full employment w
 Keynes defines full employment
w
wmeans that persons who are willing to work wandwwable to work must have
employment or a job.

et
eett
2. What is the main feature of rural unemployment ?
NN NNe ett
lalai.iThe
. major l a
l ai .i. of unemployment in the form of - lalai
feature of rural unemployment is the existence

assaa  Disguised unemployment

Seasonal unemployment.
a ad d a assaa
a ad d aas saa
P P P P

.N
ww . . w w . .
ww w w
Short note on Frictional Unemployment w w w w
3. Give short note on frictional unemployment. (Frictional Unemployment /Temporary Unemployment)

 Frictional unemployment arises due to imbalance between supply of labour and demand for labour.
 This is because of immobility of labour, lack of necessary skills, break down of machinery, shortage

N N eett
of raw materials etc.
lai N Ne ett
4.i.iGive .i.
. reasons for labour retrenchment at presentlalsituation.
i i
l a
l a a l a
l a
assaa Reasons a s
a
for labour retrenchment at present
aad d
Now a days, Invention and Innovations
sasituation
a
a ad d
leads to the adoption of new techniques there by the aa s saa
existing
workers are retrenched .P . P for technological unemployment. ww.P . P
ww
 Labour saving devicesw w
are responsible ww
w w w w
sa
5. List out the assumptions of Say’s law.
Assumptions of Say’s law

N Neett
1. Full employment.
N Ne ett
l a
l i
a .i. l lai .i.
2. There will be a perfect competition in labour and product market.
a l a
l i
a
assaa aa aa
3. There is wage-price flexibility.
s s ss
da

aadaa
4. Money acts only as a medium of exchange.
d aaddaa
What is effective demand ?.P
. P . P
. P
6.
Effective Demand w
w w w
w money actually spent by the people on products ww
wwdenotes
 Effective demand wwofwindustry.
 ED=Y=C+I = Output = Employment
Pa

ee tt
7. What are the components of aggregate supply ?
NN N N eett
l a
l i
a .i. The components of aggregate supply are :
l a
lai .i. l a
l i
a
assaa  Aggregate ssaa s aa
s
Aggregate (desired) consumption expenditure (C)

a d d aa
(desired) private savings (S)
a ad
a a
d a
Net tax payments (T)
w w .
 Personal (desired) transfer
P P
.payments to the foreigners (Rf) w w. P
. P
www
 Aggregate Supply w = C + S + T + Rf = Aggregate income generated inw ww
weconomy.
the

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

N Ne et t Chapter – 4 et t
N N e
lalai .
i . CONSUMPTION AND
l a
l a
INVESTMENTi .
i . FUNCTIONS
l a
l i
a
assaa 1. What is consumption function? aaddaassaa a ad daas saa
Consumption Function: .P . P . P P
.total consumption
w w is a “Functional relationship between two aggregatesw
w w w
www
 Consumption function
and gross national income”.
 It is represented as C = f(Y)
www viz.,

where,

et
N Ne e tt
C = Consumption
N Neett
lalai.i. Y = Income
f = Function
l a
l i
a .i. l a
l i
a
assaa 2. What do you mean by propensityaa todda as s
consume?
aa
ad
a a
d s
a aa
s
PP P P

.N
ww . . income and consumption.
Meaning of propensity to consume:
ww. .
 When income
w w consumption also increases.
wwincreases
 It is the relationship between w
www
3. Define average propensity to consume (APC).

N Neett
Average propensity to consume (APC) – Definition:
lai N Ne ett
l a
l i
a .i. l a
l ai .i.
 The average propensity to consume is the ratio of consumption expenditure to any particular level of
l a
l i
a
assaa aa aa
Income.
 APC = C/Y
dda ass d daa s s
Where,
. Pa a
C = Consumption Y = Income
P
. consume (MPC). . P
. P aa
4.
w w
Define marginal propensity to
wwto Consume (MPC) – Definition: ww w w
w w w w
sa
Marginal Propensity
 The Marginal propensity to consume may be defined as the ratio of the change in the consumption to
the change in income.
 MPC = ΔY/ΔC

N Neett
Where,
N Neett
l a
l i
a .i. ΔC = Change in Consumption
l a
la i .i. l a
l i
a
assaa s saa saa
s
ΔY = Change in Income
da

a d d
MPC is positive but less than unity
a a a aaddaa
5.
w w . P
. P
What do you mean by propensity to save?
ww. P
. P
 Propensity to w
w
Meaning of Propensity to Save: w
wsavewis a “functional relationship between two aggregateswwvizw
 Total Savings and Gross National Income.
 The propensity to save is merely the propensity not to consume.
Pa

NN ee tt N Nee tt
l a
l i
a .iAverage
6. Define average propensity to save (APS).
. Propensity to Save (APS) l a
l ai.i. l a
l i
a
assaa  The aa
average propensity to save is the ratio
a a dd s aofasaving to consume.
s
ad
a a
d s
a aa
s
 APS = S/Y
w w .P
In other words, it is the ratio of total
. P savings to total income.
w
w. P
. P
www w
Where, S = Saving, Y = Income w
www
7. Define Marginal Propensity to Save (MPS).
Marginal Propensity to Save (MPS) – Definition:

N Neett N Ne e tt
 Marginal Propensity to Save is the ratio of change in saving to a change in income.
 MPS is obtained by dividing change in savings by change in income.
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

 MPS = ΔS / ΔY
Where, ΔS = Change in Saving, ΔY = Change in Income

N Ne ett N Neett
lalai .iMultiplier
8. Define Multiplier.
. l a
l i
a .i. l a
l i
a
assaa  The achange
a in national income to change in Investment.aassaa
– Definition:
a a ss
muliplier is defined as the ratio of the
d d dd
Multiplier(K) = ΔY / ΔI
. P
. P a a . P.P a a
w w w
 Multiplier is also called as
w investment multiplier.
w w w w
w w
9. Define Accelerator.
Accelerator – Definition:
w w
 Accelerator is the numerical value of the relation between an increase in consumption and the

et
N Nett
e
resulting increase in investment.
 Accelerator (β) = ΔI/ΔC
N Neett
lalai.i. l a
l i
a .i. l a
l i
a
Where, ΔI = Change in investment outlays (Say 100), ΔC=Change in consumption demand (Say 50).

assaa aaddas
a aa
s
ad
a a
d s
a aa
s
PP P P

.N
w
w . . Chapter – 5 ww. .
w
www MONETARY ECONOMICS www w

N eett
1. Define Money?
Money – Definition:
N lai N Nee tt
l a
l i
a .i.
 “Money is, what money does ” – Walker.
l a
l ai .i. l a
l i
a
assaa s aa
s s saa
 “Money can be anything that is generally acceptable as a means of exchange and at the same time

a add aa
acts as a measure and a store of value”. – Crowther
aa d da a
ww . P
. P w w . P
. P
2. What is barter?
w w w
w ww ww
sa
Barter – Meaning:
 Before money was invented, exchange took place by Barter, that is, commodities and services were
directly exchanged for other commodities and services.
 Such exchange of goods for goods was known as “Barter Exchange” or “Barter System”.

N Neett N Neett
l a
l i
a .i.
3. What is commodity money?
l a
lai .i. l a
l i
a
assaa s aa saa
Commodity Money – Meaning:
s s
da

ad
adaa aaddaa
 After the barter system and commodity money system, modem money systems evolved.

ww P
. P
 Among these, metallic standard is the premier one. ,
. w
w . P
. P
 Under metallic standard, some kind of metal either gold or silver is used to determine the standard
w
www
value of the money and currency. w
www
4. What is gold standard?
Pa

Gold Standard – Meaning:

Neett N Neett
 Gold Standard is a system in which the value of the monetary unit or the standard currency is directly
N
l a
l i
a .i. linked with gold.
l a
lai.i. l a
l i
a
assaa aa aa
 The monetary unit is defined in terms of a certain weight of gold.

d daass d a s
a s
 The purchasing power of a unit of money is maintained equal to the value of a fixed weight of gold.
d
.P P aa
What is plastic money? Give .example? . P
. Paa
5.
w ww
w is plastic money. w w
w
wwof money
Plastic money – Meaning:
 The latest type www
 Plastic money is one of the most evolved forms of financial products.
 Plastic money is an alternative to the cash or the standard “money”.

N Neett N Ne e tt
 Plastic money is a term that is used predominantly in reference to the hard plastic cards used every

lalai.i. day in place of actual bank notes.

l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

 Examples: Cash cards, Credit cards, Debit cards, Pre-paid Cash cards, Store cards, Forex cards and
Smart cards.

NN e ett N Nee tt
lalai .iInflation
. – Definition:
6. Define inflation.
l al i
a .i. l a
l i
a
assaa  Inflation a ad da
is a consistent and appreciableas sainathe general price level.
rise
aaddaassaa
 “A state of abnormalw w .
“ Too much of Money chasingPP
. in the quantity of purchasing power” – Gregorye.
too few goods” - Coulbourn.
ww .P.P
w w w w increase
w www
7. What is Stagflation?
Stagflation – Meaning:

et
 Stagflation is a combination of stagnant economic growth, high unemployment and high inflation.
N Nett
e N N ee tt
lalai.i. l a
l i
a .i. l a
l i
a
assaa Chapter
a ad d a a–ss6aa- BANKING
a a d da as saa
PP P P

.N
w w . . w w . .
1.
w w
Commercial Banks
w w
Define Commercial banks.
– Definition: w w ww
 Commercial bank refers to a bank, or a division of a large bank, which more specifically deals with
deposit and loan services provided to corporations or large/ middle-sized business.

N Ne tt
2. What is credit creation?
e lai N N ee tt
l a
l i
a .i.
Credit Creation – Meaning:
l a
l i
a .i.
 Credit Creation means the multiplication of loans and advances.
l a
l i
a
assaa aadd as saa
 Commercial banks receive deposits from the public and use these deposits to give loans.
a aaddaassaa
3. Define Central bank.
w w . P
. P w
w . P
. P
w w
w bank, or monetary authority is an institution thatwww
wwreserve
sa
Central bank - Definition
 A central bank,
 manages a state’s currency, money supply, and interest rates.
 Central banks also usually oversee the commercial banking system of their respective countries.

N Neett N Neett
l a
l i
a .i.
4. Distinguish between CRR and SLR.
l a
lai .i. l a
l i
a
assaa aa aa
Distinguish between CRR and SLR
ss ss
da

BASIS FOR
COMPARISON
CRR
a ad d aa SLR
aa d d aa
1. Meaning
ww.
1. CRR PisP
.the bank has to keep with
the percentage of money 1. The bank has
w
to
w . P
keep P
. Time
a certain
w
wwwthe Central Bank of India in the
which w
wwwLiabilities in the
percentage
and Demand
of their Net

form of cash. form of liquid assets as

specified by RBI.
Pa

N 2. e
N ett NNeett
l a
l i
a .i. Form 2. Cash.
l a
lai.i. gold and government
2. Cash and other assets like
l a
l i
a
assaa a ad da a saa
s securities viz.
a addaasaa
s
Write the meaningw
. PP
. operations.
wwmarket ww. P
. P
5.
Meaning of w
ofw
w market operations:
Open
Open
www w
 In narrow sense, the Central Bank starts the purchase and sale of Government securities in the money market.
 In Broad Sense, the Central Bank purchases and sells not only Government securities but also other

N Neett N N e tt
proper eligible securities like bills and securities of private concerns.
e
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

6. What is rationing of credit?

e ett
Rationing of Credit – Meaning:
N N N Ne ett
lalai .i.
 This is the oldest method of credit control.
l a
l i
a .i. l a
l i
a
assaa 7. Mention the functions of agriculture aa aa
 It aims to control and regulate the purposes for which credit is granted by commercial banks.

d d a a ss ddaass
. P P a a
. Department:
credit department.
.P.Paa
ww w w w w
w
 To maintain wanw
Functions of Agriculture Credit
www
expert staff to study all questions on agricultural credit;
 To provide expert advice to Central and State Government, State Co-operative Banks and other
banking activities.

et
N N e et t Chapter – 7 - INTERNATIONAL N Ne e tECONOMICS
t
lalai.i. l a
l i
a .i. l a
l i
a
assaa 1. What is International Economics?aaddaassaa aad daassaa
P P P P

.N
ww .
International Economics: .
w w . . of goods
and servicesw
w
wwtwo or more countries.
 International Economics
between
is that branch of economics which is
www
concernedwwith the exchange

2. Define international trade.

N e e tt
International Trade:
N lai N N ee tt
l a
l i
a .i.  between two or more countries. l l ai .i.
 International trade refers to the trade or exchange of goods and services
a l a
l i
a
assaa 3. State any two merits of trade. aaddaassaa aa daassaa
 In other words, it is a trade among different countries or trade across political boundaries.
d
w w . P
. P w
w . P
. P
Merits of Trade
 Trade is onew ofw
w
thew w
w w
w
sa
powerful forces of economic integration.
 It brings foreign exchange to our country.
 Equitable distribution of scarce materials.

Neett N Neett
4. What is the main difference between Adam Smith and Ricardo with regard to the emergence of
N
l a
l i
a .i.
foreign trade?
l a
lai .i. l a
l i
a
assaa aa aa
Main difference between Adam Smith and Ricardo with regard to the emergence of foreign trade:
ss ss
da

ad
adaa aaddaa
 According to Adam Smith, the basis of international trade was absolute cost advantage.
 According to Ricardo a country can gain from trade when it produces at relatively lower costs.
w w. P
. P w
w . P
. P
5.
www w
Define Terms of Trade.
Trade – Definition:
w
www
 It is the rate at which the goods of one country are exchanged for goods of another country.
 It is expressed as the relation between export prices and import prices.
Pa

N Neett
6. What do you mean by balance of payments?
N N eett
l a
l i
a .i.
Balance of Payments - Meaning:
l a
l ai.i. l a
l i
a
assaa s aa s aa
 Balance of Payment is a systematic record of a country’s economic and financial transactions with the
d da
rest of the world over a period of time. a s d da a s
What is meant by Exchange.P . P a a . P
. Pa a
7.
w w w
Exchange Rate – Meaning: w Rate?
w w w w
w
 Exchange Ratew is the external value of domestic currency. w w
 Thus, exchange rate may be defined as the price paid in the home currency (say Rs.75) for a unit of
foreign currency (say 1 US $).

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

N Ne e t t Chapter – 8
N Neett
lalai .i. INTERNATIONAL ECONOMIC
l a
l ai .i.
ORGANISATIONS
l a
l i
a
assaa 1. Write the meaning of Special Drawinga
aa d d as saa
Rights.
a ad da assaa
. PP
. is otherwise called ‘Paper Gold’. www.
Special Drawing rights – Meaning:
w w . PP
 They are a w ww
formw
 Special Drawing Rights (SDRs)
of international reserves created by the IMF inwwwto solve the problem of
1969
international liquidity.
2. Mention any two objectives of ASEAN.

et
N e ett
Objectives of ASEAN:
N N Neett
lalai.i. l a
l i
a .i.
 To accelerate the economic growth, social progress and cultural development in the region.
l a
l i
a
 To serve as a centre of information and as an ASEAN link with other international organizations.

assaa 3. Point out any two ways in whichaIBRD ad da as s aa

lends to member countries.
ad
a a
d s
a aa
s
P P P P

.N
w w
Two ways in which IBRD lends . . to member countries:
ww. .
w w w w
i) Loans out of its own fund, ii) Loans out of borrowed capital
w
w w
w
4. Define Common Market.
Common Market – Definition:

N e ett e ett
 A group formed by countries within a geographical area to promote duty free trade and free
N lai N N
l a
l i
a .iWhat
. is Free trade area? l l i
movement of labour and capital among its members.
a a .i. l a
l i
a
assaa Free Trade Area – Meaning: aaddaassaa
5.

a a d da s
a aa
s
w .
 These agreements involve
P P
.cooperation between at least two countries to reduce
w w . PP
. barriers.
 A region encompassing a trade bloc whose member countries have signed a Free Trade Agreement.
w
ww w w w w w w trade
sa
6. When and where was SAARC Secretariat established?
SAARC Secretariat Established:
 The SAARC Secretariat was established in Kathmandu (Nepal) on 16th January 1987.

NN e e tt N Neett
l a
l i
a .iAffiliates
. of World Bank Group:
7. Specify any two affiliates of World Bank Group.
l a
lai .i. l a
l i
a
assaa International ssaa saa
s
da

1)
a ad da a
Development Association.(IDA)
aaddaa
2)

w w P
. P
International Finance corporation.(IFC)
. w
w . P
. P
www w Chapter – 9 - FISCAL ECONOMICSw w
ww
1. Define public finance.
Pa

N Ne e tt
Public Finance – Definition:
N N e ett
 “Public finance is an investigation into the nature and principles of the state revenue and
l a
l i
a .i. expenditure”. - Adam Smith
l a
la i.i. l a
l i
a
assaa 2. What is public revenue?
Public Revenue – Meaning:
a a d da as saa
ad
a a
d s
a aa
s
w w P
 Public revenue deals with.theP
.principles and rate of taxation.
methods of raising public revenue.
w
w. P
. P
 For (e.g.) Tax and
3. Differentiate tax w
w
wandwNon
fee.
Tax w
www
Differentiation of Tax and Fee:
 Tax is a compulsory payment by the citizens to the government to meet the public expenditure.

N Neett N Ne e tt
 A fee is charged by public authorities for rendering a service to the citizens.

lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

4. Write a short note on zero based budget.

N e ett
Short note on Zero Based Budget:
N eett
 Zero base - budgeting involves fresh evaluation of expenditure in the government budget Assuming
N N
lalai .i. it as a new item.
l a
l i
a .i. l a
l i
a
assaa 5. Give two examples for direct tax.aaddaassaa
 Indian Government presented ZBB first in 1987 - 88.

aaddaassaa
ww . P
are,. P w
w .P.P
w
www
Examples for Direct Tax
(i) Income Tax w
www
(ii) Wealth Tax.
6. What are the components of GST?

et
N eett
The component of GST are of 3 types. They are,
N N Ne e tt
lalai.i. (i) CGST
l a
l i
a .i. l a
l i
a
assaa 7. What do you mean by public debt? aa aa
(ii) SGST
(Iii) IGST
d d a as s d a
d s
a s
PPa a P Pa a

.N
Meaning of Publicw w w . . ww . .
 Public debt ww w
with the methods of raising loans from internal andw
Debt:
deals w
ex-
w w
ternal sources.
 The burden, effects and redemption of public debt fall under this head.

N Ne et t Chapter – 10 - ENVIRONMENTAL
lai N Neet tECONOMICS
l a
l i
a .i. l a
l ai .i. l a
l i
a
assaa 1. State the meaning of environment.
Environment meaning:
aa d d aa s sa a
a ad a s
a s
dof an
aa
w . P
. P
 “All the conditions, circumstances,
organism or group ofw
and influences surrounding and affecting
w
the
w . P
. P
development

w w w w organisms”.
w w w w
sa
2. What do you mean by ecosystem?
Meaning of Ecosystem:

N Ne ett N Ne ett
 An ecosystem includes all living things (plants, animals and organisms) in a given area, interacting

l a
l i
a .i. l a
lai .i. l a
l i
with each other, and also with their non-living environments (weather, earth, sun, soil, climate,
a
assaa 3. Mention the countries where peracapita aa aa
atmosphere).
s s ss
da

adda a aa d daa
w w . PP
. carbondioxide emission is the highest in w
the ww . P
. P
carbondioxide emission is the highest in the world.

wwww
The countries where per
Countries
capita
Per capita CO2 emission www
world:

1. Saudi Arabia 16.85

Pa

2. Australia 15.83

NN e et3.t United states N Neett

l a
l i
a .i. 4. Canada 15.53
l a
lai.i. l a
l i
a
assaa ssa a s a
s a
15.32
5. South Korea
aadd aa 11.58
ad
a a
d a
w w. PP
. Give examples. w
w. P
. P
ww w
4. What are environmental
Environmentalw goods:
goods?
w
www
 Environmental goods are typically non-market goods.
 Examples: Clear air, clean water, landscape, green transport infrastructure, public parks, urban
parks, rivers, mountains, forests and beaches.

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

5. What are the remedial measures to control noise pollution?

NN e et tmeasures to control noise pollution NNeet t

lalai .i. Use
Remedial
1) of noise barriers.
l a
l i
a .i. l a
l i
a
assaa Newer
2) roadways
Traffic control
3)
for surface

a a d d as s
transport.
a aa
aaddaassaa
. P
.
Regulating times for heavy
4)
w w P vehicles.
w
w .P.P
wwww
6. Define Global warming. w
www
Global warming – Definition:
 Global warming is the current increase in temperature of the earth’s surface (both land and water) as

et
well as its atmosphere.

N Nett
e N Neett
lalai.i.
7. Specify the meaning of seed ball.
l a
l i
a .i. l a
l i
a
assaa s aa
s s aa
s
Seed Ball Meaning:
d aa d a a
 A seed ball (or seed bomb) is a seed that has been wrapped in soil materials, usually a mixture of clay
aa d aa d
PP P P

.N
w
w .
and compost, and then dried.
. ww. .
 Seed balls are an easy and sustainable way to cultivate plants that provide a larger window of time
w
www
when the sowing can occur. w
www
Chapter – 11
N Ne et t ECONOMICS OF DEVELOPMENTe
lai N N et t PLANNING
l a
l i
a .i. l a
l i
a .i. AND
l a
l i
a
assaa 1. Define Economic Development
Economic Development – Definition:aa d a
d a ssaa
a a d aassaa
dpopular
w w . P P
 “Development is a multidimensional process involving major changes in
w .
. as well as the acceleration of growthwthewreduction
social, P P
. of inequality
structures,
w
wwof w
attitudes and national institutional
www
sa
and eradication abso- lute poverty” - Michal P.Todaro
(or)
 From the welfare perspective, economic development is defined as sustained improvement in

NN e ett
health, ,literacy and standard of living.
N N e ett
l a
l i
a .iMention
. the indicators of development. lalai.i. l a
l i
a
assaa Indicators aa aa
2.
s s ss
da

of development
aad
 Gross National Product (GNP)
a
d a aaddaa
 GNP per capita
w
w . P
. P w
w . P
. P
 Welfare w
 Social Indicators
w
www- health, education, food, water, sanitation and housing
wwwfacilities
Pa

3. Distinguish between economic growth and development

N Ne e tt N Ne e t t development
l a
l i
a .i. Economic Growth
l a
lai.iEconomic
Distinguish between economic growth
. and
Development
l a
l i
a
assaa Deals with the problems of Developed

a ad d
countries Change is gradual and steadyaass aawith theandproblems
Deals
discontinuous
of UDCs change in
spontaneous Wider
a
concept d
a a
d s
a aa
s
Narrow.
w w . P
. P Development = Growth+ Change.
w w. P
. P
4. What is GNP? w w w w ww w w
GNP – Meaning:
 GNP is the total market value of all final goods and services produced within a nation in a particular

N Neett N N e tt
year, plus income earned by its citizens minus income of non-residents located in that country.
e
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

5. Define Economic Planning.

N Neett N Neett
 According to Robbins - economic planning is collective control or suppression of private activities

lalai .i. of production and exchange.

l a
l i
a .i. l a
l i
a
assaa aa aa
(or)

dda as s ddaass
 According to Dalton - economic planning in the widest sense is the deliberate direction by persons

. P P a a
incharge of large resources of economic activity towards chosen ends.
. of economic development? .P.Paa
What are the socialw w w w w w
w
6.
ww
Social indicators
indicators
of economic development: www
 The basic needs for development such as health, education, sanitation, water, food etc.

et
ett
e
7. Write a short note on NITI Aayog
N N N Neett
lalai.i. Short note on NITI Aayog
l a
l i
a .i. l a
l i
a
assaa aa aa
 NITI Aayog was formed on 1st January, 2015 through a union cabinet resolution.

ddas
a s
 NITI Aayog is a policy think tank.
d a
d s
a s
aa
 It replaced the Planning Commission from 13th August, 2014.
PP P Paa

.N
w
w . . ww. .
w
www w
www
Chapter – 12
INTRODUCTION TO STATISTICAL METHODS AND ECONOMETRICS

NNe ett lai N Ne ett

l a
l i
a .iWhat
. is Statistics? l a
l ai .i. l a
l i
a
assaa Statistics aa aa
1.
– Meaning:
 Statistics as a science of estimatesdd a a ss d a a
d of s s
 Statistics may be defined.as P
. P a aand probabilities.
. P
. P a a
numerical data ww w w w
the collection, organizations, presentation, analysis and interpretation

w w w w w ww
sa
2. What are the kinds of Statistics?
There are two major types of statistics.

N N ett
1) Descriptive statistics
e N N e ett
l a
l i
a .i. 2) Inferential statistics
l a
lai .i. l a
l i
a
assaa 3. What s saa s aa
s
da

do you mean by Inferential Statistics?

Inferential Statistics – Meaning: d
a a d a a aad a
d ofa
w w . P
. P
 The branch of statistics concerned with using sample data to make an
w
inference . P
.
about
w P
a population

w w w w
data is called Inferential Statistics.
w w ww
4. What are the kinds of data?
Pa

NNeett
Kinds of Data
N Neett
l a
l i
a .i. i)Quantitative
BASED ON CHARACTERISTICS
data
l a
lai.i. l a
l i
a
assaa a) Primary data b)

ii)Qualitative data Pa
Secondary

a dda a ssaa
data

ad
a a
d s
a aa
s
w . P
data.b) Secondary data
w w
w. P
. P
www w
a) Primary
w
www
BASED ON SOURCES
i)Primary data
ii)Secondary data

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

5. Define Correlation.
e ett
Correlation – Definition:
N N N Neett
lalai .i. l l i
a .i.
 Correlation is a statistical device that helps to analyze the co-variation of two more variables,
a l a
l i
a
assaa 6. Define Regression. aa aa
 Sir Francis Galton is responsible for the calculation of correlation coefficient.
d d a a ss d da a ss
Regression meaning: w . . PP a a .P. P a a
w w w w w w w
w w
 Regression means going
between two variables
back and it is a mathematical measure
w w
showing the average relationship

et
7. What is Econometrics?

N ett
e
“Econometrics” – Meaning:
N N Neett
lalai.i. l a
l i
a .i. l a
l i
 “Econometrics may be defined as the social science in which the tools of economic theory,
a
assaa aa aa
mathematics and statistical inference are applied to the analysis of economic phenomena”.
ddas
a s d a
d s
a s
PPaa P Paa

.N
w
w . . ww. .
w
www w
www

N Neett lai N Neett

l a
l i
a .i. l a
l i
a .i. l a
l i
a
assaa aaddaasaa
s
aaddaassaa
ww. P
. P w
w . P
. P
w
www w
www
sa

N Neett N Neett
l a
l i
a .i. l a
lai .i. l a
l i
a
assaa ssaa saa
s
da

ad
adaa aaddaa
ww. P
. P w
w . P
. P
w
www w
www
Pa

N Neett N Neett
l a
l i
a .i. l a
lai.i. l a
l i
a
assaa aaddaasaa
s
ad
a a
d s
a aa
s
w
w .P. P w
w. P
. P
w
www w
www

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

N N e etChapter
t – 1 - INTRODUCTION TO N Neet t ECONOMICS
lalai .i. l a
l i
a .i. MACRO
l a
l i
a
assaa aad daas
ThreesaaMarks
aaddaassaa
1. State the importanceww . P
. P ww.P.P
Importance wofw
ww of Macro Economics.
Macro Economics
w
www
A. Helps to frame suitable solutions to the basic problems in an economy.

et
B. It helps to use many scientific investigations to understand the reality.

N Neett N Nee tt
It helps to make comparison and analysis of economic indicators.
.i2.. Describe different types of economic systems.lalai.i.
C.

lalai l a
l i
a
assaa The different types of economicaasystems dda a ssaa
are
ad
a da as saa
A. Capitalstic Economy:.P P PP

.N
w w . the means of production are privately ownedwandww. . determines the
w w
 It is the system
wwactivities
economic
where
www market

 Ex. USA, West Germany, Australia etc.

NNeett
B. Socialistic Economy :
lai N N eet owned
t and controlled by the
l a
l i
a .i. government, Social welfare is a main motive
l l ai .ofi.it.
 It is the system where the major economic activities
a
are
l a
l i
a
assaa C. Mixed  Ex. Russia, China, Poland etc. ss
a add a a aa
aa d da s
a saa
Economy:
ww . PP
. system, both private and public sectors coexistwandww. P
. P
 In a mixed w w
economic
wwdevelopment. www work together towards
sa
economic
 Ex.: India, England, France, etc.

NN et tmerits of Capitalism.
3. Outline the major merits of capitalism.
e N Neett
l a
l i
a .i. 1. Automatic working:
Major
l alai .i. l a
l i
a
assaa ssawithout
a any government intervention saa
s
da

aad da
 The economy works automaticallya aaddaa
. P P
. into optimum use.
2. Efficient use of resources:
 All resources w w w w . P
. P
3. Incentives
w
wwforwhard work:
are put
wwww
 Hard work is encouraged and entrepreneurs getmore profit for more efficiency.
Pa

N eett
4. Indicate the demerits of Socialism.
N N Ne e tt
l a
l i
a .i. Demerits of Socialism
l a
la i.i. l a
l i
a
assaa 1. Red-tapism and bureaucracy:

a
 Work cannot be started a dd a as saa
ad
a a
d s
a aa
s
ww. P
. P easily for its lengthyprocess.
w w . P. P
 This ww w wdoes not provide any incentive for efficiency. So,ww
2. Absence of Incentive:
system ww also suffers.
productivity
3. Limited freedom of choice:
 consumers do not enjoy freedom of choice overconsumption of goods and services

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

5. Enumerate the features of mixed economy.

N Neett
Features of Mixed Economy
N Neett
lalai .i. l
Ownership of property and means of production:
a
l i
a .i. l a
l i
a
assaa Co-existence a as
Both the public andprivate have rights
a ad d saaproperty and means of production.
over
a a ddaassaa
 public sector aimsww PP
of public and Private
. sector:
. welfare whereas private sectors aims at for w w w .P.P
w w
Economic plan: ww at social
w w
profits.
w
 National plans are drawn up by the government and bothpublic and private sectors abide.

et
N eett
6. Distinguish between Capitalism and Globalization.
N N Nee tt
lalai.i. l l ai .i.
Distinguish between Capitalism and Globalization
a l a
l i
a
assaa ssaa s a
s a
Capitalism

a d d
 It is the system where the means
a aa
of
Globalization
 It is an economic system where the ad
a a
d a
P P P P

.N
w w . .economic
production are privately owned and
ww .
economic activities of a nation are.inter-
ww ww
mar-ket determines the connected and w w w w
nterdependent on each
activities. other.

N e ett lai
7. Briefly explain the two sector circular flow model.
N N N eett
l a
l i
a .i. Circular Flow Model: l a
l ai .i. l a
l i
a
assaa a
• There are only two sectors namely,
a a d d a ssaa sector and firm sector.
household
a ad aa
d of ssaa
w w . P
. P
• In a two-sector economy; production and sales are equal and there
w
will
w
be .
a P
. P
circular flow
income andw
w ww
ww good.
w w
sa
• The outer circle represents real flow (factors and goods) and
• The inner circle represents the monetary flow (factor prices and commodity prices).

NNeetReal
t flow indicates the factor services flow fromNN
• ee t t sector to the business sector, and
household

l a
l i
a .i. goods and services flow from business sector
l a
lai .i.the household.
to
l a
l i
a
assaa s saa ss aa
da

a a d da a a a d da a
w w . P. P w w . P
. P
w
www wwww
Pa

N Neett N Neett
l a
l i
a .i. l a
lai.i. l a
l i
a
assaa aaddaasaa
s
ad
a a
d s
a aa
s
w
w .P. P w
w. P
. P
w
www w
www

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

N Ne ett Chapter – 2 eet t

N N
lalai .
i . NATIONAL INCOME
l a
l ai .i . l a
l i
a
assaa 1. Write a short note on per capitalaincome.
a dd a a s saa
a add aassaa
Per Capital Income
ww . P P . P
.a person of a country in a particular year is calledwperwcapita
w P
.income.
 The average w wis obtained by diving national income by Population.
wincome
 Per capitaw
income of
www
National income

et
N N e 
ett
Per capita income =
N Neett
lalai.i. Population
l a
l i
a .i. l a
l i
a
assaa 2. Differentiate between personal d d a a
and disposable
Differencea a
s saincome.
a
a a d da as s aa
PP P P

.N
Basis of Difference
w w . between
.income personal and disposable income
Personal Income
ww . .the individuals
Disposable Income
Meaning
www w Personal is the total income
received by the individuals before
www
DisposablewIncome
income after
is
the payment of income
payment of direct taxes in a year. tax.
Implication Personal income is never equal to the This is the amount available

N Neett lainational income.

N Ne e ttFor households for consumption.

l a
l i
a .i.Formula
l l i
a .i.
Personal Income = National Income –
a Disposable Income = Personal
l a
l i
a
assaa aa aa
income – Direct Tax. Disposal
payments.
d d as s
(Social Security Contribution) + Transfer
a ddaa
income = consumption + saving.ss
. P P a
.cost. a . P
. Paa
w w w w ww
wwCostw- Explanation www
3. Explain briefly NNP at factor
sa
NNP at Factor
 NNP at factor cost is the total of income payment made to factors of production.
 Thus from the money value of NNP at market price, we deduct the amount of indirect taxes and

N Ne e tt N Ne e tt
add subsidies to arrive at the net national income at factor cost.

l a
l i
a .i. l a
lai .i.
 NNP at factor cost = NNP at Market prices – Indirect taxes + Subsidies.
l a
l i
a
assaa 4. GiveTheshortE xnote on Expenditure Method. ss aa ss aa
da

penditure Method P a a d daa aa d d a a

w w . P
. total expenditure incurred by the society inw
(Outlay method):
w w . P P
. year is added
 Under this w
www
together.
method, the
www a particular

 To calculate the expenditure of a society, it includes personal consumption expenditure, net

Pa

N Neett N Ne ett
domestic investment, government expenditure on consumption as well as capital goods and

l a
l i
a .i. net exports.
l alai.i. l a
l i
a
assaa Symbolically,
a ad da
GNP a=ss
C
a+aI + G + (X-M)
ad
a a
d s
a aa
s
w w .P P
. consumption expenditureI - w
w. P
. P
w
wwwPrivate
C - Private
Investment Expenditure G - w
w w
w
Government expenditure
X-M = Net exports.

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

5. What is the solution to the problem of double counting in the estimation of national income?

N Ne ett N N eett
Solution to the problem of double counting in the estimation of national income

lalai .i. Double counting is to be avoided under valueladded

al ai .imethod.
. l a
l i
a
assaa  Any a as
commodity which is either raw material
a a dd saaor intermediate good for the final production should
a a d a
d ofas saa
not be included.

GNP or the sumw w .

 To avoid double counting,
w P P
.added should be taken.
either the value of the final output should be taken
w w .
into P
. P
the estimate

 For example,wwvaluewof cotton enters value of yarn as cost, and valuew

of values
ofw
w w
yarn in cloth and that of cloth
in garments.

et
ett
e
6. Write briefly about national income and welfare
N N N Neett
lalai.i. National Income and Welfare – Explanation:
l a
l i
a .i. l a
l i
a
 National Income is considered as an indicator of the economic wellbeing of a country.
assaa growth rate.
aad a
dassaa
ad
a a
d s
a aa
s
 The economic progress of countries is measured in terms of their GDP per capita and their annual

P P P P

.N
. . . .
 A country with a higher per capita income is supposed to enjoy greater economic welfare with a
w w ww
w w w
higher standard of living.
w w
w w
w
7. List out the uses of national income.
Uses of national income:

N Neett lai N Neett

i) To know the relative importance of the various sectors of the economy and their contribution towards

l a
l i
a .i. national income
l a
l i
a .i. l a
l i
a
assaa aa aa
ii) To formulate the national policies such as monetary policy, fiscal policy and other policies

ddaass
iii) To formulate planning and evaluate plan progress
ddaass
. P
. Paa . P
. Paa
www w w
w
www www
sa
Chapter – 3
THEORIES OF EMPLOYMENT AND INCOME

N Neett N Ne ett
l a
l i
a .i.
1) Explain the following in Short
l a
lai .i. C. Educated Unemployment la l i
a
assaa aa aa
A. Seasonal unemployment B. Frictional unemployment
s s s s
da

Seasonal unemployment: ad
a a
d a a d
a a
d a
B.

ww
 In agriculture and . PP
. industries like sugar production activities
agro-based w w
are . P P
. out only in
carried
www w
some seasons. www w
 People may remain unemployed during off seasons.
Pa

C. Frictional unemployment:

NNe
etItt arises due to imbalance between supply of labour
N N e e
andtdemand
t for labour.
l a
l i
a .i.  This is because of immobility of labour lack
l a
la i .necessary
i. skills, breakdown of machinery, etc. lalai
assaa aa aa
of

d daa s s d a as
d thes
Educated unemployment:
D.
 Educated people are .P. Pa a . P
. Pa a
w w w unemployed or underemployed when
w w
qualifications
w
do not match
job.
www www

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

2) According to classical theory of employment, how wage reduction solves the problem of

N e ett
unemployment? Diagrammatically explain?
N N N e ett
lalai .i. a) The classical theory of employment assumeslalthat
ai .ithe. economy operates at the level of full l a
l i
a
assaa b) employment d d a
without inflation in the
It also assumes that wages a a as saaperiod.
long
a a d aa
d in ssaa
. P P and prices
the economy (laissez – .faire economy).
ww w w . PP
of goods are flexible and the competitive market exists
.be achieved by
c) According tow w
wwthewwage rate.
cutting down
the classical theory of employment, full
www
employment condition can

d) Unemployment would be eliminated when wages are determined by the mechanism of economy
itself.

et
N Nett
e N Neett
e) The following figure shows the relationship between wage rate and employment:

lalai.i. l a
l i
a .i. l a
l i
a
assaa aaddas
a aa
s
ad
a a
d s
a aa
s
PP P P

.N
w
w . . ww. .
w
www w
www

N Neett lai N Neett

l a
l i
a .i. l a
l i
a .i. l a
l i
a
assaa aad daas saa
aaddaassaa
w w . P
. P w w . P
. P
 In the figure,w
w w wthe wage rate is OW, then the employment is ON.www w
sa
when
 As the wage rate is reduced to OW , then the employment has increased to ON .
1 1

 Prof. Pigou has taken this theory as base for developing the solution of unemployment problem.

N Neett N Ne ett
l a
l i
a .i.
3) Write a note on the implications of the Say’s law.
Implications of the Say’s Law: l a
lai .i. l a
l i
a
assaa s s aa saa
s
da

aa daa
 There is no general over production or unemployment
d aaddaa
w w
 Interest flexibility . P
 Automatic price mechanism
P
rate.brings equality between savings and investment w
w . P
. P
 Moneyw acts
w
waswonly medium of exchange. wwww
Pa

N Neett N Neett
l a
l i
a .i. l a
lai.i. l a
l i
a
assaa aaddaasaa
s
ad
a a
d s
a aa
s
w
w .P. P w
w. P
. P
w
www w
www

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

N N ett
4) Explain Keynes’ theory in the form of flow chart.
e N Neett
lalai .i. l a
l i
a .i. l a
l i
a
assaa aaddaassaa
aaddaassaa
ww. P
. P w
w .P.P
w
www w
www

et
N Nett
e N Neett
lalai.i. l a
l i
a .i. l a
l i
a
assaa aaddas
a aa
s
ad
a a
d s
a aa
s
PP P P

.N
w
w . . ww. .
w
www w
www

N Neett lai N Ne ett

l a
l i
a .i. l a
l i
a .i. l a
l i
a
assaa 5) What do you mean by aggregate ademand?
a ddaa ssaa
Mention its components.
aaddaassaa
w . P
. P
Aggregate Demand – Meaning:
w w w. P
. P
w w
wwwmodel, output is determined mainly by aggregatewdemand.
• In the Keynesian ww
sa
• The aggregate demand is the amount of money which entrepreneurs expect toget by selling the
output produced by the number of labourers employed.

NNeett N N e tt
e
l a
l i
a .i. Components of Aggregate Demand: lalai.i. l a
l i
a
assaa aacomponents.
• Aggregate demand has the followingsfour
s saa
s
da

a ad da a aaddaa
. P P
1. Consumption Demand
2. Investmentww . w
w . P
. P
w
www Expenditure and
3. Government
Demand
w
www
4. Net Export (export - import)
Pa

AD = C + I + G + (X - M)

N Ne ett N Nee tt
l a
l i
a .i. l a
lai.i. l a
l i
a
assaa 6) ExplainAggregate
about aggregate supply with thea
a a d d as
help
aa
s
of diagram.
aad da a ss aa
Supply:
• Aggregatew w w .P P w w .
. is an increasing function of the level of employment.P
. P
• Aggregate
w refers to the value of total output of goodswand
wwsupply
supply function
ww wservices produced in an
economy in a year.
• In other words, aggregate supply is equal to the value of national product, i.e., national

N Neett income.
N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

• Aggregate Supply = C + S + T + Rf =Aggregate income generated in the Economy

N Neett N Neett
lalai .i. l a
l i
a .i. l a
l i
a
assaa aaddaassaa
aaddaassaa
ww. P
. P w
w .P.P
w
www w
www

et
N Nett
e N N eett
lalai.i. l a
l ai .i. l a
l i
a
assaa a ad daa s saa
ad
a a
d s
a aa
s
PP PP

.N
1.
Z1 curve isw w w .
Z curve is linear where
. since wage rate increases with employment. www.
money wages remains fixed. .
2.
3. When full
w level of Nf is reached it is impossible to w
wwemployment
non - linear
wwoutput by
increase
employing more men.
4. So aggregate supply curve becomes inelastic (Vertical straight line).

N N ee tt lai eett
Thus aggregate supply is an important factor in determining the level of economicactivity.
N N
l a
l i
a .i. l a
l i
a .i. l a
l i
a
assaa 7) Write any five differences betweenDifferences
d d aa
classism
aa
ssaaKeynesianism.
and
aaddaassaa
w w . P
. P between classism and Keynesianism
ww. P
. P
Sl. No.
www w Keynesianism
www w
Classicism
sa
1 Short-run equilibrium Long-run equilibrium
2 Saving is a vice Saving is a social virtue.

N Nee
3tt The function of money is a medium of
N eett
The function of money is to act as amedium of
N
l a
l i
a .i. l lai .i.
exchange on the one side and astore of
a
exchange
l a
l i
a
assaa 4 Macro approach to national aaMicro foundation to macro problems aassaa
value on the other side
ss
da

a ad d aa
problems
aadd
5
w w . P
. P
State intervention is advocated. .
Champions of Laissez-fair policy .
ww PP
ww w w ww w w
Chapter – 4
Pa

N N e et t CONSUMPTION AND INVESTMENT

N Ne e t t
FUNCTIONS

l a
l i
a .
i . l a
lai .
i . l a
l i
a
assaa The propositions of keynes’s psychological aa aa
keynes’s
1) State the propositions of
d daa s s
psychological Law of consumption.
d a
d s
a s
.P P a a
. consumption also increases but bya smaller amount.
Law of consumption
. P
. Paa
w ww
 When income increases,
w w w w
wconsumption
 w wThe increased income will be divided in some proportionw
expenditure and saving
w
between

 Increase in income always leads to an increase in both consumption andsaving.

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

2) Differentiate autonomous and induced investment

NN e ett N Neett
lalai .i. Sl.No. l a
l i
a .i.
Differences between autonomous and Induced Investment
l a
l i
a
assaa s aa
s ssaa
Autonomous Investment Induced investment
1 Independent d
a a a
d a Planned
aaddaa
2
w w . P
. P
Income inelastic Income elastic
ww.P.P
3 w
www Welfare Motive ww
Profitw w
motive

3) Explain any three subjective and objective factors influencing the consumption function.

et
N N ett
A) Subjective Factors
e N Ne ett
lalai.i. l a
l i
a .i.
1. The motive of precaution: To build up a reserve against unforeseen contingencies.
2. The motive of foresight: The desire to provide for anticipated future needs. Eg. Old age
l a
l i
a
assaa B) Objective Factors a a s saa
3. The motive of calculation: The desire to enjoy interest and appreciation.
aa d d a a dd aassaa
P P P P

.N
ww . . ww . .
w
2) Price level:w wwthe price falls, real income goes up;
1) Income Distribution:
When
There is large disparity between rich and poor.
w w ww
3) Wage level: Wage level plays an important role in determining the consumption function.

N Ne tt lai NN eett
4) Mention the differences between accelerator and multiplier effect.
e
l a
l i
a .i. l a
l ai .i. and M ultiplier Effect l a
l i
a
assaa Sl.No. aa aa
Differences between Accelerator

d da as s d da s
a s
It is the ratiow . P Pa a
Accelerator
. in induced It is the ratio of changew Multiplier
. PP a a
. change in
w w w w
wwwto change in consumption investment www
1 of change in incometo
sa
investment

2 Induced investment plays vital role in it Autonomous investment plays

N Nee tt N N ett
vital role in it
e
l a
l i
a .i. l a
lai .i. l a
l i
a
assaa 5) State s saa s saa
da

the concept of super multiplier.

Meaning of Super Multiplier
a ad d a a a ad aa
dand β
w w . P.
 In order to measure the total Peffect of initial investment on income, Hicks has . P
. P
combined
ww the k

ww w wis worked out by combining both induced consumption

mathematically and given
 The super multiplier
it the name of the Super Multiplier.
w w w wand induced investment.
 The combined name of the super multiplier and the accelerator is also called the leverage effect.
which may lead the economy to very high or low level of income propagation. Y= C + IA + IP
Pa

N Neett N Neett
l a
l i
a .i.
6) Specify the limitations of the multiplier.
Limitations of the multiplier
l a
lai.i. l a
l i
a
assaa aadd asaa
s
ad
a d s
a aa
s
 The multiplier assumes that those who earn income are likely to spend a proportion of their additional
a a
income on consumption. But in practice, people tend to spend their additional income on other items.

w
w .P. P w
w. P
. P
 Such expenses are known as leakages. These leakages are the limitations of the multiplier.
w
www
 Payment towards past debts.
 Purchase of existing wealth w
www
 Import of goods and services

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

N Ne et t Chapter – 5 eet t
N N
lalai .
i . l
MONETARY ECONOMICS
al i
a .
i . l a
l i
a
assaa 1) Write a note on metallic money. aaddaassaa aa d da as aa
s
ww .
Short note on Metallic Money:PP .P
. kind of metal either gold or silver is used towdetermine
w w P
. the standard
w
wwand currency.
 Under metallic standard,
value of the w
money
some
www
 Standard coins made out of the metal are the principal coins used under the metallic standard.
 These standard coins are full bodied or full weighted legal tender. Their face value is equal to their

et
NN e ett
intrinsic metal value.
N N e ett
lalai .iWhat
. is money supply? l a
l i
a .i. l a
l i
a
assaa aa aa
2)
Money Supply
d da a s s d a
d s
a s
P P a a P P a a

.N
• Money supply means
ww . .
the total amount of money in an economy.
ww . .
• It refersww w
to thew
amount of money which is in circulation in an economyw
w w w atany given time.
Money supply plays a crucial role in the determination. of price level and interest rates.
• In India, currency notes are issued by the Reserve Bank of .India (RBI) and coins are issued

NN e tt
e eett
by the Ministry of Finance, Government of India (GOI).
lai N N
3)i.iWhat
. are the determinants of money supply? lalai.i. i
l a
l a l a
l a
assaa Determinants of Money Supply
a d
a a
:d
as saa
a d
a a
d as aa
s
 It is the ratiow
w PP
1) Current Deposit Ratio (CDR)
. . held by the public in currency to that theywhold
w w . PP
. deposits.
2) Reserve w
w of money
wwRatio (RDR) : www
inbank
sa
Deposit
 Reserve money consists of two things
(a) vault cash in banks and (b) Deposits of commercial banks with RBI.

N Neett
3) Cash Reserve Ratio (CRR) :
N Neett
l a
l i
a .i. l a
lai .i.
 It is the fraction of the deposits the banks must keep with RBI.
l a
l i
a
assaa ssaa s saa
da

 It is the fraction of theaa dd

4)Statutory Liquidity Ratio (SLR) :
aa a a d
ind
aa
. P
.
wwassets.P total
. P
. P
demand and time deposits of the commercialbanks
ww
the form

w w
of specified liquid
4) Write the types w
ofw
inflation. ww ww
The four types of inflation are indicated below.
Pa

(i) Creeping Inflation:

e et tIt is slow moving and very mild. ee tt
l a
l i
a NN N N
.i.  The rise in prices will not be perceptiblelabutlaispread
.i. over a long period . l a
l i
a
assaa (ii) Walking Infltion: aaddaassaa a a d a
d s
a aa
s
 When prices rise .
w w P
. P
moderately and the annual inflation rate is a single
w w
digit, .
itP.
isPcalled

w ww w
walking inflation.
w w w w
(iii) Running Inflation :
 When prices rise rapidly like the running of a horse at a rate of speed of 10% - 20% per

N Neett annum, it is called running inflation.

N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

(iv) Galloping Inflation :

 inflation or hyper inflation points out to unmanageably high inflation ratesthat run into two

N N e ett N Neett
lalai .i. or three digits.
l a
l i
a .i. l a
l i
a
assaa 5) Explain Demand-pull and Cost pushaadda as sa
inflation.
a
aaddaassaa
.
(i) Demand-Pull Inflation.
w w PP w
w .P.P
 wwww w
www
Demand and supply a crucial role in deciding the inflation levels in the society at all the points of time.
 For instance, if the demand is high for a product and supply is low, the priceof the products
increases.

et
NN e ett
(ii) Cost-Push Inflation
N N eett
lalai.i.  When the cost of raw materials and other l a
l i
a .inputs
i . rise inflation results. l a
l i
a
assaa a a daa s saleads
 Increase in wages paid to labour also
d
a to inflation
ad
a a
d s
a aa
s
P
P P P

.N
w w .
6) State Cambridge equations of.value of money.
w w . .
w w w w w w w w
(i) Marshall’s equation:
The Marshall’s equation is expresse as : M= KPY,

NNeett
where,
lai N Neett
l a
l i
a .i. • M is the quantity of money l a
l i
a .i. l a
l i
a
assaa a add as
• Y is the aggregate real incomeaof sacommunity.
the
a
aad d a assaa
. P
.
• P is purchasing power
w w P of money.
w w. P
. P
w wthe fraction of the real income which the publicww
• K represents
ww w w tohold in the form
sa
desires
of money.

N N ett
Thus, the price level = M/KY (or)
e N Neett
l a
l i
a .i. l lai .i.
value of money (The reciprocal of price level) is 1/P = KY/M.
a l a
l i
a
assaa  According s savalue
a of money is influenced not only by changes ainaM,ssaa
da

but also by changes in K. a a da a

to Marshall’s equation, the
d aad d
w w . P
. P ww . P
. P
www: w
(ii) Keynes’ equation www w
Keynes equation is expressed as : n = PK (or) P = n/K
Where ,
Pa

NNeet t• n is the total supply of money,

N N e e tt
l a
l i
a .i. • l a
la i .i.goods. l a
l i
a
assaa aa units the people decide to keep inthe formaofassaa
P is the general price level of consumption
• K is the total quantity ofa
d d a s s d d
cash.
. P
. P a a consumption
. P Pa a
. goods.
Keynes indicatesw thatw
Kw w ww
 Accordingww w
to Keynes’, peoples desire to hold money is unaltered byw ww authority.
is a real balance, because it is measured in terms of consumer
monetary
 So, price level and value of money can be stabilized through regulatingquantity of money (n) by

N Neettthe monetary authority.

N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

7) Explain disinflation:
Disinflation – Explanation:

Neett N Neett
 Disinflation is the slowing down the rate of inflation by controlling the amount of credit (bank loan,
N
lalai .i. l a
l i
a .i. l a
hire purchase) available to consumers without causing more unemployment.
l i
a
assaa aa aa
 Disinflation may be defined as the process of reversing inflation without creating unemployment or

dda
reducing output in the economy.
ass ddaass
. P
. Paa .P.Paa
www w w
w
www Chapter – 6 - BANKING www

et
1) Write the mechanism of credit creation by commercial banks:

N Nett
e N Nee
Mechanism of credit creation by commercial banks:tt
lalai.i. l l i
a .i.
 Credit Creation means the multiplication of loans and advances.
a l a
l i
a
assaa aa aa
 Banks have the power to expand or contract demand deposits and they exercise this power through

ddas
a s d a s
a s
granting more or less loans and advances and acquiring other assets.
d
aa aa
 This power of commercial bank to create deposits through expanding their loans and advances is
PP P P

.N
w
w . .
known as credit creation.
ww. .
2) Give a brief notew
w
w
wNBFI.
on
w
www
NBFI – Meaning:
• These banks do not have full bank licence or supervised by RBI.
N NeetDot not carry on pure banking business but carryNN
lai e e tfinancial
t Transaction.
l a
l i
a .i. •
l a
l i
a .i. other
l a
l i
a
assaa • They receive deposits and give loans.
• Just undertakes borrowing a a dd a as saa
lending handling both money market andcapitala
adda a ssaa
w
• NBFIs can be broadly
w . P P and
.classified into two categories. Viz. w
w . P
. P market.

w w w w and w w w
w
sa
 Stock Exchange
 Other Financial Institutions.
• Examples for the latter category are Finance corporations, Chit funds, Building societies etc.

N N e ett
3) Bring out the methods of credit control.
NN e ett
l a
l i
a .i. Quantitative (or) General Method l a
lai .i. (or) Selective Method l a
l i
a
assaa (i) Bank Rate Policy s aa of Credit saa
Qualitative
s s
da

ad
a a
d a
(i) Rationing
aaddaa
(ii) Open Market Operations.P. P . P
. P
w w w w (ii) Direct Action
w w w w
w w
(iii) Variable Reserve
(iv) Cash Reserve Ratio
Ratio (iii) Moral persuasion
(iv) Method of Publicity
w
w
Pa

(v) Statutory Liquidity Ratio (SLR) (v) Regulation of Consumer’s Credit

N Nee t t (vi) Regulating the e

N N et t requirement on security loans.
l a
l i
a .i. l a
lai.i. marginal
l a
l i
a
assaa 4) WhatFunctions
are the functions of NABARD? a
a ad d a s aa
s
aa d d aas aa
s
of NABARD
• NABARD acts w asw. P P
. institution for all kinds of productionwandww . PP
. credit to
www w
agriculture,
a refinancing
small-scale industries, cottage and village industries, w investment
wwbhandicrafts and rural
crafts
•
N Neet t and other financial institutions approved byNN
LDBs e
RBI. tt
It provides short-term, medium term and long-term credit to state cooperative Banks, RRB,
e
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourP P aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

• NABARD gives long-term loans (upto 20 years) to State government

N Ne
5) .Specifyet
• t N N e e
NABARD gives long-term loans to any institution approvedt t by the CentralGovernment.

lalai i . the functions of IFCI.

l a
l i
a .
i . l a
l i
a
assaa ssa a ssaa
Functions of IFCI:

a ad
 Long term loans, both in rupees da a
and foreign currencies.
a add aa
w w .
 Underwriting of equity,P
. Ppreference and debenture issue
w w .P.P
w w w
 Subscribing to wequity, preference and debenture issues. w w ww
 Guaranteeing the deferred payments in respect of machinery imported fromabroad or
purchased in India.

et
N N e ett N N ett
 Guaranteeing of loans raised in foreign currency from foreign financial institutions.
e
lalai .iDistinguish
. l a
l ai .i. l a
l i
a
assaa Differences aa market aa
6) between money market and capital market.

d da as s d da s
a s
between money market
P P a a and capital
P Paa

.N
 Money market deals with
the purchase, salew
w . . short-term loans. It designated financial institutions
ww . .
which handle

www w
 Capital market
and transfer of short-term credit instrument.
w
wwwand mortgages.
deals in raising capital by dealing in shares, bonds, equities
7) Mention the objectives of demonetizations.

NN(i)eett
Objectives of Demonetisation :
lai N Neett
l a
l i
a .i. (ii) Stopping of corruption.
Removing Black Money from the country.
l a
l i
a .i. l a
l i
a
assaa (iii) Stopping terror funds. aaddaassaa aaddaassaa
w w . P
. P w
w . P
. P
w w
wwfake note. Chapter – 7 w
www
sa
(iv) Curbing

INTERNATIONAL ECONOMICS

N Neett N N e ett
l a
l i
a .i. l a
l ai .i.
1) Describe the subject matter of International Economics.
l a
l i
a
assaa 1. Pure Theory of Trade aaddaassaa s saa
da

Subject matter of International Economics

aa d a a
dof trade,
determinationw
.
 This component explains
of w w P
. P
the causes for foreign trade, composition,
ww
direction
terms of trade and exchange rate, issues related tow
.
andP
. P
volume

ww
balance of
w the
payments. www balance of trade and

2. Policy Issues
Pa

N Neett N N ett
 Policy issues such as free trade vs. protection, methods of regulating trade, capital and technology
e
l a
l i
a .i. l a
la i.i.
flows, use of taxation, subsidies and dumping, exchange control and convertibility, foreign aid,
external borrowings and foreign direct investment.
l a
l i
a
assaa 3. International Financial andaaTrade d d a as saa Institutions
Regulatory
aa dda a saa
s
influencew w w . PP
. economic transactions and relations shall alsowbeww
 The financial institutions like International Monetary Fund IMF, IBRD, .
WTO PP
. of
etc., which

wwweconomics.
international
international www the part

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

2. Compare the Classical Theory of international trade with Modern Theory of International trade.
Comparison of the Classical Theory of international trade with Modern Theory of International trade

NN eetClassical
t Theory of International Trade Modern N N e etTheory
t of International Trade
lalai .i. The classical theory explains the lalai.The
Sl.No.
i . modern theory explains the phenomenon lalai
assaa athea of international trade on the basis of aassaa
1

dd
phenomenon of international trade
basis of labour theory of a
aass
on
dd
. PP a
value. general theory of value.
.P P aa
It presents w
aw
wfactor. (labour) model. In presents a multi- factor
one w w w w . and
2
ww capital) model. w ww (labour

3 It attributes the differences in the It attributes the differences in comparative

et
N Nett
e comparative costs to difference in the
N Neett
Costs to the differences in factor

lalai.i. l l ai .i.
productive efficiency of workers in the two
a endowments in the two countries.
l a
l i
a
assaa aa aa
countries.

d da as s d a
d s
a s
PP a a P Paa

.N
3)
w w .
Explain the Net Barter Terms. of Trade and Gross Barter Terms of Trade.
w
w . .
w w ww
1. Net Barter Terms of Trade
w ww w
• This type was developed by Taussig in 1927.
• The ratio between the prices of exports and of imports is called the “net

NNeett lai
barter terms of trade’.
NN e e tt
l a
l i
a .i. • It is named by Viner as the ‘commoditylalterms
i
a .i. of trade’. l a
l i
a
assaa It is expressed as:
a ad d aas saa
aaddaassaa
w w. P
. P
Tn= (Px / Pm) x 100
w
w . P
. P
Where,
Tn = Netw
w
wwTerms of Trade w
www
sa
Barter
Px = Index number of export prices Pm =

N Neett Index number of import prices

N Ne e tt
l a
l i
a .i. l a
la i .i. l a
l i
a
assaa 2. Gross Barter Terms of Trade s saa s s aa
da

a ad da a a ad aa
dtrade.
w w. P
.
• This was developedPby Taussig in 1927 as an improvement over
w w
the . P
.
net P
terms of
• It isw wwof relationship between total physical quantity w
windex
an ofw ww andthe total
imports
physical quantity of exports.
Pa

Tg= (Qm/Qx) x 100

N eett
Where,
N N N eett
l a
l i
a .i. Qm = Index of import quantitiesQx lalai.i. l a
l i
a
assaa Distinguish
= Index of export quantities
between Balance of a d
a da assaa
ad
a a
d s
a aa
s
4)
ww . P P
. between Balance of Trade and Balance ofw
Trade and Balance of Payments.
ww. P
. P
BALANCE
w
wwwOF TRADE
Differences
BALANCE OFw ww
Payments.
PAYMENT
Balance of Trade (BOT) refers to the total Balance of Payment is a systematic record of a
value of a country’s exports of commodities country’s economic and financial transactions

N Neett
and total value of imports of commodities.
e e tt
with the rest of the world over a period of time.
N N
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

Only export and import of commodities When a payment is received from a foreign country,
are included in the statement of Balance of it is a credit transaction while a payment to a

N N eett
Trade of a country. ee tt
foreign country is a debit transaction.
NN
lalai .i.Movements of goods (export and imports Thelala i .i. items on the debit side include l a
l i
a
assaa oftrade’. aaimports of goods and services, transfer paymentsatoassaa
principal
commodities) are also known as ‘visibless
aa d da a foreigners, lending to foreign countries,
a add
w w . P
. P investments by residents in
w
foreign
w . P
. P
countries

www w www w
5)What are import quotas?
i. Import Quotas - Meaning
 Import quota means physical limitation of the quantities of different products to be imported

et
N Neett N Ne ett
from foreign countries within a specified period of time, usually one year.

lalai.i. l l i
a .i.
 The import quota may be fixed either in terms of quantity or the value of the product.
a l a
l i
a
assaa ii. Example ❖ The government maya a dd a a ss aa
a ad da a s saa
P P P P

.N
w w . specify
. exchange rate. w w .
that 60,000 colour T.V. sets may be imported from
. Japan.

Write a brief notew w w w

6)
 Under the ww on flexible
flexible exchange rate (also known as floating exchangewwrate) system, exchange rates
are freely determined in an open market by market forces of demand and supply.
 The economic position of the country determines the market demand and supply for its currency.

N Ne ett e ett
 The higher the demand for a particular currency, the higher is its exchange rate and the lower the
lai N N
l a
l i
a .i. l l i
a .i.
demand, the lesser is the value of currency compared to other currencies.
a l a
l i
a
assaa State
7)
d da as saa
the objectives of Foreign Direct Investment.
a a aaddaassaa
 Sales Expansion
w w P P
Objectives of Foreign Direct Investment
. .
Acquisition of resources
w
w . P
. P
www w
 Diversification Minimization of competitive risk. w
www
sa
Chapter – 8
N Ne et tINTERNATIONAL ECONOMICN
Nee tt
l a
l i
a .i. l a
la i .i. ORGANISATIONS
l a
l i
a
assaa 1) Mention the various forms of economic s aa
s s saa
da

a ad d aa
integration.
a ad d a a
w w P P
Various forms of economic .integration
. the form of Free Trade Area, Customs Union, ww . P P
. Market and
Economicww w w
 Economic integration
Union.
takes w
www Common

 A free trade area is the region encompassing a trade bloc whose member countries have signed a
freetrade agreement (FTA). e.g. SAFTA, EFTA.
Pa

N N ett N N ett
 A customs union is defined as a type of trade block which is composed of a free trade area with
e e
l a
l i
a .i. l a
lai.i. l a
l i
no tariff among members and with a common external tariff. e.g. BENELUX.
a
assaa aa aa
RSN English (Ashwin)
2) What are trade blocks?
ddaass d a
d s
a s
Trade blocks – Meaning:
.P. Paa . P
. Paa
 Trade blocks are a set of countries which engage in international trade together and are usually related
w w
w w w
w
www www
through a free trade agreement or other associations.
 Trade blocks cover different kinds of arrangements between or among countries for mutual benefit.
 Some countries create business opportunities for themselves by integrating their economies in order
to avoid unnecessary competition among them.

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

3) Mention any three lending programmes of IMF.

N Neett
Lending programmes of IMF
N N e e tt
lalai .i. 1. Basic Credit Facility :
l a
l ai .i. l a
l i
a
assaa s aa s aa
 The IMF provides financial assistance to its member nations to overcome their temporary
d d aa s ddaa s
. . P aa
difficulties relating to balance of payment.
P .P.Paa
2.
ww
Extended Fund Facility:
w warrangement, the IMF provides additional borrowingw w w
w up to 140% of the
w
 Under
w this
member’s quota, over and above the basic credit facility.
w
w facility

3. Buffer Stock Facility:

et
NNe ett The Buffer Stock financing facility was startedNN eett
in 1969.

lalai.i.  The purpose of this scheme was tolahelp l a i .ithe. primary goods (food grains) producing lalai
assaa a a s s
countries to finance contributions
a d
a d
aa
to buffer stock arrangements for the stabilisation s
a ad daa aa
ofs

PP
primary product prices.
P P

.N
w w . . w w. .
w w w
4) What is Multilateral w
Agreement? ww w w
Multilateral Agreement
i. A International agreements involving three or more parties.

N N e e tt lai e ett
ii. For example - GATT has been, since its establishment in 1947.
N N
l a
l i
a .i. l a ai .i.
iii. Seeking to promote trade liberalization through multilateral negotiations.
l l a
l i
a
assaa 5) WriteAgenda a d d
the agenda of BRICS Summit, 2018.
a a a s saa
aa ddaassaa
. P
of BRICS Summit,
w
w P
. 10th BRICS summit in July 2018.
2018
w w . P
. P
w wBRICS summit 2018 includes Inclusive Growth,wTrade
i. South Africa hosted
ww
the
wwwissue Global
sa
ii. The agenda for
Governance, Shared prosperity, International peace and security.

N N ett
6) State briefly the functions of SAARC.
e N Neett
l a
l i
a .i. l a
lai .i.
The main Functions of SAARC are as follows.
1. Maintenance of the cooperation in the region.
l a
l i
a
assaa ssaa saa
s
da

aadaa aaddaa
2. Prevention of common problems associated with the member nations.
d
ww P
. P w
w . P
. P
3. Ensuring strong relationship among the member nations.
.
w
www w
www
4. Removal of the poverty through various packages of programmes.
5. Prevention of terrorism in the region.

7) List out the achievements of ASEAN.

Pa

Ne
N ett
Achievements of ASEAN
N N ee toftan uninterrupted period of peace and
l a
l i
a .i. stability. l l a i.i.
The main achievement of ASEAN has been the maintenance
a l a
l i
a
assaa  ASEAN’s modernization efforts a ad da
have a s saaabout changes in the region’s structure of production.
brought
a a dd a as saa
ww . P. P
 ASEAN has been the fourth largest trading entity in the world.
w w . P
. P
w
www www w

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

N Ne et t Chapter – 9 - FISCAL ECONOMICS

N Neett
lalai .i. l a
l i
a .i. l a
l i
a
assaa 1) Describe canons of Taxation.
aaddaassaa
aa d da as saa
Canons of Taxation
w w. P
. P ww . P
.P
w
www should impose tax in such a way that the people
(1) Canon of Ability:
 The Government w
wwhavewto pay taxes according
to their ability.
(2) Canon of Certainty:

et
 The Government must ensure that there is no uncertainty regarding the rate of tax or the time

N Nett
e of payment.
N Ne e tt
lalai.i. (3) Canon of Convenience:
l a
l i
a .i. l a
l i
a
assaa the people.
a ad d as saa
ad
a d s
a aa
s
 The method of tax collection and the timing of the tax payment should suit the convenience of
a a
P P P
P

.N
w w . . between public finance and private finance.www. .
w
Similarities w w w public finance and private finance www
2) Mention any three similarities
between
(1) Rationality: Both public finance and private finance are based on rationality
(2) Limit to borrowing : Both have to apply restraint with regard to borrowing.

N Neett eett
(3) Resource utilisation: Both the private and public sectors have limited resources.
lai N N
l a
l i
a .i. l a
l i
a .i.
(4) Administration: The effectiveness of measures depends on the administrative machinery
l a
l i
a
assaa 3) What are the functions of a modernaastate?
d d a as saa state is a welfare state.
Modern
aaddaassaa
w w . P P
. and social overhead.
Function of Modern state:
w
w . P
. P
w ww w w w w
w
sa
(1) Creating economic
(2) Ensuring stability in both internal and external.
(3) Conserving resources for sustainable development.

N Neett (4) Defense.

N Neett
l a
l i
a .i. (5) Judiciary.
l a
lai .i. l a
l i
a
assaa ssaa saa
s
da

(6) Enterprises.

ad
a
(7) Social welfare.daa aaddaa
ww. P
. P
(8) Infrastructure.
w
w . P
. P
w
www
(9) Macro - economic policy w
www
(10) Social justice.
(11) Control monopoly.
Pa

N Neett N Neett
l a
l a .i.
Three characteristics of taxation.
l a
lai.i.
4) State any three characteristics of taxation.
i l a
l i
a
assaa a dd asaa
s
 A tax is a compulsory payment made to the government.
a ad a
d s
a
 Every tax involves some sacrifice on part of the tax payer.
a a
aa
s
w
w .P. P w
w. P
. P
 A tax is not levied as a fine or penalty for breaking law.
w
www w
www

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

5) Point out any three differences between direct tax and indirect tax.

NN e e tt N Neett
Differences between direct tax and indirect tax

lalai .i.Basis For Comparison Direct Tax la l ai .i. l a

l i
a
assaa Meaning s aa s aa
Indirect Tax

Direct a disd
a a s d a
d a s
. P P taxa referred to as the
tax,.levied on person’s income .P P a
Indirect Tax is referred to as a
the
.services.
w w
w w w w
tax, levied on a person who
www and wealth. consumes
www
the goods and

Nature Progressive Regressive

et
Impact Falls on the same person. Falls on different persons.

N Nett
e N Neett
lalai.i.
6) What is primary deficit?
l a
l i
a .i. l a
l i
a
assaa s aa s aa
Primary deficit

daa s d a
d a s
 Primary deficit is equal to fiscal deficit minus interest payments.
d
P aa P aa
 It shows the real burden of the government and it does not include the interest burden on loans
P P

.N
w
w
taken in the past.. . ww. .
w
www w
www
 Thus, primary deficit reflects borrowing requirement of the government exclusive of interest
payments.
 Primary Deficit (PD) = Fiscal deficit (PD) - Interest Payment (IP)

eett
7) Mention any three methods of redemption of public debt.
N N lai N Ne ett
l a
l i
a .i. Methods of redemption of public debt
l a
l ai .i. l a
l i
a
assaa 1. Budgetary Surplus:

aaddaasaa
s
a ad
 When the government presents surplus, it can be utilized for repaying the debt. d a a ssaa
2. Terminal Annuity:
w w. P
. P w w . P
. P
ww government pays off the public debt on the basis
wwmethod, w
wwofwterminal annuity in equal
sa
 In this
annual installments.
3. Reduction in Rate of Interest:

N Ne et t
 Another method of debt redemption is the compulsory
N Neet treduction in the rate of interest,

l a
l i
a .
i . during the time of financial crisis.
l a
lai .
i . l a
l i
a
assaa s saa – 10 s aa
s
da

aa d da a
Chapter
a ad d a a
. P
. P
ENVIRONMENTAL
w w ECONOMICS
w w . P
. P
w w economy and environment.
wbetween
1) Brief the linkage w
www w
Pa

Linkage between economy and environment

N Neett N Neett
 Human’s life depends on social, political, ethical, philosophical and other aspects of economic

l a
l i
a .i. system.
l a
l ai.i. l a
l i
a
assaa aa aa
 The life of human beings is shaped by his living environment

d da s
a s d a
d s
a s
 The relationship between the economy and the environment is generally explained in the form of a

. P aa
“Material Balance Model” developed by Alen Kneese and Ayres.
P. balance principle. . P
. Paa
w ww w w
w
www
2) Specify the meaning
Meaning of material
of material
balance principle: www
 The material balance principle considers the total economic process as a physically balanced flow
between inputs and outputs.

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

3) Explain different types of air pollution

NNeett
Types of air pollution
N N e e tt
lalai .i. • Indoor Air pollution: l a
l ai .i. l a
l i
a
assaa It refer to the toxic contaminatess
places.
aad d aa saaface in ourdaily lives at our homes, schools and work
we
a ad daas aa
s
w w . P
.
e.g. Cooking and heatingP with solid fuels on open fires, etc.
ww . P
.P
• Outdoor w w w
Airw
pollution: w w w w
It refers to ambient air caused by combustion processes from motor vehicles, solid fuel
burning and industry.

et
ett
e
4) What are the causes of water pollution?
N N N Neett
lalai.i. Causes of Water Pollution
l a
l i
a .i. l a
l i
a
assaa s aa
s s aa
s
1. Discharge of sewage and waste water

a
2. Dumping of solid waste
addaa ad
a a
d a
PP P P

.N
w . .
3. Discharge of Industrial waste
w ww. .
4. Oil Spill
5. Acid rain
w
www w
www
6. Global warming

N Neett
7. Eutrophication
lai N Ne tt
e
l a
l i
a .i.
5) State the meaning of e-waste.
l a
l i
a .i. l a
l i
a
assaa aa aa
Meaning of E-waste:

ddaass ddaass
a. It can be defined as the result when consumer, business and household devices are disposed
or re-cycled.
. P
. Paa . P
. Paa
w w
w w w
w
• Example : Television, Computers, Wireless devices, Xerox machines etc.
wwwMention the causes of land pollution: www
sa
6) What is land pollution?
Land Pollution:

N Neett conditions and nuisances.

N Neett
a. Unnecessary addition to the soil which threaten the public health and cause unpleasant

l a
l i
a .i. Causes:
l a
lai .i. l a
l i
a
assaa ssaa saa
s
a) Deforestation and soil erosion
da

b)
ddaa
Agricultural activities
aa aaddaa
c)
d)
Mining

ww. P
.
Landfills P w
w . P
. P
e)
f)
w
www
Industrialization
Construction activities and
w
www
g) Nuclear Waste.
Pa

NN ett
7) Write a note on (a) Climate change, (b) Acid rain
e N N e ett
l a
l i
a .i. a) It refers to any significant change in temperature,
a) Climate Change:
l a
la i.i. precipitation, or wind pattern that occurs lalai
assaa over long period.
a add a a ssaa
a a d da asaa
s
b) Acid rain:
b) It is thew w w . P P
.of sulphur di-oxide and nitrogen oxides reactingwinww . PP
. with
wwandwreturning to earth as rain, or snow.
water
resultant
www the atmosphere

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

NNeett Chapter – N N ee tt
lalai .i. ECONOMICS OF DEVELOPMENT l a
l i
a .i. AND PLANNING
11
l a
l i
a
assaa 1) Elucidate major causes of viciousacircle
ad d aa s aa
s
aaddaassaa
w w . P
. P of poverty with diagram
w w . P
.P
w w w
Major causes of wvicious circle of poverty with diagram
ww w w
1. There are circular relationships known as the ‘Vicious Circles of Poverty’that tend to
perpetuate the low level of development in less developed countries (LDCs).

et
2. tAtcountry is poor because of low capital income. tt
i N Nee NN ee
.i. 3. The vicious circle of poverty operates bothlalonaithe.i.demand side and thesupply side. i
lala l a
l a
assaa 4. It is associated with low rate of savinga

a a d da a
income leads to low level of demand
s s a
and
on the demand side.
ad
a da
investment on the supply side and low level of
s
a aa
s
PP P P

.N
5. For example Aw
w .
poor .man may not have enough to eat, being underfed etcw .
w .
. w w w w ww w w

N Neett lai N Neett

l a
l i
a .i. l a
l i
a .i. l a
l i
a
assaa aaddaasaa
s
aaddaassaa
ww. P
. P w
w . P
. P
w
www w
www
sa

N Neett N Neett
l a
l i
a .i. l a
lai .i.
2) What are the non-economic factors determining development?
l a
l i
a
assaa s aa saa
The non-economic factors determining development
s s
da

1. Human Resource
ad
adaa aaddaa
2. Technical Know-how
w
3. Political Freedom
w. P
. P w
w . P
. P
w
www
4. Social Organization
5. Corruption free administration
w
www
6. Desire for Development
7. Moral, ethical and social values
Pa

e ett
8. Casino Capitalism
N N N Ne e tt
l a
l i
a .i.
9. Patrimonial Capitalism
l a
la i.i. l a
l i
a
assaa 3) How would be break vicious circleaofadpoverty?
da as saa
ad
a da ass aa
w w . P
. P
Break vicious circle of poverty
w w . P
. P
w
1. By increasing
with more
w rate of save than that of average rateof saving.
wwmarginalrate
www w
of investment and capital formation without reducing consumption and

2. Balanced Growth developing all kinds of industries in order to raise income and to raise

N Neett consumption capacity.

N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

NN ett
4) Trace the evolution of Economic planning in India.
e NN e ett
lalai .i. 1. Sir M. Vishveshwarya (1934) “PlannedlEconomy
l ai .i. of India” with 10year plan.
Planning Commission was created on March 15, 1950 and its evolution is asfollows:
a l a
l i
a
assaa d da a
2. Jawaharlal Nehru (1938) “National
a a
s saPlanning
a Commission”
a add aassaa
w w . P P
. - “Gandhian Plan” focusing on agriculturalw
3. Bombay plan (1940) - 8 industrialists with 10year investment plan.
w w . P
. P
wwww
4. S.N. Agarwal (1944)
www and rural Economy.
5. M.N. Roy (1945) drafted “People’s Plan”
6. J.P. Narayan (1950) advocated “Sarvodaya Plan” with Vinoba Bhava’s idea.

et
ett
e
5) Describe the case for planning
N N N Neett
lalai.i. l a i
a .i.
Economic planning can be justified for the following reasons:
l l a
l i
a
assaa aaddas
a aa
s
(1) To accelerate and strengthen market mechanism
(2) To remove unemployment
ad
a a
d s
a aa
s
PP P P

.N
w
w . .
(3) To achieve Balanced development
ww. .
w
www
(4) To remove poverty and inequalities w
www
6) Distinguish between functional and structural planning.

N Neet t lai N N e etStructural

t Planning
Differences between functional and structural planning

l a
l i
a .i.1 It refers to that planning which seeks to lalaItirefers
Sl.No Functional Planning
.i. to a good deal of changes in thesocio lalai
assaa 2 remove economic difficulties a
a ad d a s saa economic framework of the economy aassaa
aad d
w w . P
. P
It is directing all the planning activities This type of planning is
.
adopted
under developed countries. w w P
. P
mostly in

www w
within the existing economic and social
www w
sa
structure

e ett
7) What are the functions of NITI Aayog.
NN N Ne ett
l a
l i
a .iFunctions
. of NITI Aayog l a
la i .i. l a
l i
a
assaa 1. Co-operative and CompetitiveaadFederation: ss aa saa
s
da

d a a aaddaa

w w . P
. P
Helps states to participate in the formulation of National policy.
w
w . P
. P
2. Shared Nationalw w
www Agenda:
www
 Welcomes states to share their vision for nationaldevelopment with priorities and strategies.
3. Decentralised planning:
Pa

 Bottom-up Planning process for easy and effective ad-ministration.

NNeett NN ee tt
l a
l i
a .i. To design medium and long term strategic planlaltowards
4. Vision and Scenario planning:
ai.i. India’s future. l a
l i
a
assaa 5. Network aa aa

of Expertise:
d da as s d a
d s
a s

. P
. Pa
To implement External ideas a
and expertise into government policies and
. P
. P
programmes.aa
w w w w w w
www www

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

N N eett Chapter – 12 eet t

N N
lalai .
i . INTRODUCTION TO STATISTICAL METHODS
l a
l i
a .
i . AND ECONOMETRICS
l a
l i
a
assaa 1) What are the functions of statistics?aaddaassaa aaddaassaa
w w . P
. P ww.P.P
w
1. Presents w w
Functions of Statistics:
factswin a definite form wwww
2. Simplifies mass of figures
3. facilitates Comparison

et
N Nett
e
4. helps in formulating and testing
N Ne ett
lalai.i. 5. helps in prediction
l a
l i
a .i. l a
l i
a
assaa 6.
aas saa
It helps in the formulation of suitable policies.
aa d d ad
a a
d s
a aa
s
P P P
P

.N
ww . . the following data:14,22,9,15.20,17,12.11 www..
ww w
2) Find the Standard Deviation
w of
w w w
No Values (X) X-X (X-X)2
1 14 14 -15 =-1 1
2 tt t t
i .
i N
. Ne e lai
22
9 - 15 = -6 i.iN
. Nee
22 - 15= 7 49
i
a l
a a
l a 3 9
-a
l a
l
a= 0 a 36
l
aa a
l a
ass 4 15
aaddaas
15 s 15 0
aaddaass
5 20
17 w
w . P
. P 20 - 15 = 5 25
w
w . P
. P
6
w
ww12w
17 - 15 = 12
w
ww9 w
4
sa
7 12 - 15 = -3
8 11 11 - 15 = -4 16
E(X-X)2 = 140

N
N=8

Neett Ex= 120

N Neett
l a
l i
a .i. l a
lai .i. l a
l i
a
assaa ssaa saa
s
da

ad
adaa aaddaa
ww. P
. P w
w . P
. P
w
www w
www
Pa

N Neett N Neett
l a
l i
a .i. l a
lai.i. l a
l i
a
assaa aaddaasaa
s
ad
a a
d s
a aa
s
w
w .P. P w
w. P
. P
w
www w
www

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

3) State and explain the different kinds of Correlation.

N Neett N Neett
lalai .i. l a
l i
a .i. l a
l i
a
assaa aaddaassaa
aaddaassaa
ww. P
. P w
w .P.P
w
www w
www

et
N Nett
e N Neett
lalai.i. l a
l i
a .i. l a
l i
a
assaa aaddas
a aa
s
ad
a a
d s
a aa
s
PP P P

.N
w
w . . ww. .
w
www w
www

N Neett lai N Nee tt

l a
l i
a .i. l a
l ai .i. l a
l i
a
assaa 4) Mention the uses of Regression Analysis.
a ad d a a s saa
aaddaassaa
Uses of Regressionww . P
. P w
w . P
. P
w Analysis
w
wwthewcause and effect relationship between the variableswand w functional
westablishes
sa
1. It indicates
relationship.

NNe et t
2.
N N ee tt
Besides verification it is used for the prediction of one value, in relation tothe other given

l a
l i
a .i. 3. Regression coefficient is an absolute figure.lalIfawei.i.know the value of the independent variable, lalai
value.

assaa s savariable.
a saa
s
da

a d da a
we can find the value of the dependent
a a a dd a a
5) Specify the objectives ofw
w . P
. P
econometrics. w w . P
. P
w
The specific w w w are as follows:
objectives w w w w
1. It helps to explain the behaviour of a forthcoming period that is forecastingeconomic
phenomena.
Pa

N Neett N Ne e tt
2. It helps to prove the old and established relationships among the variablesor between the

l a
l i
a .i. variables
l a
lai .i. l a
l i
a
assaa a as
3. It helps to establish new theories and
a ad d saarelationships.
new
ad
a a
d s
a aa
s
w w .P. P w
w. P
. P
www w w
www

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

Neett N Ne e
6) Differentiate the economic model with econometric model.
N tt
lalai .i. l a
l ai .i.
Differences the economic model with econometric model
l a
l i
a
assaa 1 An Economic Model is a local ssaaAn Econometric Model is an integration ataassaa
S.No. Economic Model

aa ddaa Econometric Model

a ad d
w . P
. P
representation of knowledge.
w dependent variable with
w . P
.
explanatory
w Pvariables

www w test the theories. www w

to analyse the particular economic activity and

2 It is adapted to yield a definite and It represent a set of hypotheses that permits

et
N Ne e tt
precise formulation of the economic
N N ett
statistical inference from the particular date
e
lalai.i3. It is prepared after formulation of
processes at work.
l a
l ai .i. of econometric model is the
under review.
l a
l i
a
assaa s saastarting point of any econometricinvestigation aassaa
Construction
economic laws
aad d aa a a dd
PP P P

.N
w w . . organizations (offices) in India. w w . .
w w Organizations (offices) in India.
wStatistical
Important w
7) Discuss the important statistical
wwww
 The Ministry has two wings, Statistics and Programme Implementation.

NNeet tThe Statistics Wing called the National Statistical

 lai NN e e t t (NSO) consists of the Central
Office

l a
l i
a .i. Statistical Office (CSO), the Computer Centre l a
l ai .i.the National Sample SurveyOffice (NSSO). lalai
and

assaa Central Statistical Office (CSO) ass

a add a aa
is one of the two wings of the National Statistical aadd a assaa
. P
. P
a. The Central Statistical
ww
Office
w w . P. P
b. It w
w w
Organisation (NSO).
responsible for co-ordination of statistical activities in w
isw w w w
sa
the country andfor evolving
and maintaining statistical standards.
c. National Sample Survey Organisation (NSSO)

N Neett N Ne e tt
d. The National Sample Survey Organisation, now known as National Sample Survey

l a
l i
a .i. l alai .i. l a
l i
a
Office, is an organization under the Ministry of Statistic of the Government of India.

assaa s saa saa

s
da

a a da a aaddaa
e. It is the largest organisation in India, conducting regular socio-economic surveys.
d
w w . P
. P
The Programme Implementation Wing has three Divisions, namely,
ww. P
. P
I Twentyw w ww
w w Point Programme
ii Infrastructure Monitoring and Project Monitoring
ww
iii Member of Parliament Local Area Development Scheme.
Pa

N Neett N Neett
l a
l i
a .i. l a
lai.i. l a
l i
a
assaa aaddaasaa
s
ad
a a
d s
a aa
s
w
w .P. P w
w. P
. P
w
www w
www

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

N Neett Chapter – 1
NNeett
lalai .i. INTRODUCTION TO MACRO
l a
l i
a .i. ECONOMICS l a
l i
a
assaa aadd a assaa
Five Marks aaddaassaa
w w . P
. P w
w .P.P
www
1) Discuss the scope of Macro
Scope of Macrow Economics:
Economics.
w
www
i. National Income:
 Measurement of national income and its composition by sectors are the basic aspects of macro-

et
N N e ett
economic analysis.
N Ne ett
lalai.iii..Inflation: l a
l ai .i. l a
l i
a
assaa  Inflation refers to steady increase in generala

a a d da
constructing various price index numbers as s aas Wholesale
price
such
level. Estimating the general price level by
Price Index, Consumer
a
Price
ad da a
Index,
s saa
etc,
PP P P

.N
ww . . w w . .
iii. Business Cycle:
w w
 Almost all economies w wface the problem of business fluctuations and business
w w wwcycle.
 The cyclical movements in the economy need to be carefully studied based on aggregate economic
variables.

N Neett lai N Neett

l a
l i
a .i. iv. Poverty and Unemployment:
l a
l i
a .i.
 The major problems of most resource - rich nations are poverty and unemployment.
l a
l i
a
assaa aa d d as saa
 This is one of the economic paradoxes.
a a ad a
d s
a aa
s
v. Economic Growth:
w w . PP
. of an economy and the factors determining ww . P
. P
w
wwonlywthrough macro analysis.
 The growth and development
wwww them could be
sa
understood

vi. Economic Policies:

N N e tt N N ett
Economic policies are necessary to solve the basic problems, to overcome the obstacles and to achieve
e e
l a
l i
a .i. growth.
l a
l a i .i. l a
l i
a
assaa 2) Illustrate s saaon its activities. s saa
da

a a da a
the functioning of an economy based
d aa d da a
Economic System refers toP P P P
w w . . in a particular area.
the manner in which individuals and institutions are
w . .
connected
w
together to
w wthe fundamental economic activities are productionww
carry out economic activities
w
 In an economy,w w
andw consumption. These two
activities are supported by several other activities.
 The ultimate aim of these activities is to achieve growth.
Pa

NN eett

N N ett
The ‘exchange activity’ supports the production and consumption activities. These activities are
e
l a
l i
a .i.  l a
lai.i.
influenced by several economic and non-economic activities.
l a
l i
a
assaa  aa aa
The major economic activities include transportation, banking, advertising, planning, government
policy and others.
ddaass d a
d s
a s
. . Paa . P
. Paa
The major non-economic activities are environment, health, education, entertainment,
P
w
w
governance, regulations etc.
w w w
w

www www
In addition to these supporting activities, external activities from other economies such as import,
export.

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

3) Compare the feature of Capitalism and Socialism

N Neett N Neett
lalai .i. l a
l i
a .i. l a
l i
a
assaa aaddaassaa
aaddaassaa
ww. P
. P w
w .P.P
w
www w
www

et
N Nett
e N Ne ett
lalai.i. l a
l i
a .i. l a
l i
a
assaa a a d da as saa
ad
a a
d s
a aa
s
PP P P

.N
ww . . ww. .
4) Compare the featurew w
www among Capitalism, Secularism and Mixedism.
www
Comparition of the feature among Capitalism, Secularism and Mixedism
S. Features Capitalism Socialism Mixedism
No.
N Neett lai N Neet t Private Ownershipand
l a
l i
a .i.
1 Ownership of Means Private Ownership
l a
l i
a .i.
Public Ownership
l a
l i
a
assaa 2 Economic Motive Profitaaddaassaa Social Welfare Social Welfare andaaProfit aa
of Production Public Ownership
ddaass
w
w . P
. P ww . P
. P
ww w w Internal Regulation Complete ww w w
Motive
sa
3 Government Role Limited Role
only Involvement
4 Income Distribution Unequal Equal Less unequal

N
5
Neett
Nature of Enterprise
N Neett
Private Enterprise

l a
l i
a .i. l a
la i .i. Government
l a
l i
a
Both Private andState

assaa aa aa
Enterprise Enterprises
ss ss
da

ad
adaa aaddaa
ww. PP –
. NATIONAL INCOME
Chapter 2
w
w . P
. P
w
www w
www
 Explain the importance of national income:
Pa

N Neett
Importance of national income:

N Neett
National income is of great importance for the economy of a country. Nowadays the national

l a
l i
a .i. l a
lai.i. l a
l i
a
income is regarded as accounts of the economy, which are known as social accounts.

assaa saa
s s aa
s
It enables us,

aaddaa ad
a a
d a
 To know the relative importance of the various sectors of the economy and their contribution towards

w .P. P w
w. P
. P
national income; from the calculation of national income.
w
 To formulate the national policies such as monetary policy, fiscal policy and other policies; the
w
www w
www
proper measures can be adopted to bring the economy to the right path with the help of collecting
national income data.
 To formulate planning and evaluate plan progress; it is essential that the data pertaining to a country’s

N Neett
economic planning.
N Ne e tt
gross income, output, saving and consumption from different sources should be available for

lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

 To build economic models both in short - run and long - run.

 To know a country’s per capita income which reflects the economic welfare of the country.

N N e ett N Neett
 To know the distribution of income for various factors of production in the country.

lalai .i. l a
l ai .i. l a
l i
a
assaa Discuss

d a
tod
the various methods of estimating
a a as s
theanational
a income of a country.
aaddaassaa
. P P
. method
There are three methods that are used
w w
measure national income.
w
w .P.P
w
wworwfactor earning method
1. Production or value added
wwww
2. Income method
3. Expenditure method.

et
N N e ett N Ne ett
lalai.i. 1. Production or value added method:
l a
l ai .i. l a
l i
a
assaa • Product method measures the output
aad d a as saofathe country. The gross value of out-put from different
aad d a as s aa
P P
sectors like agriculture, industry,
P P
trade and commerce etc is obtained from the entire economy

.N
during a year.
w w . . ww . .
w w Earning Method):
ww(Factor
2. Income Method www w
• Income method approaches national income from the distribution side.
•
NNeet t course of producing national product. NNeet t
Under this method, national income is calculated by adding up all the in- comes generated in
lai
l a
l i
a .i. • Factors incomes are grouped under labourlincome,
the
a
l ai .i.capital income and mixedincome. l a
l i
a
assaa • National income is calculateddd
aa asaa ssaafactor income plus net factor in-comes fromddaassaa
domestic
aa
abroad. . P
. P
wr + i + π + (R-P) ww . P
. P
• In short, Y ww +w
=w w w
ww ww
sa
w = wages, r = rent, i = interest, π = profits, R = Exports and P = Imports

NN t t this method, the total expenditure incurred

3. The Expenditure Method (Outlay method)
e
•eUnder N N ee tt
l a
l i
a .i. added together. l a
lai .i. by the society in a par- ticular year is
l a
l i
a
assaa saa it includes personal consumption expenditure,
ssociety, s s aa
da

ofa
• To calculate the expendituredd aa a a
domestic investment,P Pa a P Pa ad d and
net

net exports.w w w . .government expenditure on con- sumption as well

w as
w . .
capital goods

www www w
• Symbolically, GNP = C + I + G + (X-M)
C - Private consumption expenditure, I - Private Investment Expenditure
Pa

N N e e tt G - Government expenditure, X-M = Net exports

N N e ett
l a
l i
a .iWhat
 . are the difficulties involved in the measurementl alai .i.of national income? l a
l i
a
assaa Difficulties a
involved in the measurement of
1. Transfer payments
a ad d a s saa
national income
aa d a s
a
detc.
a
s a
w .
 Government makes payments
w P. P in the form of pensions, unemployment
w .
allowance,
w P
. P
subsidies,

w w ww
 These are government
w w
expenditure. But they are not included in the national
ww
income.

2. Difficulties in assessing depreciation allowance

 The deduction of depreciation allowances, accidental damages, repair and replacement charges

N Neett from the national income is not an easy task.

N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

3. Unpaid services

N N ee tt N Ne ett
 A housewife renders a number of useful services like preparation of meals, serving, tailoring,

lalai .i. l l i
a .i.
mending, washing, cleaning, bringing up children, etc.
a l a
l i
a
assaa 4. Income from illegal activities
 Income earned through illegala ad da as saa
like gambling, smuggling, illicit extraction a
ofad a a ss
d etc.,
aa
w w . P
. P
is not included in national
activities
income.
w w . P
. P liquor,

ww
5. Production for
w w
self-consumption and changing price www w
 Farmers keep a large portion of food and other goods produced on the farm for self consumption.

et
N Nett
e N Neett
lalai.i. l l i
a .i.
4. Discuss the importance of social accounting in economic analysis.
a l a
l i
a
assaa aa aa
 National Income and Social Accounting

ddas
a s d a
d s
a s
 National income is also being measured by the social accounting method.
aa aa
 Under this method, the transactions among various sectors such as firms, households, government, etc.,
PP P P

.N
w . . w . .
 Social Accounting and Sector Under this method, the economy is divided into several sectors.
w w
w
www
The Importance of social accounting are as follows:
(1) In Classifying Transactions:
w
www
Economic activity in a country involves innumerable transactions relating to buying and selling,
paying and receiving income, exporting and importing, paying taxes, etc.

NN e ett lai N N ee tt
l a
l i
a .i. Social accounting helps us to understand the structure
(2) In Understanding Economic Structure:
l a
l i
a .i.of the body economic. l a
l i
a
assaa (3) In Understanding DifferentaaSectors d da as saa
and Flows:
a a d daassaa
w w .
Social accounts throw lightP
. P
on the relative importance of the different sectors
ww
and . P
. P
flows in the
economy.
w w consumption sector, investment sector and thewrest
wwsector, w
wofwthe world sector
sa
(Eg):production

(4) In Clarifying Relations between Concepts:

N Ne e tt N N e tt
Social accounts help in clarifying the relationships between such related concepts as net national
e
l a
l i
a .i. l a
lai .i.
product at factor cost and gross national product at market prices.
l a
l i
a
assaa (5)Social ss aainvestigator by indicating the type of data whichamight
s saa
da

In Guiding the Investigator:

accounts are a guide for thed
a a da a
economic
aad d a
. P.
be collected for analysing the
w w Pbehaviour of the economy.
w w . P
. P
www w www w
Chapter – 3
Pa

N N ee
1. .Describe
t t THEORIES OF EMPLOYMENT AND INCOME
N N e ett
l a
l i
a i . following are the types of unemployment. lalai.i.
the types of unemployment.
l a
l i
a
assaa 1. Cyclical Unemployment:- aaddaassaa s aa
s
The

a a d a
d a
w . P
.
 In a business cycle during
w Pthe period of recession and depression, income
ww
and . P
. P
output fall

w w w w
leading to widespread unemployment.
ww w w
 It is caused by deficiency ofeffective demand.
2. Seasonal Unemployment:-

N Neett N Ne e tt
 This type of unemployment occurs during certain seasons of the year.

lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

3. Frictional Unemployment:-
 Frictional unemployment arises due to imbalance between supply of labourand demand for labour.

N Nee tt N N e e tt
lalai .i4.. Educated Unemployment:- l l i
a .i.
The persons who lose jobs and in search of jobs are
a
also included under frictional unemployment.
l a
l i
a
assaa  Sometimes educated peopleaareaddunderemployed
aassaa or unemployed when qualification does aad da
not as saa
match
the job.
w w . P
. P w w . P
. P
w
w ww
5. Technical Unemployment:-
w w w w
 Modern technology being capital intensive requires less labourers and contributes to technological
unemployment.

et
N Nett
e N Neett
lalai.i.
2) Critically explain Say’s law of market.
l a
l i
a .i. l a
l i
a
assaa s ademand
a s aa
The classical theory of employment is based on says law of market.
a
• He stated that supply createsdits
d a s dda a s
P P aa own
P Pa a

.N
• It tells that supply
w w . w w .
is.always equals to demand (S=D). A person receives his
. income from
w
production
w wwhich w
w is spent in the purchase of goods and serviceswwproduced
w by others for the
economy as a whole total production equals total income.
Assumptions of the Say’s law of market

N Neett lai N Ne ett

The Say’s Law of market is based on the following assumptions:

l a
l i
a .i. l a
l i
a .i.
1) No single buyer or seller of commodity or an input can affect price.
l a
l i
a
assaa s saa ssaa
2) Full employment.

aa d daa aaddaa
3) People are motivated by self-interest and self -interest determines economicdecisions.

w w . P
.
4) The laissez faire policyP w
w . P
. P
5) There w w wbew w w w
w
sa
will a perfect competition in labour and product market.
6) There is wage-price flexibility.
Implications

NN e e tt
There is no general over production or unemployment
N Neett
l a
l i
a .i. • Automatic price mechanism l a
lai .i. l a
l i
a
assaa s sabetween
a savings and investment saa
s
da

a a da a
• Interest flexibility rate brings equality
d aaddaa
w w P
• Money acts as only.medium
. P of exchange.
w
w . P
. P
Criticisms
w
wwwto Keynes, supply does not create its demand. www
1. According
w
2. Automatic adjustment process will not remove unemployment.
Pa

N N e e tt
3. Money is not neutral.

N N ee tt
l a
l i
a .i. l a
l ai
general overproduction andMass unemployment..i.
4. Keynes said overproduction is possible the need for state intervention arises in case of
l a
l i
a
assaa 3) Narrate the equilibrium betweenaADF a d da as saa
and ASF with diagram.
a add aa ss aa
Equilibrium between ADF .
(i) Under the Keynesw w w P
and. PASF
w w . P
. P
w w
sector and the business
wsector is taken to understand the equilibrium between
theory
ww ww
of employment, a simple two sector economy consisting of the households
ADF and ASF.
(ii) All the decisions concerning consumption expenditure are taken by the individual households, while
the business firms take decisions concerning investment.

N N ett N N e tt
(iii) It is also assumed that consumption function is linear and planned investment is autonomous.
e e
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

N ee tt
There are two approaches
N N Ne e tt
lalai .i.1. Aggregate demand - Aggregate supply approach
l a
l i
a .i. l a
l i
a
assaa Diagram explanation : aa aa
2. Saving - Investment approach

dda as s ddaass
. P P aa
. - E. .P.Paa
(i)
w w w
In the figure, the aggregate demand and
w is N0 at that point.
aggregate supply
w w
w
wwlevel
reach equilibrium
(ii) The employment
at point
www
(iii) At ON1 employment, the aggregate supply is N1 R1
(iv) They are able to produce M1 N1

et
N ee tt
(v) The expected level of profit is M1 R1
N N Neett
lalai.i. l l i
a .i.
(vi) To attain this level of profit, entrepreneurs will employ more labourers.
a l a
l i
a
assaa 4) Explain the difference between classical
aa d d a as s
theoryaanda Keynes theory.
ad
a a
d s
a aa
s
PP P P

.N
w w . . ww. .
www w w
www

N Neett lai N Neett

l a
l i
a .i. l a
l i
a .i. l a
l i
a
assaa aaddaasaa
s
aaddaassaa
ww. P
. P w
w . P
. P
w
www w
www
sa

N Neett NN e ett
l a
l i
a .i. Chapter – 4
l a
la i .i. FUNCTIONS l a
l i
a
assaa CONSUMPTION AND INVESTMENT
ss aa ss aa
da

a ad da a a ad da a
w w . P P
.law of consumption function with diagram.www. . P P
w
1) Explain Keynes psychological
www law of consumption
Meaning of Psychological
www
The law implies that there is a tendency on the part of the people to spend on consumption less than the
full increment of income.
Pa

N ee tt
Assumptions:
N N Ne e tt
l a
l i
a .i. l a
lai.i.
1. 1.The other variables such as income distribution, tastes, habits, social customs, price movements,
l a
l i
a
assaa 2. Existence of Normal Conditions:aaThe s saa s saa
population growth, etc. do not.

d d a a aad aa
d the
. P P
whole of increased income.on consumption.
w w w w . P. P
law holds good under normal conditions. People may spend

3. Existence ofw
w w
Laissez-faire Capitalist Economy: The law operates in w
aw aw
w w
rich capitalist economy where
there is no government intervention.

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

The three propositions of the law Diagrammatically, the three propositions Explanations

NN e et t (1): When income increases from 120 to N N eet t also increases from 120 to
lalai .i. 170 but the increase in consumption is less thanlaltheaiincrease
Proposition .i. in income, 10 is saved.
180 consumption
l a
l i
a
assaa Proposition (2): When incomeaincreases a d da as saa
a a dda as aa
s
consumption by 170 and .
w w P
.
220Pand saving by 10 and 20 respectively.
w w .P.P
to 180 and 240, it is divided in some proportion between

Propositionw
ww in income to 180 and 240 lead to increasedwconsumption
wIncreases
(3):
w
ww 170 and 220 and
increased saving 20 and 10 than before.

et
N ee tt N Ne ett
2) Briefly explain the subjective and objective factors of consumption function?
N
lalai.i.A) Subjective Factors l a
l ai .i. l a
l i
a
assaa 1.2. The motive of precaution: To build up a s
a a d da a saaagainst unforeseen contingencies. Eg. Accidents,sick.
reserve
to provide for anticipated future needs. Eg. Old age ad
a a
d s
a saa
3. The motive of calculation:.P P
The motive of foresight: The desire
P P

.N
w w . The desire to enjoy for improving standard ofwliving.
The desire to enjoy interest and appreciation.
w w . .
www w
4. The motive of improvement:
www
B) Objective Factors
1) Income Distribution

N e ett eett
If there is large disparity between rich and poor, the consumption is low because the rich people have
N lai N N
l a
l i
a .i. low propensity to consume and high propensity to save.
l a
l ai .i. l a
l i
a
assaa 2)PricePricelevellevelplays an important roleainaddetermining
da as saa
a a d da
the consumption function. When the price falls,
s
a aa
s
real income goes up.
ww . P
. P ww . P
. P
3) Wage level w w w w w w ww
sa
Wage level plays an important role in determining the consumption function and there is positive
relationship between wage and consumption.

N N e et tPolicy N N e ett
l a
l i
a .i.When government reduces the tax the disposable lincome
4) Fiscal
alai .i.rises and the propensity to consume of l a
l i
a
assaa community increases. s saa s aa
s
da

a ad d a a aad d aa
C) Illustrate the working of
ww . P
. P
Multiplier
w w . P
. P
w
 The multiplier
ww
Definition of Multiplier
w w
is defined as the ratio of the change in national incomew ww
to change in investment.
 If ΔI stands for increase in investment and ÄY stands for resultant increase in income, the
multiplier
Pa

N N e tt
K =ΔY/ΔI.
e N Neett
l a
l i
a .i. The value of multiplier depends on MPC
Multiplier K = 1/1-MPC
l a
lai.i. l a
l i
a
assaa The a ad
multiplier is the reciprocal of one
propensity to save is 1 - MPC.P
daa s
minus
aa propensity to consume. Since marginal aassaa
s
marginal
aad d
Multiplier is 1/ MPS. w w . . P
(MPC+MPS =1).
w w . P
. P
www w wwww

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

3) Illustrate the Working of Multiplier.

N eett
Working of Multiplier – Illustration
N N Neett
lalai .i. l a
l i
a .i. l a
l i
 Suppose the Government undertakes investment expenditure equal to Rs.100 crore on some public
a
assaa s aa s aa
works, by way of wages, price of materials etc.

daa s ddaa s
 Thus income of labourers and suppliers of materials increases by Rs.100 crore. Suppose the MPC is
d
. P
. Paa .P Paa
0.8 that is 80 %.A sum of Rs.80 crores is spent on consumption ( Rs.20 Crores is saved).
.
www w w
w
 As a result, suppliers of goods get an income of Rs.80 crores. They inturn spend Rs.64 crores (80%
of Rs.80cr).
www www
 In this manner consumption expenditure and increase in income act in a chain like manner.
 The final result is ΔY = 100+100×4/5+100 ×[4/5]2+100×[4/5]

et
ett
e
4) Explain the operation of the Accelerator.
N N N N e ett
lalai.i. Operation of the Acceleration Principle
l a
l i
a .i. l a
l i
a
assaa • Let us suppose that inaad d as
• Let us consider a simple example.
a saa
a a d daa s s aa
P P P P

.N
w w .
that.working life of a machine is 10 years.
order
. .
to produce 1000 consumer goods, 100 machines are
ww
required.

ww
Also suppose
• Thisww
means that every year 10 machines have to be replaced
w
wwinworder to maintain the
constant flow of 1000 consumer goods. This might be called replacement demand.
• Suppose that demand for consumer goods rises by 10 percent (ie from 1000 to 1100). This
NNeet t results in increase in demand for 10 more machines.
lai NN e e tt
l a
l i
a .i. • So that total demand for machines is l20.ala(10i.i.for replacement and 10 for meeting increased lalai
assaa demand). It may be noteda
a ad d a s
here saa a10 percent increase in demand for consumer a
aad d a s
goodssaa
• So we w w w . P P
. even a mild change in demand for consumer
causes a 100 percent increase in demand for machines (from 10 to 20).
w w . PP
. lead to wide
wwinwinvestment.
can conclude
www w oods will
sa
change

N Neett N Neett
l a
l i
a .i. l a
lai .i. l a
l i
a
assaa ssaa saa
s
da

ad
adaa aaddaa
ww. P
. P w
w . P
. P
w
www w
www
Pa

N Ne ett N Neett
l a
l i
a .i. l a
lai.i. l a
l i
a
assaa Diagrammatic illustration:
aaddaasaa
s
ad
a a
d s
a aa
s
Operation of Accelerator.
• SS is the saving curve.w w .P. P w
w. P
. P
w
wwwcurve.
• II is the investment
w
www
• E1, the economy is in equilibrium with OY1 income. Saving and investment areequal at OI2.
• tt tt
i N
.i. Nee Now, investment is increased from OI2 to OI4.

i N
.i. Ne e i
lala l a
l a l a
l a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

• This increases income from OY1 to OY3, the equilibrium point being E3.
•
NN ee tt NNe ett
If the increase in investment by I2 I4 is purely exogenous, then the increase in income by Y1 Y3

lalai .i•. But in this diagram it is assumed that exogenouslalinvestment

would have been due to the multiplier effect.
a i .i. is only by I2 I3 andinduced investment lalai
assaa is by I3 I4. a ad d a assaa
a adda s
a saa
• Therefore, increase inw w . PP .P P
. by Y1 Y2 is due to the multiplier effect andwthewwincrease
income . in income
by Y2 Y3 is w w
due tow www
w the accelerator effect. MPC is positive butless than unity.
5) What are the differences between MEC and MEI.

et
NN ett
e NN e ett
Differences between MEC and MEI

lalai.i.No Marginal Efficiency of Capital

l a
l ai .i. Marginal efficiency of investment l a
l i
a
assaa (MEC)

a a d
ofd
aas saa (MEI)

a ad d aassaa
P P P P

.N
1
w w . .
Based on a given supply price Capital
. .
Based on the induced change in the
ww
due to changes in demand for Capital
price

2 It represents
w w
wwthewrate of return on thesuccessive It shows the ratewofwreturn
w on just those units
units of Capital without of Capital over and above the existing Capital
regard to existing Capital stock.
3 et t e tt
i N N e lai
It is a stock concept
N N e
It is flow concept
.i.4 It determines the optimum capital stock inlanalai.iIt.determines the net investment of the lalai
l a
l a
assaa Economy at each level ofinterest rate sa
a a d d a a s a economy at each interest rategiven the
Capital Stock.
a ad a
d s
a a
s a
w w . P
. P w w . P
. P
www w w w w w
sa
Chapter – 5
MONETARYECONOMICS

N N e ett N N eett
l a
l i
a
1).i.Illustrate Fisher’s Quantity theory of money. lalai.i. l a
l i
a
assaa The s saisaMV = PT. saa
s
da

Where,
a a daa
general form of equation given by Fisher
d aaddaa
w w . PP
. of Money
• M = Money Supply/quantity w
w . P
. P
w
wwofwMoney
• V = Velocity w
www
• P = Price level
Pa

•
NN eet t
T = Volume of Transaction.
NN e ett
l a
l i
a .i.  Fisher points out that in a country during any
l a
la i.i. period of time, the total quantity of money lalai
given

assaa (MV) will be equal to the total value ofa

This equation isP a ad d a a ssallagoods and services bought and sold (PT). MV = PT a

ad
a da as s a
w w . P
. bank’s demand deposits or credit money and
referred to as “Cash Transaction Equation”.
w w . PP
. play a vital
www w
 But, in a modern
part in business.
economy,
www w its velocity

 Therefore, Fisher extended his original equation of exchange to include bankdeposits M1 and its
velocity V1.
N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

 The revised equation was: PT=MV + M1 V1

N Ne ett N N e e tt
lalai .i. P = MV + M1 V1
l a
l ai .i. l a
l i
a
assaa s saathe price level is determined by ssaa
T
d da a
From the revised equation, it is evident,
a a that
aaddaa
• The quantity of money
ww . P
. P
in circulation ‘M’
w
w .P.P
w
wwofwcirculation of money ‘V’
• The velocity www w
• The volume of bank credit money M1
•

et
N Net
e t
The velocity of circulation of credit money V1
• N Neett
lalai.i. The volume of trade (T)
l a
l ai .i. l a
l i
a
assaa a a d da a s aa
s
ad
a a
d s
a aa
s
P P P P

.N
w w . . ww. .
www w w
www

N Neett lai N Neett

l a
l i
a .i. l a
l i
a .i. l a
l i
a
assaa aaddaasaa
s
aaddaassaa
ww. P
. P w
w . P
. P
w
www w
www
sa

NNeett NN eett
l a
l i
a .i. • Figure (A) shows the effect of changes inlthealaquantity
i .i. of money on the pricelevel. l a
l i
a
assaa 1. The quantitys amoney
s a is OM, the price level is OP. s s aa
da

a a d d aa of
quantity of money is doubled to OM2, the price a ad a a
dis also
ww . P P
.doubled to OP2. when the quantity of moneywis w
2. When the
w . P P
. four fold to
level

w
www OM4, the price level also increases by fourww wto OP4.
times
increased

• Figure (B), shows the inverse relation between the quantity of money andthe volume of
Pa

money, where the value of money is taken on the vertical axis.

NNe•etBut,
t with the quantity of money increasing by fourNfold
N e e tOM4,
t the value ofmoney is reduced
l a
l i
a .i. by O I/P4 l alai.i. to
l a
l i
a
assaa • This inverse relationship between
a ad da as saa
the
d da
quantity of money and the value ofmoney is shown
a a asaa
s
by downward sloping
w w . P P
. Functions
curve I O/P = f(M).
w w. P
. P
ww w
2) Explain the functionswof money
ww w w
Functions of money are in four forms
1) Primary functions

N Neett 2) Secondary functions

N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

3) Contingent functions

N Neett 4) Other functions.

1. Primary functions
N N e ett
lalai .i. 1. Medium of Exchange
l a
l ai .i. l a
l i
a
assaa 2. Measure of Value
a adda as saa
a ad aa
d inss aa
• Money as a Medium
w w . P
. Pof Exchange:
w
w .P.P
Money acts as the medium of Exchange (intermediary)

w
wwas w
Sales and purchases.
• Money a measure of Value: The value (price) of goods and w
w
wware in terms of money.
services
•

et
N N tt
2. Secondary functions
ee N Ne e tt
lalai.i. 1. Money as store of value
l a
l i
a .i. l a
l i
a
assaa aa(or savings) can be stored in the formof money.aaThessaa
2. Standard of deferred payments.
• Money as a Store of Valued d a as s d d
value of money is.P P a a - Value
P Pa a

.N
w w .
more or less stable.
w w . .
• Money
w w w w
acts as a standard of deferred payment Future
w w
transactionw w on in terms
can be carried
of money. The loans which are taken at present can berepaid in money in future.
3. Contingent functions

NN e e t
• t Basis of the Credit system
lai N Neett
l a
l i
a .i. • Money facilitates distribution of National l al ai .i.
income
l a
l i
a
assaa a adda
• Money helps to equalize marginal
as saa and marginal productivities
utilities
aaddaassaa
Other functions w w w P P
• Money increases.productivity
. of Capital.
w w. P
. P
whelpswto maintain repayment capacity www w
• Moneyw
sa
• Money represent General purchasing power money gives liquidity to Capital.

N Neett N Neett
l a
l i
a .i. l a
lai .i.
3) What are the causes and effects of inflation on the economy?
l a
l i
a
assaa s aa saa
Causes of inflation::
s s
da

ad
adaa aaddaa
i) Increase in Money Supply: Inflation is caused by an increase in the supply of money which leads to

ww. P
. P
increase in aggregate demand.
w
w . P
. P
ii) Increase in Public Expenditure: Government activities have been expanding due to developmental
w
www
activities and social welfare programmes. w
www
iii) Cheap Monetary Policy: Cheap monetary policy or the policy of credit expansion also leads to
increase in the money supply.
iv) Deficit Financing: In order to meet its mounting expenses, the government resorts to deficit
Pa

N N e e tt N Neett
financing by borrowing from the public and even by printing more notes.

l a
l i
a .i.Effects of Inflation l a
lai.i. l a
l i
a
assaa The a ad a a s
effects of inflation can be classified into
d saaheads:
two
a a ddaasaa
s
1. Effects on Production: .P P P P
(1) Effects on Production (2) Effects on Distribution.
w w .prices encourages and induces business classw w w . .their
 The profit due
investments
w
wwinwproduction, leading to generation of employment w
to rising
and
w
wincome.
to increase

 However, hyper-inflation results in a serious depreciation of the value of money and it

discourages savings

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

2. Effects on Distribution

N N e ett N Nee tt
i) Debtors and Creditors: During inflation, debtors are the gainers while the creditors are losers.

lalai .i. l l i
a .i.
ii) Fixed-income Groups: The fixed income groups are the worst hit during inflation because their
a l a
l i
a
assaa 4) Describe the phases of Trade cycle.aaddaassaa aa
incomes being fixed do not bear any relationship with the rising cost of living.

d d aass
Phases of Trade cycle w . P
. P .P.Paa
w w w
wto oscillations in aggregate economic activity particularly ww
win employment,
 A Trade cyclewwrefers
output, income, etc.
w w

et
Definition:

N Nett
e N Neett
 “A trade cycle is composed of periods of good trade characterised by rising prices and low

lalai.i. l a
l a i .i. l a
l i
a
unemployment percentages altering with periods of bad trade characterised by falling prices and

assaa high unemployment percentages’:

a a d d a a s saa
ad
a a
d s
a aa
s
PP P P

.N
Phases of Trade Cycle:
w w. . ww. .
w w w wof trade cycle is referred to as
The four different phases
w
w w
w
1. Boom
2. Recession

N Neett
3. Depression
lai N Neett
l a
l i
a .i. 4. Recovery
l a
l i
a .i. l a
l i
a
assaa aaddaasaa
s
aaddaassaa
ww. P
. P w
w . P
. P
w
www w
www
sa

N Neett N N e ett
l a
l i
a .i(1). Boom (or) Prosperity Phase: l a
l ai .i. l a
l i
a
assaa s saaof the economy beyond3full em-ployment. aassaa
da

2. Money wages rise, profitsa a da a

1. The full employment and the movement
d aad d
w w . P P
. period.
increase and interest rates go up.
ww . P
. P
www
3. It is characterized
(2) Recession: w
as boom
w
www
1. The turning point from boom condition is called recession.
Pa

2. This happens at higher rate, than what was earlier.

N Neett N Neett
3. Liquidity preference of the people rises and money market becomes tight.

l a
l i
a .i. l a
lai.i. l a
l i
a
assaa aa aa
(3) Depression:

ddaass d a s
a s
1. During depression the level of economic activities becomes extremely low.
d
.P. Paa . P
. Paa
2. Firms incur losses and closure of business becomes a common feature and the ultimate result is
w
w
unemployment.
w w w
w
www
3. Interest prices, profits and wages are low.
www
4. Depression is the worst phase of the business cycle.
5. Extreme point of depression is called as ‘trough’

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

N N ett
(4) Recovery:
e N Neett
lalai .i. l a
l i
a .i.
1. After a period of depression, recovery sets in.
l a
l i
a
assaa aa aa
2. It begins with the revival of demand for capital goods.

ddaass ddaass
3. Recovery may be initiated by innovation (or) investment (or) by govern-ment expenditure.

. PP aa
. Chapter – 6 - BANKING www. .PPaa
www
www www
1) Explain the role of Commercial Banks in economic development.

et
Role of Commercial Banks in economic development

N N eett
(1) Capital Formation:
NN ee tt
lalai.i. • Banks play an important role in capital formation
l a
l ai .i. which is essential for theeconomic l a
l i
a
assaa development of a country.
• It is utilized for productivea ad da as saa
aad a
d s
a aa
s
P P P P

.N
(2) Creation of Credit:w w . . purpose.
w w . .
• Banks w www
create
w
www project.
credit for the purpose of proving more funds for development
• Credit Creation leads to increased production, employment, sales and prices.

N N tPooled
e t savings should be allocated to various sector
(3) Channelizing the Funds towards Productive Investment:
e lai N Ne
ofe
tt
l a
l i
a .i. the productivity.
•
l a
l i
a .i. the economy with a view to increase
l a
l i
a
assaa (4) Finance to Government
a ad da s
a aa
s
a ad da a ssaa
• Banks provide long-term
w w . PP
. finance by purchasing Treasury Bills. www.
credit to Government by investing their
.
funds P
inPGovernment
ww
securities and short
wwGeneration
term
www
sa
(5) Employment
• After the nationalization of big banks, banking3industry has grown to a great extent. Bank’s
branches are opened frequently, which leads to the cre- ation of new employment

N N ee ttopportunities.
NN e ett
2)i.iElucidate
. the functions of Commercial Banks lalai.i. i
l a
l a l a
l a
assaa Functions s aa
s saa
s
da

of Commercial Banks
aa d d a a aaddaa
(a) Primary Functions:
w w. P
. P w
w . P
. P
w
There arew w
1. Accepting Deposits:
twow
types of deposits, which are discussed as follows w
w w
w
Demand Deposits
•
Pa

It refers to deposits that can be withdrawn by individuals without anyprior notice to the bank.

N N e ett
Time Deposits
NN e ett
l a
l i
a .i. • It refers to deposits that are made for certain
l a
la i.i. period oftime. l a
l i
a
assaa 2. Advancing aa aa
committed

a
• Banks pay higher interest on time
d d a s s
deposits.
d d a a ss
Loans :
.P. P a a . P
. Pa a
w w w
 Commercial banks w w w w w
grant loans in the form of overdraft, cash credit, and dis-counting bills of
w w
exchange.
(b) Secondary Functions :
w w
• The secondary functions can be classified under three heads, namely, agency functions, general

N Neett utility functions, and other functions.

N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

N1.e
N et t Functions :
Agency
N N e ett
lalai .i. It implies that commercial banks act as agents
l a
l i
a
of.icustomers
. by performing various functions. lalai
assaa • Collecting Cheques: Banks collect
a add a
customers through clearing house as s a a and bills of exchange on the behalf ofatheir
cheques
facilities provided by the central bank.
a a dd s
a aa
s
• Collecting Incomew w. P P
.: Commercial banks collect dividends, pension, w
w .P P
. rents, and
interestsw
w w w on behalf of their customers.
on investments www w salaries,

• Paying Expenses : Commercial banks make the payments of various obligations of

customers, such as telephone bills, insurance premium, school fees, and rents.

et
N ett
e
(2) General Utility Functions:
N N Neett
lalai.i. l a
l i
a .i.
• Providing Locker Facilities: Commercial banks provide locker facilities to its customers for
l a
l i
a
assaa aa aa
safe custody of jewellery, shares, debentures, and other valuable items.

ddas
a s d a
d s
a s
• Issuing Traveler’s Cheques: Banks issue traveler’s cheques to individuals for traveling
PPaa P Paa

.N
w
w . .
outside the country.
ww. .
• Dealing in Foreign Exchange: Commercial banks help in providing foreign exchange to
w
www
businessmen dealing in exports and imports. w
www
(3) Transferring Funds :

N Neett lai N Neett

It refers to transferring of funds from one bank to another.

l a
l i
a .i.(4) Letter of Credit :
l a
l i
a .i. l a
l i
a
assaa saa
s ssaa
Commercial banks issue letters of credit to their customers to certify their creditworthiness.

aaddaa aaddaa
• Underwriting Securities: Commercial banks also undertake the task of underwriting
securities.
ww. P
. P w
w . P
. P
w w
• (ii) Electronic Banking: It includes services, such as debit cards, credit cards, and Internet
www www
sa
banking.
c). Other Functions
• Money Supply: It refers to one of the important functions of commercial banks that help in

N Neett increasing money supply.

N Neett
l a
l i
a .i. l alai .i. l a
l i
• Credit Creation: Credit Creation means the multiplication of loans and advances.
a
assaa s aa saa
Commercial banks receive deposits from the public and use thesedeposits to give loans.
s s
da

d aa d aa
• Collection of Statistics : Banks collect and publish statistics relating to trade, commerce and
aad aa d
industry.
w
w . P
. P w
w . P
. P
w
wwwof Reserve Bank of India.
3) Describe the functions w
www
Functions of RBI :
(1) Monetary Authority :
Pa

• tIttcontrols the supply of money. tt

i N
.i. Ne
• e i N
.i. N ee i
l a
l a To stabilize exchange rate, maintain
l a
healthy
l a
balance of payment;
l a
l a
assaa (2) The issue of currency:
• (i) To maintain the currencya d
a da a s saa
ad
a a
d s
a aa
s
• (ii) It is thewsoleww .P P and credit.
. to issue currency. w
w. P
. P
• (iii) Tow wwthe circulation of fake currency.
control
authority
w
www
(3) The issuer of banking licence:
• tAs
t t t
i.iN
. Nee RBI to conduct banking business in India.
i .
i N
. Ne e
per See 22 of Banking Regulation Act, every bank has to obtain a banking license from

i
lala l a
l a l a
l a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

d da a s s d aass
Kindly send me yourP Pa
studyamaterials to our email id - PP d
padasalai.net@gmail.com a a
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

(4) Bankers to the Government:

• It acts as banker both to the Central and the State Government.
N Neet t Bank: RBI is the bank of all banks in India.NNeet t
lalai .i(6). Lender of last resort: The banks can borrow lfrom
(5) Banker’s
al i
a .i.RBI by keeping eligiblesecurities as l a
l i
a
assaa collateral s aa s aa
the
at the time of need or crisis. a
(7) Act as clearing house : RBI a dd a s d a
d a s
. PP a
manages
. reserves. 314 clearing houses.
.P.P a a
w w w w w w w
www
(8) Custodian of foreign exchange
ww
(9) Regulator of economy.
(10) Managing government securities.
(11) Regulator and supervisor of payment and settlement system.

et
N ett
e
(12)
N Developmental Role.
N Neett
lalai.i. (13)
l a
l i
a
Publisher of monetary data and other data..i. l a
l i
a
assaa (14)
a as
Exchange man?-ger and controller.
aa d d
aa
s
ad
a a
d s
a aa
s
(15)
PP
Banking Ombudsman Scheme.
P P

.N
w w . . ww. .
(16)
www w
Banking Codes and Standards Boards of India.
w
www
4) Mention the objectives of demonetization:
The objectives of monetary policy
1. Neutrality of Money

N N e ett e tt
e
 The monetary authority should aim at neutrality of money in the economy.
lai N N
l a
l i
a .i. l l i
a .i.
 Monetary changes could be the root cause of all economic fluctuations.
a l a
l i
a
assaa 2. Exchange Rate Stability
 Exchange rate stability wasa ad d a as aa
s
aaddaassaa
 This was the mainw w . PP
. under Gold Standard among different countries.
the traditional objective of monetary authority.
w w. P
. P
w www objective
w w w w
sa
3. Price Stability
 Economists like Crustave Cassel and Keynes suggested price stabilization as a main objective of

N N e ett
monetary policy.

NN ee tt
l a
l i
a .i4..Full Employment l a
lai .i. had increased rapidly. l a
l i
a
assaa  It was regarded as sociallyadangerous, s saa wasteful and morally deplorable. aassaa
da

During world depression, the problem of unemployment

a d da a economically
a ad d
5. Economic Growth w w . P
. P w w . P
. P
 Economic w w w wis the process whereby the real per capita incomeww
growth w
of aw
country increases over a
long period of time.
 It implies an increase in the total physical or real output.
Pa

N N eett NN e ett
l a
l i
a .i. Chapter – 7 - INTERNATIONAL
l a
l ai.i. ECONOMICS l a
l i
a
assaa 1) Discuss the differencesDifferences d da
between Internal
a a as saaand International Trade.
Trade
ad
a da a saa
s
w w .P Pbetween
. Trade Internal Trade and International Trade.
Internationalw
w . P
. P
S.No
1 Trade w www
takes
Internal
place between different
w
wwwdifferent individuals
Trade takes place between
Trade

individuals and firm within the same and firms in different countries.

N Neet2
t Labour and capital move freely from

N Ne e tt
Labour and capital do no move easily

lalai.i. one region to another.

l a
l ai .i.
from one nation to another.
l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourP Paa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

3 There will be free flow of goods and Goods and services do not easily move

NN eet t
services.
e t t currencies.
from one country to another.
NN e
lalai .i. 5 Trade and financial regulations are lalaTrade
4 There is only one common currency.
i .i. and financial regulations such interest lalai
There are different

assaa more or less the same

aa dd a as saa rate laws differ between countries. aassaa
a ad d
2) Explain briefly the w w w . PP
. Cost Theory. w w . P.P
Comparativeww w
Comparative
Cost Theory wwww
 According to Ricardo, a country can gain from trade when it produces at relatively lower costs.
 Even when a country enjoys absolute advantage in both goods, the country would specialize in the

et
N Nett
e N Neett
production and export of those goods which are relatively more advantageous.

lalai.i. l a
l i
a .i.
 Similarly, even when a country has absolute disadvantage in production of both goods.
l a
l i
a
assaa aa aa
Assumptions

ddas
a s
1. There are only two nations and two commodities
d a
d s
a s
P aa
2. Labour is the only element of cost of production.
P P Paa

.N
w
w . .
3. All labourers are of equal efficiency.
ww. .
w
www
4. No change in technology.
5. No transport cost.
w
www
6. Perfect competition.
7. Full employment.

N Ne tt
8. No government intervention.
e lai N Neett
l a
l i
a .i.
RSN English (
l a
l i
a .i. l a
l i
a
assaa aa aa
Diagrammatic Explanation
a ss a ss
 India should concentrate on the production of wheat in which she enjoys a comparative cost
dd a dd a
. . Paa
advantage. (80/120 < 90/100).
P . P
. Paa
 America will specialize in the production of cloth and export it to India in exchange for wheat.
www w w
w
www www
 With trade, India can get 1 unit of cloth and 1 unit of wheat by using its 160 labour units.
sa
 With trade, America can get 1 unit of cloth and one unit of wheat by using its 200 units of labour.

3) Discuss the Modern Theory of International Trade.

N e ett
Modern Theory of International Trade - Introduction :
N NN e e tt
l a
l i
a .i.• It was developed by Swedish economist Eli Heckscher
l al ai .i. and his student Bertil Ohlin in 1919. lalai
assaa • This theory says that the basisaforadinternational
ssaatrade is the difference in fac-tor endowments.aassaa
da

da a a a dd
• That is otherwise called .asP
. P . P
. P
The Theory : w ww w w Factor endowment theory.
w w w w
w w w
1. The classical theory argued that the basis for foreign trade was comparativecost
difference and its labour factor.
Pa

N Neett N Ne ett
2. But the modern theory of international trade explains the causes for suchcomparative

l a
l i
a .i. cost difference.
l alai .i. l a
l i
a
assaa Differences in comparative cost a: addaassaa ad
a a
d s
a aa
s
w
• Difference in the w .P P
. of factors of production between countries.
w w. P
. P
w w
wwinwthe factor proportions required in production. www
• Differences
endowments

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

NN tt
Assumptions :
e
1.eThere are two countries (2 × 2 model) N N e e tt
lalai .i. 2. Differ in factor endowments. l a
l i
a .i. l a
l i
a
assaa 3. Commodities are categorizedd
a a d
ina a ss
terms
aofafactor intensity.
aaddaassaa
w w . P
. P
4. Same production technology.
w
w .P.P
w
wwwcompetition in both product and factor markets.www
5. There is perfect w
Explanation :

et
According to Heckscher - Ohlin, a capital abundant country will export the capital intensive

N Nett
e N Neett
goods while the labour abundant country will export the labour intensive goods.

lalai.i. l a
l i
a .i. l a
l i
a
assaa aa aa
Limitations

d as
a s
1. Factor endowment of a country may change over time.
d d a
d s
a s
aa aa
•2. The efficiency of the same factor (say labour) may differ in the two coun-tries.
PP P P

.N
w
w . . ww. .
w
www w
www

N Neett lai N Ne ett

l a
l i
a .i. l al i
a .i. l a
l i
a
assaa a ad da a ssaa
aaddaassaa
w w .
4) Explain the types of Terms ofP
. P
Trade given by Viner.
ww . P
. P
w w w w of trade: w ww w
sa
The single factoral terms
1. Viner has devised another concept called the Single Factoral Terms ofTrade.
2. It an improvement upon the Commodity Terms of Trade.

N Ne ett N N ett
3. It represents the ratio of export price index to the import price index adjusted for changes in
e
l a
l i
a .i. l a
lai .i.
the productivity of a country factors in the productionof exports.
TF = (PX /PM ) FX
l a
l i
a
assaa s saa saa
s
da

T stands for single factoral.

a ad d a a aaddaa
. P
. P
FX stands for productivity
w w
in exports.
ww. P
. P
w w w wof Trade:
Double Factoral Terms
w w w w
1. Viner constructed another index called double factoral terms of trade.
T FF = (PX /PM ) (FX/ Fm)
Pa

NN e tWhich
2.e t takes into account the productivity in country’s
N Ne et t as well asthe productivity of
l a
l i
a .i. foreign factors. l ala i.i. exports,
l a
l i
a
assaa 3. FM represents import index.
a ad da as aa
s
a a d da a saa
s
w w.
5) Bring out the components of PP
. into three categories. They are, www.
balance of payments account. . P P
ww ww
Components of BOPs are divided
w
w w
(a) The Current Account
(b) The Capital Account and

N Neett N Ne e tt
(c) The Official Settlements Accounts or Official Reserve Assets Account.

lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

NN t
•eIttincludes all international trade transaction of goods
(a) The Current Account:
e N Nee t tservices.
lalai .i. • It is also includes international unilateralltransfers.
al i
a .i. and
l a
l i
a
assaa (b) The Capital Account: aaddaassaa aaddaassaa
w
• Financial transactions
w . P P
.consisting of direct investment and purchasesw . P
of interest.
ww P
ww w w
bearing financial instruments.
ww w
• They includes non interest bearing demand deposits and gold.
(c) The Official Reserve Assets Account:

et
• tOfficial
e t Reserve Transactions consist of movements toft international re-serves by
e
i.iN
. N e i .
i N
. N e i
lala Government.
l a
l a l a
l a
assaa a a aa
• Official agencies also accommodate
• The official reserve assets ofd a
ad as s
in balance arising from the current and capital accounts.
dda a ss
P P aa country include its gold stock, SDRs &IMFetc.
P P aa

.N
w w . . ww . .
ww w w :
6) Discuss the various types
Types BOP Disequilibrium
of disequilibrium in the balance of payments.
w w w w
There are three main types of BOP Disequilibrium.
(a) Cyclical Disequilibrium.

N N ee tt lai
(b) Secular Disequilibrium.
N Nee tt
l a
l i
a .i. l a
l i
a .i. l a
l i
a
assaa (a) Cyclical aa aa
(c) Structural Disequilibrium.
Disequilibrium:
d da a ss ddaass
• First, two countries P maya a passing through different phases of businesscycle.aa
w w . P
. of demand may differ between countries. www.
be
. PP
www w
• Secondly, the elasticities
www
sa
(b) ‘Secular Disequilibrium:
• The secular or long run disequilibrium in BOP occurs because of long - run.

N Nee t•t
In the initial stages of development domestic investmentt t
N N e e exceeds domesticsavings and

l a
l i
a .
i . imports exceed exports, as it happens in India
l a
la i .
i .
since 1951.
l a
l i
a
assaa s saa ss aa
(c) Structural Disequilibrium:
da

• Structural changes in the a

a d d
economya a a a
may also cause balance of payments disequilibrium.d a
d a
• Structural changes w w . P
. P
include development of alternative sources of
w w
supply,. P
. P
development of
wwww exhaustion of productive resources or changesw
better substitutes
www routes and costs.
in transport

7) How the Rate of Exchange is determined? Illustrate.

Pa

Definition of Equilibrium Exchange Rate.

N Neett N Ne ett
The equilibrium exchange rate is that rate which over a certain period oftime, keeps the

l a
l i
a .i.balance of payments in equilibrium.
l a
l ai.i. l a
l i
a
assaa aas saa
Determination of Equilibrium Exchange Rate.
1. The equilibrium rate ofa ad d a ind
a daasaa
s
w w . PP
. theory of value.
exchange
ww . P
. P
is determined in the foreign exchangemarket

w
www determined in the interaction of the forces of demand
accordance with
2. The equilibrium
the general
w
wwwandsupply.
3. Thus, the rate of exchange is determined at the point where demand for fo-rex is equal to the

N Neett supply of forex.

N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

N Neett N Neett
lalai .i. l a
l i
a .i. l a
l i
a
assaa aaddaassaa
aaddaassaa
ww. P
. P w
w .P.P
w
www w
www

et
N Neett N Ne ett
lalai.i. l a
l i
a .i. l a
l i
a
assaa a ad da a ss aa
a ofd
a da as s aa
P P P P

.N
w w . .
In the above diagram, Y axis represents
. .
exchange rate, that is, value of rupee interms
w w
dollars.

w
wwwof equilibrium where DD intersects SS.
• X axis represents demand and supply of forex.
www w
• E is the point
• The exchange rate is P2.

N Neett lai N Neett

l a
l i
a .i. l l i
a .i.
8) Explain the relationship between Foreign Direct Investment and Economic development.
a l a
l i
a
assaa aeconomy.
a aa
Relationship between Foreign Direct Investment and Economic development
thea
1. FDI is an important factor ind
d as s d a
d ass
. P P a a global
. like India FDI in the natural resource sector, . PP a a
. plantation
w w w
2. Foreign trade and FDI are closely related.
w w w
wtradewvolumes.
increasesw
3. In developing countries
www including
sa
4. FDI is also influenced by the income generated from the trade and regional integration

N Ne tt schemes.
5.eMany developing countries, strongly prefer foreign
N Ne et t to imports.
l a
l i
a .i. l a
l ai .i. investment
l a
l i
a
assaa s saa saa
s
da

aa d d aa
Chapter – 8 aaddaa
w w
INTERNATIONAL. P
. P ECONOMIC ORGANISATIONS
w w. P
. P
ww w w w
w w w
1) Explain the objectives of IMF.
Pa

Objectives of IMF

NNe tTot promote international monetary cooperation among

1.e
NN e e t tmember nations.
the

l a
l i
a .i. 2. To facilitate faster and balanced growth oflalinternational
ai.i. trade. l a
l i
a
assaa 3. To ensure exchange rate stabilitya
a a d d a
bys saa competitive exchange depreciations. aassaa
curbing
ad
a d
5. To promote thew w .
4. To eliminate or reduce P
. P
exchange controls imposed by member nations.
of capital from developed to developing nations. w w . P
. P
ww
6. To solve
w w flow
the problem of international liquidity. www w

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

N N et t of World Bank
2) Bring out the functions of World Bank.
e NN eett
lalai .i.1. Investment for productive purposes: lalai.i.
Functions
l a
l i
a
assaa a ad d aa
 The World Bank performs the functions saaof assisting in the reconstruction and developmentaasofsaa
a ad d
ww . P P
. development of productive facilities and resources
territories of member nations through facility of investment for productive
w . P P
.less developed
purposes.
w
ww w
 It also encourages
countries.w
the
wwww in

2. Balanced growth of international trade :

et
N Nee t t
•
Promoting
N Ne e t t
the long range balanced growth of trade at international level and the maintaining

lalai.i. l a i
a .
i .
equilibrium in BOPs of member nations by encouraging
l international investment.
l a
l i
a
assaa 3. Provision of loans and guarantees : ss
• Arranging the loans P a d
a da a aa
a ad a a s
sodas to
s aa
P P P

.N
w w . .
or providing
. .
guarantees on loans by various other channels
w w
ww
execute important
4. Promotionw ofw
projects.
foreign private investment: www w
• The promotion of private foreign investment by means of guarantees on loans and other

NNeett investment made by private investors.

lai N N ee tt
l a
l i
a .i. • The Bank supplements private investmentlalbyaiproviding
.i. finance for productive purpose out of lalai
assaa 5. Technical
its own resources or from borroweds
a ad da a saa
funds.
aad daa s s aa
services :
• The World w w w . P
. P w w. P
. P
throughw ww
Bank
www w
facilitates different kinds of technical services to the member countries
sa
Staff College and experts.

3) Discuss the role of WTO in India’s socio economic development .

N Neett N Neett
Role of WTO in India’s socio economic development

l a
l i
a .i. l lai .i.
❖ India is the founding member of the WTO.
a l a
l i
a
assaa aa aa
❖ India favours multilateral trade approach. India benefited from WTO on following grounds.
ss ss
da

ad
adaa aaddaa
1) By reducing tariff rates on raw materials, components and capital goods, it was able to import

ww P
. P
more for meeting her developmental requirements.
.
2) India's imports go on increasing.
w
w . P
. P
w
www w
www
3) India gets market access in several countries without any bilateral trade agreements.
4) Advanced technology has been obtained at cheaper cost.
5) India is in a better position to get quick redressal from the trade disputes.
6) The Indian exporters benefited from wider market information.
Pa

N N e e tt N N e tt
e
4)i.iWrite
.SAARCa note on a) SAARC b) BRICS i .i. i
l a
l a l a
la l a
l a
assaa  The a d d aas s
South Asian Association for Regional
a
aCo-operation
a
a d a
(SAARC) is an organisation of South
a as saa
d social
Asian
. PP
nations, which was established
w w
on
. P
. within the South Asia region and also forwfriendship
8 December 1985 for the promotion of economic
w w P
. and and

ww
operation with w w
progress, cultural development
other developing countries. ww w co-

 The SAARC Group (SAARC) comprises of Bangaladesh, Bhutan, India, The Maldives, Nepal,
Pakistan and Sri Lanka.


N Neett In April 2007, Afghanistan became its eighth member.

N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

 The basic aim of the organisation is to accelerate the process of economic and social development of
member states through joint action in the agreed areas of cooperation.

N
Neett eett
The SAARC Secretariat was established in Kathmandu (Nepal) on 16 th January 1987.
N N
lalai .i.

l a i
a .i.
The first SAARC summit was held at Dhaka in the year 1985.
l l a
l i
a
assaa s saa ssaa
SAARC meets once in two years. Recently, the 20th SAARC summit was hosted by Srilanka in
2018.
aad da a aaddaa
w w. P
. P w
w .P.P
BRICS
ww
 BRICS is the w
acronym w
w for an association of five major emerging national w Brazil, Russia,
wweconomies:
India, China and South Africa.
 Originally the first four were grouped as "BRIC" before the induction of South Africa in 2010.

et
N Nett
 The term ‘BRIC’ was coined in 2001.
e N Neett
 The BRICS members are known for their significant influence on regional affairs.
lalai.i. l a
l i
a .i.
 Since 2009, the BRICS nations have met annually at formal summits. l a
l i
a
assaa aaddas
a aa
s
ad
a a
d s
a aa
s
 South Africa hosted the 10th BRICS summit in July 2018. The agenda for BRICS summit 2018
PP P P

.N
and security.
w
w . ww.
includes Inclusive growth, Trade issues, Global governance, Shared Prosperity, International peace
. .
w
www w
www
 It’s headquarters is at Shanghai, China. The New Development Bank (NDB) formerly referred to as
the BRICS Development Bank was established by BRICS States.
 The first BRICS summit was held at Moscow and South Africa hosted the Tenth Conference at
Johanesberg in July 2018.

N eett e ett
 India had an opportunity of hosting fourth and Eighth summits in 2012 and 2016 respectively.
N lai N N
l a
l i
a .i. l a
l i
a .i. l a
l i
a
assaa Chapterd–da9as
aa
aa
-sFISCAL ECONOMICS
a add aas saa
w w . P. P w w . P
. P
Scope of publicw w w w
1) Explain the scope of public finance.
w w ww
sa
finance:
The subject ‘Public Finance’ includes five major sub-divisions, viz., Public Revenue, Public Expenditure,
Public Debt, Financial Administration and Fiscal Policy.,

N Neett N Neett
l a
l i
a .i.1. Public Revenue
l a
l i
a .i. l a
l
Public revenue deals with the methods of raising public revenue such as tax and non-tax, the principlesi
a
assaa ssaa s aa
s
da

a ad d a
of taxation, rates of taxation, impact, incidence and shifting of taxes and their effects.
a a d
a a
d a
2. Public Expenditure
w w. P P
. principles that govern the Government expenditure,
ww . PP
. of
w
wwandwcontrol of public expenditure.
This part studies the fundamental
public expenditure wwww effects

3. Public Debt
Pa

N N e ett N N e ett
Public debt deals with the methods of raising loans from internal and external sources.
The burden, effects and redemption of public debt fall under this head.

l a
l i
a .i4..Financial Administration l a
l i
a.i. l a
l i
a
assaa This a d d aa s
part deals with the study of the different
a
saa of public budget.
aspects
ad
a a
d s
a aa
s
. P
. P
The budget is the Annual master financial
w w
plan of the Government.
w w . P
. P
5. Fiscal Policy ww w w w w w w
Taxes, subsidies, public debt and public expenditure are the instruments of fiscal policy.

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

N N ett N N ett
2) Bring out the merits of indirect taxes over direct taxes.
e e
lalai .i.Merits of indirect taxes over direct taxes:
l a
l i
a .i. l a
l i
a
assaa aa aa
1. Convenient:

ddaass
 Indirect taxes are levied on commodities and services.
ddaass
. P
. Paa .P.Paa
 Whenever consumers make purchase, they pay tax along with the price.

www w w
w
www www
 They do not feel the pinch of paying tax.
2. Tax Evasion:
 Tax Evasion is possible in direct tax but it is hardly possible in Indirect Tax.
 Because indirect taxes is includes in the price of the goods and services.

et
N ett
e
3. Wider coverage:
N N Neett
lalai.i. l a
l i
a .i. l a
 All the consumers, whether they are rich or poor, have to pay indirect taxes.
l i
a
assaa 4. Less Burdensome:
aa d d s
a aa
s
ad
a d s
a aa
s
 In India, everyday pays indirect tax as against just 2 %paying income tax. (indirect tax).
a a
PP P P

.N
. . . .
 As the tax is hidden in price, the consumers feel it less Burdensome, but the direct tax is
w w ww
wwww
inconvenient to be paid in lump sum. w
www
3) Explain the methods of debt redemption.
The process of repaying a public debt is called redemption. The following methods are

NN e ett
adopted for debt redemption.
lai N N e e tt
l a
l i
a .i.  Conversion means that on old loan is converted
1. Conversion:
l a
l i
a .i.into a new loan. l a
l i
a
assaa 2. Budgetary a a d da
Under this system a high interest assaadebt is converted into a low interest public debt.aassaa
public
a ad d
Surplus:
ww . P P
. presents surplus budget, it can be utilized forw w w . P
. P
www w
 When the government
www repaying the debt.
sa
3. Terminal Annuity:
In this method, government pays off the public debt on the basis of terminal annuity in equal
annual installments.

N Neett
4. Repudiation:
N N e e tt
l a
l i
a .i. l lai .i.
 In such cases, the government does not recognize its obligation to repay the loan.
a l a
l i
a
assaa aa aa
 It is certainly not paying off a loan but destroying it.
s s s s
da

5. Reduction in Rate of Interest:

aa d da a a ad d a a
w w P
 It is the method.of
. P
reduction in the rate of interest, during the time of
w . P
. P
financial
w crisis.

w
4) State and explainw w w of fiscal policy.
instruments w w ww
Fiscal Instruments
Fiscal Policy is implemented through fiscal instruments also called ‘fiscal tools’ or fiscal levers:
Pa

N N ett N N ett
Government expenditure, taxation and borrowing are the fiscal tools.
e e
l a
l i
a .ii).Taxation: l a
l ai .i. l a
l i
a
assaa  Taxes a as s
transfer income from the people to

a ad d
Taxes are either direct or indirect.
a athe Government.

ad
a a
d s
a a
s a
. P
.
 An increase in tax reduces
w w P disposable income.
w
w. P
. P
w w w w
 So taxation should be raised to control inflation.
w
w w
w
ii) Public Expenditure:
 Public expenditure raises wages and salaries of the employees and thereby the aggregate demand

N e
N ett for goods and services.
N Ne e tt
lalai.i. l l ai .i.
Hence public expenditure is raised to fight recession and reduced to control inflation.
a l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

iii) Public debt:

N Neett N Neett
 When Government borrows by floating a loan, there is transfer of funds from the public to the

lalai .i. Government.

l a
l i
a .i. l a
l i
a
assaa aa aa
 At the time of interest payment and repayment of public debt, funds are transferred from
Government to public.
dda a ss ddaass
. PP aa
. finance. .P.Paa
5) Explain the principles of
w ww
federal
w w
w
www
Principles of federal finance
www
1. Principle of Independence
 Under the system of federal finance, a Government should be autonomous and free about the

et
N Neett internal financial matters concerned.
N Neett
lalai.i. l l ai .i.
 It means each Government should have separate sources of revenue, authority to levy taxes, to
a l a
l i
a
assaa 2. Principle of Equity s saa s s aa
borrow money and to meet the expenditure.

a a dd a a a ad d a a
P P P P

.N
 From the point ofw
w .
view.of equity, the resources should be distributed among
w w .
the .
www w
that each state receives a fair share of revenue.
www w different states so

3. Principle of Uniformity
 In a federal system, each state should contribute equal tax payments for federal finance.

N N e ett eett
 But this principle cannot be followed in practice because the taxable capacity of each unit is not
lai N N
l a
l i
a .i. of the same.
l a
l i
a .i. l a
l i
a
assaa 4. Principle of Adequacy of Resources a
 The principle of adequacy a a dd a s saa
aaddaassaa
 Central and Statew w . P P
. be adequate to carry out its functions effectively.
means that the resources of each Government i.e.
ww. P
. P
www w should
www w
sa
5. Principle of Fiscal Access
 In a federal system, there should be possibility for the Central and State Governments to develop

N Neett N N ett
new source of revenue within their prescribed fields to meet the growing financial needs.
e
l a
l i
a .i. l aai .i.
6) Describe the various types of deficit in budget.
l l a
l i
a
assaa ssaa saa
s
Types of deficit in budget:
da

1) Revenue Deficit:
ad
adaa aaddaa
ww. P
. P w
w . P
. P
 It refers to the excess of the government revenue expenditure over revenue receipts.
 It does not consider capital receipts and capital expenditure.
w
www w
www
 Revenue deficit implies that the government is living beyond its means to conduct day-to-day
operations.
Pa

N Neett N N e e tt
Revenue Deficit (RD) = Total Revenue Expenditure (RE) – Total Revenue Receipts (RR)

l a
l i
a .i. l alai .i. l a
l i
a
assaa 2) Budget Deficit: aa aa
When, RE – RR > 0

d da as s d a
d s
a s
. P P a a
.difference between total receipts and total expenditure.. P
. Paa
w w w w w w
www
 Budget deficit is the

Budget Deficit (BD) = Total Expenditure – Total Revenue

www

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

3) Fiscal Deficit:

N Neett N N ee tt
lalai .i. l l ai .i.
Fiscal Deficit (FD) = Budget Deficit + Governments Market Borrowing and Liabilities.
a l a
l i
a
assaa 4) Primary Deficit: a ad d aa ssaa
a ad a s
a aa
s
dloans
w w . P
.
 It shows the real burdenPof the government and it does not include the
w w . P
.
interest P
burden on

w w w
taken in the w
past.
w w w w
 Thus, primary deficit reflects borrowing requirement of the government exclusive of interest
payment.

et
N Ne ett N Neett
Primary Deficit = Fiscal Deficit (FD) – Interest Payment (IP)

lalai.i. l a
l ai .i. l a
l i
a
assaa 7) What are the reasons for the recentaagrowth
d da as saa
ad
a a
d s
a aa
s
PP P P

.N
w w . .in public expenditure
in public expenditure?
ww. .
www w
Reasons for the recent growth w
www
1) Defense Expenditure:
 There has been enormous increase in defense expenditure in India during planning period.


N N ee tt equipment. lai N Neett

The defense expenditure has been increasing tremendously due to modernization of defense

l a
l i
a .i.2) Debt Servicing: l a
l i
a .i. l a
l i
a
assaa ad da
 The government has been borrowing
a a ssaa both from the internal and external sources. aassaa
heavily
a ad d
ww . P
. P
 As a result the government has to a make huge amounts of repayment
.
towards
w w P
. P
debts servicing.

w w ww ww w w
sa
3) Development Projects:
 The government has been undertaking various development projects.
 The Development Projects involve huge investment.

N
4)Ne ett N Neett
l a
l i
a .i.  There has been an increase in urbanization.lalai.i.
Urbanization:
l a
l i
a
assaa s saa expenditure on law and order, education andacivic
s saa
da

a a da a
 The increase un urbanization requires
d heavy
a ad d a
amenities.
w w . P P
.state and union territories: ww . P
. P
 There hasw
w
5) Increase in grants in aid to w
wbeenwtremendous increase in grant-in-aid to state and union w to meet natural
wwterritories
disasters.
Pa

N Neett N Neett
l a
l i
a .i. Chapteraa
l l –i.10
i. l a
l i
a
assaa aa
ENVIRONMENTAL
aadd ssaa ECONOMICS
ad
a a
d s
a aa
s
w w . PP . P P
. between GDP growth and the quality of environment.
w w .
w w
1) Briefly explain the relationship
w w w w w w
GDP growth and the quality of Environment:
 Environmental quality is a set of properties and characteristics of the environment either

N Neett generalized or local, as they impinge on human beings.

N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

 It is a measure of the condition of an environment relative to the requirements of one or more

N Neett species.
N Neett
lalai .i. 
l a
l i
a .i. l a
l i
a
Environment is a pure public good that can be consumed simultaneously by everyone and from

assaa  ssaa ssaa

which no one can be excluded.

aaddaa aaddaa
A pure public good is one for which consumption is non-revival and from which it is impossible

 . P
. P
to exclude a consumer.
ww w
w .P.P
w
www w
www
The contribution of the nature to GDP as well as depletion of natural resources are not accounted
in the present system of National Income Enumeration.
 Economic growth is often pointed out to be the cause of environmental issues based on the notion
that increased production equals increased pollution.

et
e e tt
2) Explain the concepts of externality and its classification.
N N NN e e tt
lalai.iConcepts
. of externality and its classification lalai.i. l a
l i
a
assaa Positive Consumption Externality
When some residents of a locality a a d a
ad
as saa
a a d da as aa
s
PP P P

.N
w w . . security without bearing cost.
hire
. .
private security agency to patrol their area, the other
ww
residents

Negative Consumption
w
of the area also benefit from better
wwwExternality www w
A person smoking cigarette gets maygives satisfaction to that person, but this act causes hardship
(dissatisfaction) to the non-smokers who are driven to passive smoking.

N Neett lai N N eett

l a
l i
a .i. Positive Production Externality
l a
l i
a .i. l a
l i
a
assaa s aa s aa
The ideal location for beehives is orchards (first growing fields). While bees make honey, they also

d da a s d a
d a s
help in the pollination of apple blossoms. The benefits accrue to both producers (honey as well as apple).

. P P a a .
. include pollution generated by a factory thatwimposes P P a a
.costs on
w w
Negative Production Externality
Negative productionw
ww
www externalities
www
sa
others. The emissions and effluents of a factory cause air and water pollution.

3) Explain the importance of sustainable development and its goals.

N Neett N Neett
l a
l i
a .i. l a
lai .i.
(i) Sustainable development is concerned with the welfare of present andfuture generations.
l a
l i
a
(ii) It aims at not only satisfying the luxury wants of rich but also basic necessities of the poor like

assaa ssaa s saa

da

a a da a
food, sanitation, health care, education etc.
d aa d da a
w w .
Important goals of sustainable P P
. development ww . P
. P
1. End povertyw
w w
in all w
its forms everywhere. w ww w
2. End hunger, achieve food security and improved nutrition and promotesustainable agriculture.
3. Ensure healthy lives and promote well being for all at all ages.
Pa

NN e
4.
e t tinclusive and equality education for all and promote
Ensure
N Ne e t t learning.
lifelong

l a
l i
a .i. Achieve gender equality and empower womenlandalaigirls.
5. .i. l a
l i
a
assaa Ensure 6. access to water and sanitation fors
a ad daa saa
all.
a a d a
d s
a aa
s
7.
w w .P P
Ensure access to affordable, reliable sustainable and modern energy for all.
. economic growth, employment and de-wcentww . P P
work. for all.
8.
9. ww
Build resilient w w promote sustainable industrialization andwfoster
Promote inclusive and sustainable,
infrastructure, wwinnovation.
10. Reduce inequality within and among countries.
11. Make cities inclusive, safe, resilient and sustainable.

N Neett N
12. Ensure sustainable consumption and production pattern.
Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

13. Take urgent action to contact climate change and its impacts.

N N ett N N ett
14. Conserve and sustainably use the Oceans, seas and marine resources.
e e
lalai .i. l a
l i
a .i.
15. Sustainably manage forests, compatible certification, halt and revers landdegradation, halt
l a
l i
a
assaa 16.17. Promote aa aa
biodiversity loss.

d d aa s s
just, peaceful and inclusive societies.
ddaass
. P
. P a
Revitalize the global partnershipafor sustainable development.
.P.Paa
w w w w w
w
www www
Chapter – 11

et
N N ee
1) .Discuss
t t ECONOMICS OF DEVELOPMENT AND PLANNING
N Ne e tt
lalai i. l l i
a .i.
the economic determinants of economic Development.
a l a
l i
a
assaa Discuss the economic determinantsaadofdeconomic
aassaaDevelopment. a ad d aassaa
PP P P

.N
1. Natural Resource:
w w . . w w . .of natural
w
resources. ww w
 The principal factor
ww
affecting the development of an economy is the availability
w w
 The existence of natural resources in abundance is essential for development.

N Neett
2. Capital Formation:
lai N
 Capital formation is the main key to economic growth.
N e ett
l a
l i
a .i. l a
l i
a .i. l a
l i
a
 It facilitates adoption of advanced techniques of production. It leads to better utilization of natural

assaa resources,
aa d d aas saa
a ad daa s saa
3. Size of the Market:
 Large size ofw the ww . P P
. would stimulate production, increase employment
w w . P
. P
ww w market
www w and raise the National
sa
per capita income.

4. Structural Change:

N Neett N N e tt
 Structural change refers to change in the occupational structure of the economy.
e
l a
l i
a .i. l ala i .i.
 Any economy of the country is generally divided into three basic sectors: Primary sector,
l a
l i
a
assaa 5. Foreign Trade: aa aa
Secondary sector, Tertiary sector.
ss ss
da

a ad da a a a dda a

ww .
The country which enjoysPP
. and stable exchange rate.
favorable balance of trade and terms of trade is
w w. P
.
always P
developed.

www w
It has huge forex reserves
www w
2) Describe different types of Planning.
Pa

Types of Planning

N e e tt
Democratic Planning:
N N Ne ett
l a
l i
a .i.• Democratic planning implies planning within ldemocracy.
a
l ai .i. l a
l i
a
assaa •• People are associated at every step ina
The plan prepared by the P aa d d a saa and implementation of the plan. aassaa
thesformulation
ad
a d
w w . P Commission is not accepted as such.
.
.or modified by the Parliament of the country. www.
Planning P
P
www w
• Itcan be accepted, rejected
www
Totalitarian Planning:
•
N Neett N N e tt
Under totalitarian planning, there is central control and direction of alleconomic activities in
e
lalai.i. accordance with a single plan.
l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

Centralized Planning:
•
N N e ett N N ett
Under centralized planning, the entire planning process in a country is under a central planning
e
lalai .i. authority.
l a
l i
a .i. l a
l i
a
assaa • Under aa and institutions formulate, adopt, executeaaandssaa
Decentralized Planning:
decentralized planning locala
d d a ss
organizations
d d
Planning by Direction: w . . PP a a
supervise the plan without interference by the central authorities.
. P
. P aa
w w w w w w
wdirects and orders the
w
• Under planning w by direction, there is a central authority which w w
plans,
execution of the plan in accordance with predetermined tar- gets and priorities.
Planning by Inducement:

et
NNe et tplanning by inducement, the people are induced
• Under
N Ne et tin a certainway through various
to act

lalai.i. monetary and fiscal measures. l a

l i
a .i. l a
l i
a
assaa Indicative Planning:
• Under this plan, the outline ofaad d a as saa
a ad da a ssaa
PP plan is prepared by the Government.
P P

.N
w w . . ww . .
w
• Then it is discussed with the representatives of private management,w
w and other experts.
wwinstitutions
groups, finance www trade unions, consumer

• The essential function of planning is coordination of different economic units.

N e et timperative planning, the state is all powerful inNpreparation

Imperative Planning:
N lai N e e t t and implementation of the
l a
l i
a .i. plan. Once a plan is drawn up, its implementation
• Under
l al i
a .ai.matter of enforcement. l a
l i
a
assaa • The Government policies andaproceduresa d d a a s s aa is
are rigid. China and Russia follow imperativead
a daassaa
planning.
ww . P
. P w
w . P
. P
Short, Medium w
w w w term Planning: wwww
sa
and Long
• Short-term plans are also known as ‘controlling plans: They encompassthe period of one
year, therefore, they are also known as ‘annual plans’.

N N e
•e tThet medium-term plans last for the period of 3 toNN eet tBut normally,the medium term
7 years.

l a
l i
a .i. plan is made for the period of five years. lalai.i. l a
l i
a
assaa s sa10ato 30 years. They are also knownas ‘perspectiveaassaa
da

aad d a
• Long-term plans last for the period
a of
a a d
ind
w w P P
plans’. The basic philosophy
. . behind
w w . P
. P
long-term planning isto bring structural changes the
economy.
Financial Planning w
wwVswPhysical Planning : www w
• Financial planning refers to the technique of planning in which resources are allocated in
Pa

terms of money while physical planning pertains to the al- location of resources in terms of

N N e ett men, materials and machinery.

N N e ett
l a
l i
a .iFunctional
. l a
la i.i. l a
l i
a
assaa aa which seeks to remove economic difficultiesaasbysaa
Planning:
• Functional planning refersd to a
d a ss dd
.P. P
directing all the planning aa that
activities
planning
within the existing economic and social . P
. P a
structure.a
Structural Planning:w w w w w w
wwwplanning refers to a good deal of changes in thewsocio-
• The structural wweconomic framework
of the country.
• tThis
t t t
i.iN
. Nee i .
i . Ne e
type of planning is adopted mostly in under developed
N
countries.
i
lala l a
l a l a
l a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

d da as s daass
Kindly send me yourP P a
studyamaterials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

Comprehensive Vs Partial Planning:

•
NNeet t N N ett
General planning which concerns itself with the major issues for thewhole economy
e
lalai .i. • whereas partial planning is to consider only
is known as comprehensive planning
l a
l ai .ifew
. important sectors ofthe economy. l a
l i
a
assaa 3) Bring out the arguments against planning.s saa s aa
s
the

a ad da a a ad daa
w w. P
. P w w . P
.P
Argumentsw w w wplanning
against w w ww
 The failure of market mechanism invited state intervention in economic activities through
planning. The arguments against planning are discussed below.

et
N ee tt
(I) Loss of Freedom:
N N N ee tt
lalai.i. 2. Regulations and restrictions are the backbones l l ai .ia.planned economy.
1. The absence of freedom in decision making may act as an obstacle for economic growth.
a l a
l i
a
assaa s a
s a s a
s a
of

a a
3. The decision by the Government d d aa
are not always rational.
ad
a a
d a
PP P P

.N
w w . .priority welfare will be relegated
4. Freedom to private producers will be misused.
ww. .
w w w
5. Profit will be w
given top
ww w
w
(ii) Elimination of Initiative :
1. Under centralized planning, there will be no incentives and innovations.

N Neett eett
2. The obsence of private ownership and profit motive discourage entrepreneurs from taking
lai N N
l a
l i
a .i. bold decisions and risk taking.
l a
l i
a .i. l a
l i
a
assaa saa
s ssaa
3. As all enjoy equal reward under planned economy irrespective of their effort efficiency and
productivity.
aaddaa aaddaa
w
w . P
. P w . P
. P
4. The bureaucracy and red-tapism which are the features of planned economy cripple the
w
ww
wmanagement:
High cost ofw
w
www
initiative as they cause procedural delay and time loss.
sa
(iii)
1. No doubt the fruits of planning such as industrialization, social justice andregional balance

NNeett are good.

NN eett
l a
l i
a .i. 3. As Lewis remarks, “the better we try to plan,lalathei.imore
. planners we need’:
2. The cost of management of the economic affairs outweighs the benefits ofplanning.
l a
l i
a
assaa (iv) Difficulty in advance calculations: s saa saa
s
da

a a d d aa aad a
dina
w w . P
. P
1. Price mechanism provides· for the automatic adjustments among price
ww .
demand P
. P
and supply

www w
Laissez Faire economy.
www w
2. Excess supply and excess demand can also happen in the market orientedeconomy.
3. The arguments against planning are mostly concerned with centralized and totalitarian
Pa

N Neett planning
N Neett
l a
l i
a .i. l a
lai.i. l a
l i
a
assaa aaddaasaa
s
ad
a a
d s
a aa
s
w
w .P. P w
w. P
. P
w
www w
www

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

N Ne et t Chapter – 12 eet t
N N
lalai .
i .INTRODUCTION
l a
TO STATISTICAL METHODS
l i
a .
i . AND ECONOMETRICS
l a
l i
a
assaa 1) Elucidatethe nature and scope ofaStatistics.
d
a a
d a s aa
s
aaddaassaa
w w . P
. P w
w .P.P
According tow w w
Definition of Statistics
Croxton&
w
w Cowden “Statistics may be defined as the collection,
wwworganisation,
presentation,
analysis and interpretation of numerical data”

et
NNeet t of Statistics N N e ett
lalai.i. 1) Statistics are an aggregate of facts. lalai.i.
Nature
l a
l i
a
assaa a a s s
2) Statistics are numerically enumerated,
a ad d
3) Statistics should be collected
aaestimated and expressed.
in a systematic manner for a predetermined purpose. d
a a daassaa
P P P P

.N
4) Should be capable.of. or estimated according to reasonable standard . .
are ww w
ofw
being used as a technique for drawing comparison
5) Statisticsw w
wwarewaffected to a marked extent by a multiplicity of causes.
6) Statistics
numerated
www accuracy.

Scope of Statistics

N Neett
1) Statistics and Economics
lai N N e ett
l a
l i
a .i. 2) Statistics and Commerce
3) Statistics and Education
l a
l i
a .i. l a
l i
a
assaa 4) Statistics and Planning
aad
5) Statistics and Medicinedaasaa
s
aaddaassaa
w w . P
. P
6) Statistics and Modern applications
w
w . P
. P
w w
w Correlation Co-efficient for the followingwdata
wwPearson ww
sa
2) Calculate the Karl

N Neett N Neett
l a
l i
a .i. l a
lai .i. l a
l i
a
assaa ssaa saa
s
da

ad
adaa aaddaa
ww. P
. P w
w . P
. P
w
www w
www
Pa

N Neett N Neett
l a
l i
a .i. l a
lai.i. l a
l i
a
assaa aaddaasaa
s
ad
a a
d s
a aa
s
w
w .P. P w
w. P
. P
w
www w
www

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

Neett N Neett
3) Find out the regression equation Y on X and X on Y for the following data.
N
lalai .i. l a
l i
a .i. l a
l i
a
assaa aaddaassaa
aaddaassaa
ww. P
. P w
w .P.P
w
www w
www

et
N Nett
e N Neett
lalai.i. l a
l i
a .i. l a
l i
a
assaa aaddas
a aa
s
ad
a a
d s
a aa
s
PP P P

.N
w
w . . ww. .
w
www w
www

N Neett lai N Neett

l a
l i
a .i. l a
l i
a .i. l a
l i
a
assaa aaddaasaa
s
aaddaassaa
ww. P
. P w
w . P
. P
w
www w
www
sa

N Neett N Neett
l a
l i
a .i. l a
lai .i. l a
l i
a
assaa ssaa saa
s
da

ad
adaa aaddaa
ww. P
. P w
w . P
. P
w
www w
www
Pa

N Ne ett N Ne ett
l a
l i
a .
i . l alai .
i . l a
l i
a
assaa 4) Describe aa dda a s saa
the application of Econometrics in Economics.

a ad daasaa
s
w
 Econometrics may
w .P
Application of Econometrics in Economics
. P
be considered as the intergation of
w
economics,
w . P
. P
Statistics and
w
www = Economics + Statistics + Mathematics. www
Mathematics.
i.e., Econometries
w
Forecasting macroeconomic indicators :
• t Some
t t t
i.iN
. Nee the aggregate performance of the economy.
i .
i N
. Ne e
macroeconomics are concerned with the expected effects of monetaryand fiscal policy on

i
lala l a
l a l a
l a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

d da a ss d aa s s
Kindly send me yourP P aa
study materials to our email id - PP d
padasalai.net@gmail.com a a
 ww.. w
w ..
wwww wwww
www.Padasalai.Net www.CBSEtips.in

• Time series models can be used to make predictions about these economicindicators.

N N e tt
Estimating the impact of immigration on native workers:
e N Neett
lalai .i. l l i
a .i.
• Immigration increases the supply of workers, so standard economic theory predicts that
a l a
l i
a
assaa ahave
a positive demand effects, econometric estimatesaaaressaa
equilibrium wages will decrease for all workers.
• However, since immigrationd a as s d
a netd a d
can also
. P P a .P P a
of . .
necessary to determine the impact of immigration in the labor market

w w w
wwage is an example of a price floor, so higher minimum
Determining the influence minimum wage laws on employment levels:
w w w
wwages are supposed to
w w
• The minimum
create a surplus of labor (higher levels of unemployment).
w w
• However, the impact of price floors like the minimum wage depends on the shapes of the

et
NNett
e demand and supply curves.
N N e ett
lalai.i. • Therefore, l l a.i. to estimate the actual effect of such lalai
labor economists use econometricitechniques
a
assaa Predicting revenue increases in response s saa s aa
s
policies.

a ad da a to a marketing campaign:
a d
a a
d a
PP P P

.N
. .
• The field of marketing
w w has become increasingly dependent on empirical
ww . .
methods.
w
wwwor sales manager may want to determine the relationship
• A marketing w
www between marketing
efforts and sales.
• How much additional revenue is generated from an additional dollar spent on advertising?
•
tt tt
i N N ee
.iEconometrics
. • lai i N
.i. N e
Which type of advertising (radio, TV, newspaper, and so on) yields the largest impact on sales?
e
These types of questions can be addressed with econometric techniques.
i
l a
l a l a
l a l a
l a
assaa and other related subjects
• Econometrics, as a result ofd
aa d a:
a s
certain
saa
a ad a a s
dmodelss
outlook on the role of economics, consists of application
aa
constructed byw w . P P
. economics and to obtain numerical results.
of mathematical statistics to economic data to lend empirical
w w .
support P.
toP the
w
wwwmeans economic measurement. Econometrics deals
mathematical
w w the measurement of
wwwith
sa
• Econometrics
economic relationship.

NN e tItthelps to explain the behaviour of a forthcomingN

Objectives of Econometrics :
e
N ee tthatt is forecasting economic
l a
l i
a .i. phenomena. l a
l ai .i.period
l a
l i
a
assaa  It helps s sarelationships
a saa
s
da

aa d a
and a
It helps to prove the old and established
to establish new theoriesd new relationships.
aa daa
among the variables orbetween the variables
d
w w . P
. P
 It helps to test the hypotheses and estimation of the parameter.
w w . P
. P
www w www w
*************** All the Best Children **************
Pa

N Neett N Neett
l a
l i
a .i. l a
lai.i. l a
l i
a
assaa aaddaasaa
s
ad
a a
d s
a aa
s
w
w .P. P w
w. P
. P
w
www w
www

N Neett N Ne e tt
lalai.i. l a
l ai .i. l a
l i
a
assaa aa aa
Mrs.A.Vennila, Principal, Mydeen Matric. Hr. Sec. School, Melacauvery – Kumbakonam – 612 002

dda as s daass
Kindly send me yourPP aa
study materials to our email id - PP d a
padasalai.net@gmail.coma