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29Jul 20209 Aug 2020

Income Method of Measuring National Income

Income Method of Measuring National Income – Income method measures national income at the phases of distribution and appears as…

28Jul 20209 Aug 2020

Expenditure Method of Measuring National Income

Expenditure Method of Measuring National Income – Expenditure method gives the national income by adding up all the expenditures made…

27Jul 20209 Aug 2020

Value Added Method of Measuring National Income

Value Added Method of Measuring National Income – Value Added Method is also called Output Method or Production Method. In…

What is the Concept of Green GNP ?

31 Jul 202013 Jun 2021

What is the Concept of Green GNP ? In the recent years the economists have realized that the costs of producing GDP need to be incorporated in estimating GDP to…

Difficulties in the Measurement National Income

Difficulties in the Measurement National Income - There are many difficulties in measuring national income of a country correctly. The difficulties are of two types in nature conceptual and statistical.…

Income Method of Measuring National Income

29 Jul 20209 Aug 2020

Income Method of Measuring National Income - Income method measures national income at the phases of distribution and appears as income paid and/or received by individuals of the country. In…

Expenditure Method of Measuring National Income

28 Jul 20209 Aug 2020

Expenditure Method of Measuring National Income - Expenditure method gives the national income by adding up all the expenditures made on goods and services during a year. Income can be…

Value Added Method of Measuring National Income

27 Jul 20209 Aug 2020

Value Added Method of Measuring National Income - Value Added Method is also called Output Method or Production Method. In this method, the economy is divided into different industrial sectors…

Fiscal Policy, Equitable Distribution of Income and Price Stability

26 Jul 202028 Jul 2020

Fiscal Policy and Equitable Distribution of Income - Existence of inequalities is a social evil and no measure of economic development can increase welfare unless an equitable distribution of income…

A Brief Introduction to Public Finance

What is Public Finance ? According to Dalton, 'Public finance is concerned with the income and expenditure of public authorities and with the adjustment of one to the other.' According…

How Fiscal Deficit Affects Economic Growth ?

How Fiscal Deficit Affects Economic Growth ? Keynesian View - According to many Keynesian economists fiscal deficit promotes economic growth. In India, in the past some years as between 1997-2003,…

What are the Different Types of Deficit ?

23 Jul 202026 Jul 2020

What are the different types of Deficit ? Budget Deficit - A budget deficit occurs when an organization or government does not earns enough revenue to cover its expenditure. There…

What is Money Financing of Budget Deficit ?

What is Money Financing of Budget Deficit ? The government can finance it budget deficit by printing high powered money. The revenue raised through printing new money is also called…

How Growth of Money Supply is related to Budget Deficit ?

How Growth of Money Supply is related to Budget Deficit ? There are two possible links (or relations) between budget deficit and growth of money supply. First, the budget deficit…

What is the Government Budget Constraint ?

What is the Government Budget Constraint ? Generally, the government finances its expenditure through the revenue received from taxes (both direct and indirect). When government expenditure exceeds its revenue received…

What are the Effects of Debt Financing ?

19 Jul 202019 Jul 2020

What are the Effects of Debt Financing ? Mainly there are two effects - (a) Crowding Out Effect of Debt Financing (b) Wealth Effect of Debt Financing (a) Crowding Out…

What is Government Borrowing or Debt Financing of Budget Deficit ?

What is Government Borrowing or Debt Financing of Budget Deficit ? Government borrowing is a fiscal method used by the government to mobilise savings of the community for economic development…

What is the Role of Fiscal Policy in Economic Growth ?

What is the Role of Fiscal Policy in Economic Growth ? In the developing countries, government plays a very important role in accelerating economic growth and development by using fiscal…

What is Fiscal Policy and Its Objective ?

What is Fiscal Policy and Its Objective ? Fiscal policy is the policy which is related to the Taxation, Expenditure and Borrowing by the Government. Fiscal policy is the most…

What is the Role of Monetary Policy in Economic Growth ?

What is the Role of Monetary Policy in Economic Growth ? Economic growth means expansion in productive capacity or capital stock which in turn increases real national output or income…

What are the Instruments of Monetary Policy ?

What are the Instruments of Monetary Policy ? The Central Bank of a country has the responsibility of maintaining economic stability by controlling the volume and direction of credit in…

What is Monetary Policy and Its Objective ?

What is Monetary Policy and Its Objective ? Monetary Policy - Monetary policy is concerned with the measures taken to regulate the supply of money, the cost and availability of…

How to Correct Disequilibrium in the Balance of Payments ?

12 Jul 202012 Jul 2020

How to Correct Disequilibrium in the Balance of Payments ? According to the classical view of the adjustment mechanism, an active or passive balance, accompanied by an inflow or outflow…

What Causes Disequilibrium in the Balance of Payments ?

What Causes Disequilibrium in the Balance of Payments ? Before we explain what causes disequilibrium in the balance of payments of a country, we need to understand the factors or…

What is the Equilibrium and Disequilibrium in the Balance of Payments ?

10 Jul 202019 Jul 2020

What is the Equilibrium and Disequilibrium in the Balance of Payments ? When we add up all the demand for foreign currency and all the sources from where it comes,…

What is the Concept of Balance of Payments ?

What is the Concept of Balance of Payments ? In the modern world, it is very rare that any country is self sufficient means that it can produce all the…

What is Capital Output Ratio ?

What is Capital Output Ratio ? Capital output ratio is the amount of capital required to produce output worth Rs.1. If Y stands for output (or income) and K stands…

Which Factors Determines Economic Growth ?

Which Factors Determines Economic Growth ? - The process of economic growth is highly complex and is influenced by various factors such as social, political, economic and cultural factors. According…

What is Economic Growth and Development ?

What is Economic Growth and Development ? Economic Growth - It has been defined in two ways - first - Economic growth is defined as a sustained annual increase in…

Indian Response To The Financial Crisis

Indian Response To The Financial Crisis - The major effects of the financial crisis were - 1. Stock Market Crash 2. Depreciation of Indian Rupee due to capital outflow by…

Impact of Global Financial Crisis on India

Impact of Global Financial Crisis on India - Since 1991 following the policy of globalisation, the Indian economy was also opened to foreign capital and trade of goods and services,…

Global Financial Crisis (2007-09)

Global Financial Crisis (2007-09) - Burst of Sub-Prime Housing Bubble - The Origin of Crisis - From the second half of 2007 in the United States a financial crisis started…

GATT and WTO

GATT and WTO - General Agreement on Tariffs and Trade (GATT) - During the period of Great Depression (1929-1933) and the Second World War various countries imposed high tariffs on…

Effects of Regional Trade Agreements – Trade Creation and Trade Diversion

Effects of Regional Trade Agreements - Trade Creation and Trade Diversion Liberalisation of trade by eliminating tariffs within a free trade area or customs union has both benefits and costs…

Global Commercial Policy

Global Commercial Policy - Commercial policies are the policies related to the imports and exports of a country. Commercial policy plays a vital role in promoting growth and well being…

Globalisation

29 Jun 202019 Jul 2020

* Globalisation - Introduction Globalisation means different things to different people. In economics, globalisation refers to the increased openness of an economy to the international trade, capital flow, transfer of…

Effects of Tariffs and Quotas

Effects of Tariffs - Tariffs are used as a trade barrier to protect the domestic industries from foreign competition. We use partial equilibrium approach represented by supply and demand analysis…

Trade Barriers

Trade Barriers - Despite having many benefits of free trade, various countries have put up barriers to trade. Many instruments are used as barriers to trade but most important are…

Case for Protection

Case for Protection - By protection we mean in order to save the domestic industries from low priced imports of well established foreign industries some barriers against import of foreign…

Case for Free Trade

Case for Free Trade - 1. Gains in Output and Well Being From Specialization - The free trade is fundamentally based on the gain in output and well being a…

Free Trade VS Protection – Intro

Free Trade VS Protection - Intro Free Trade and Protection comes under the commercial policy. The commercial policy is related to whether a country should adopt the policy of free…

Anti Recessionary Policy to Remove Cyclical Unemployment

Anti Recessionary Policy to Remove Cyclical Unemployment - When aggregate demand falls short of aggregate supply at full employment level of resources, a deflationary gap emerges in the economy. This…

Insider Outsider Model

Insider Outsider Model - Insider Outsider Model is a new approach about wage employment relationship. According to this approach, those who become unemployed as a result of fall in the…

Pigou Effect and Employment

Pigou Effect and Employment - Cut in wages and consequent fall in prices produces a favourable effect on the aggregate demand and employment in another way which was first pointed…

Keynes’s Effect and Employment

Keynes's Effect and Employment - Keynes's Effect says that the cut in money wages and consequent fall in prices is likely to reduce the rate of interest which will favourably…

Wage Cut and Employment

Wage Cut and Employment - The relationship between the wages and employment always has been a controversial issue between the Keynes and classical economists. Classical economists believed that a cut…

Concept of Full Employment

Full Employment - Full employment may be defined as the situation in which all those who are willing and able to work at prevailing wage rates are employed for the…

Unemployment – Concept and Types

Unemployment - Unemployment is defined as a state of affairs in which there are a large number of able bodied persons of working age who are willing to work but…

Market Structures – Monopoly, Oligopoly, Monopolistic, Perfect Competition

16 Jun 202017 Jun 2020

Concept of Market For an individual it would mean a shopping complex or a place where he/she can buy things. But, in economics, the concept of market is very different…

Quantity Theory of Money – Cambridge Cash Balance Approach

Quantity Theory of Money - Cambridge Cash Balance Approach - In cash balance approach to demand for money Cambridge economists, Marshall and Pigou, laid stress on the store of value…

Quantity Theory of Money – Fisher’s Transactions Approach

14 Jun 202014 Jun 2020

Value of Money and the Price Level - Value of money means its purchasing power in terms of goods and services in general. It depends on the prevalent price level.…

Baumol’s Inventory Approach to Transactions Demand for Money

13 Jun 202013 Jun 2020

Baumol's Inventory Approach to Transactions Demand for Money - Baumol put forward a new approach to demand for money which explains the transaction demand for money from the viewpoint of…

Friedman’s Theory of Demand for Money

Friedman's Theory of Demand for Money - Friedman put forward demand for money function which shows how the changes in the money supply affect the price level in the economy.…

Tobin’s Portfolio Approach to Demand for Money

11 Jun 202012 Jun 2020

Tobin's Portfolio Approach to Demand for Money - James Tobin, an American economist, in his analysis makes a valid assumption that people prefer more wealth to less. According to him,…

Keynes’s Theory of Demand for Money

10 Jun 202010 Jun 2020

Keynes's Theory of Demand for Money - How much of his income or resources will a person hold in form of ready money and how much will he lend depends…

Cambridge Cash Balance Theory of Demand for Money

9 Jun 20209 Jun 2020

Cambridge Cash Balance Theory of Demand for Money - Cambridge cash balance theory of demand for money was given by Cambridge economists, Marshall and Pigou. It places emphasis on the…

Fisher’s Transactions Approach To Demand for Money

8 Jun 20208 Jun 2020

Fisher's Transactions Approach To Demand for Money - Fisher in his theory of demand laid stress only on the medium of exchange function of money. All transactions such as buying…

Concept of Demand for Money

Concept of Demand for Money - To understand the concept of demand for money we need to understand Why people demand for money ? According to the classical economists, money…

Determinants of Money Supply

6 Jun 202015 Jun 2020

Determinants of Money Supply - Money supply is composed of currency held by the public (CP) and demand deposits of the public with the banks (D). M = CP +…

Measures of Money Supply

Measures of Money Supply - Many definitions of money supply have been given and many measures have also been developed based on them. Components of money supply have been differentiated…

Concept of Money Supply

Concept of Money Supply - Money supply plays a very important role in the economic growth of a country. Any increase or decrease in the money supply directly affects the…

Methods of Credit Control

3 Jun 202015 Jun 2020

Methods of Credit Control - The central bank of a country is the apex body of the monetary system which has the responsibility of controlling the volume and direction of…

Central Bank and Its Functions

2 Jun 20202 Jun 2020

Central Bank and Its Functions - Central Bank - Central bank is an apex body or institution of the monetary system which regulates the functioning of the commercial banks of…

Credit Creation By Banks

Credit Creation By Banks Credit creation is one of the most important functions of the banks. How the bank creates credit is not a secret. The banks do not keep…

Role of Commercial Banks

Role of Commercial Banks in Economic Development - The rate of economic development depends on the rate of capital formation. The rate of capital formation depends on the rate of…

Functions of Commercial Banks

30 May 202031 May 2020

Functions of Commercial Banks - The main functions of commercial banks are to receive deposits and advance loans. Banks borrow in form of deposits and lend in form of advances…

Commercial Banking – Origin and Evolution

Commercial Bank - It is a business organization which borrows and lends money, and makes profits in the process. The difference between a money lender and a commercial bank is…

Credit – Meaning, Functions and Purpose

Credit - Credit is created when one party (a person, a firm) lends money to another party, the borrower. In general, credit mean the finance provided to others at a…

Role of Money in Economic Development

27 May 202027 May 2020

Role of Money in Economic Development of The Developing Countries - Generally it is believed that the economic development of a country depends on the growth of real factors like…

Importance of Money

Importance of Money - According to the classical economists, money only affects the price level in the economy and it has no effect on the levels of the real income…

Managed Currency Standard or Modern Monetary System

Managed Currency Standard or Modern Monetary System - Paper money has a very important role in our modern economic or monetary system. The term paper money only applies to the…

Forms of Money

Money of Account - It is the monetary unit in which the accounts of a country are kept and transactions settled, means, in which general purchasing power, debt and prices…

Money and Its Functions

Definition of Money - Professor D.H. Robertson defines money as "anything which is widely accepted in payment for goods or in discharge of other forms of business obligations." According to…

Evolution of Money

Before we study what is money, we need to understand its evolution. So, let's begin ... Evolution of Money - In the beginning money wasn't the same as we know…

Barter System and Its Difficulties

Barter System and its Difficulties - Barter System - It is system of exchange in which goods or services are exchanged with other goods or services directly. In the starting…

Sacrifice Ratio and Rational Expectations

20 May 202023 May 2020

Sacrifice Ratio and Rational Expectations - Rational Expectations hypothesis assumes that people use all the available information including government's fiscal and monetary policies to predict the future. They correctly predict…

Sacrifice Ratio and Policy of Disinflation

19 May 202019 May 2020

Sacrifice Ratio and Policy of Disinflation - Disinflation policy has been the objective of policy makers. But disinflation or reduction in inflation rate involves the cost to the society in…

Relationship between Short Run and Long Run Phillips Curves

18 May 202018 May 2020

Relationship between Short Run and Long Run Phillips Curves - The position of a short run Phillips curve (SPC) which passes through a point on the long run Phillips curve…

Long Run Phillips Curve and Rational Expectations

17 May 202018 May 2020

Long Run Phillips Curve And Rational Expectations - The viewpoint about inflation and unemployment put forward by Rational Expectations Theory which is the cornerstone of recently developed macroeconomic theory, popularly…

Long-Run Phillips Curve and Adaptive Expectations

Long-Run Phillips Curve and Adaptive Expectations - The concept of long-run Phillips curve was given by Friedman and other natural rate theorists. According to them, the economy will not remain…

Natural Rate Hypothesis and Adaptive Expectations

Natural Rate Hypothesis and Adaptive Expectations - Friedman's View Regarding Phillips Curve Another explanation of occurrence of a higher rate of inflation simultaneously with a higher rate of unemployment was…

Collapse of and Shift in – Phillips Curve

Collapse of Phillips Curve in the USA (1971-91) - During the sixties Phillips curve became an important concept of macroeconomic analysis. The stable relationship described by it suggested that policy…

Inflation – Unemployment Trade-Off — Phillips Curve

Inflation - Unemployment Trade-Off --- Phillips Curve Keynesian Explanation of Phillips Curve - The explanation of Phillips Curve by the Keynesian economists is quite simple. Keynesian economists assume the upward…