Fundamentals of Macroeconomy Flashcards
What is a market economy?
individuals and private firms make the major decisions about production and consumption
What is a command economy?
the government makes all important decisions about production and distribution
4 sectors of economy?
Private
Government
Household
External
Factors of Production
Land, Labour, Capital & Entrepreneur
Factor incomes?
Land - rent; Labour - wage; Capital - Interest; Entrepreneur- Profit
Classification of goods
Intermediate & Final - Consumption & Capital - Durable, non durable, services
Gross Capital Formation?
GFCG (infra, machinery, etc) + Net acquisition of valuables (Gold, gems, etc) + Inventory/stock changes
Circular flow of income?
B/w HH & Enterprises - Expenditure & G&S; Factor services & factor payments
Calculation of NI
Expenditure method (fav of g&s); Income (sum total of all values of FIs); product (aggregate value of g&s produced by a firm)
GDP estimation
Value added (final value of g&s); expenditure (C+I+G+X-M);Income (Profit+rent+interest+wages)
Domestic territory?
Aka floating island theory
Embassies, consulates, political frontiers
India’s GDP?
All States Gross Domestic Product (SGDP) + Output from Centre specific activities like Railways, Defence, Central Highways etc. + Embassies located in other countries + Fishing vessels, oil and natural gas rigs, floating platforms etc. operated by the residents of the country in the international waters.
Macroeconomic fundamentals
NDP-FC + IT - S = NDP-MP
NDP-MP + DEPRECIATION = GDP-MP
GDP-MP + NFIA = GNP/GNI-MP
GNP-MP - DEPRECIATION = NNP-MP
NNP-MP - IT + S = NNP-FC
Real GDP
Numerical value of gdp
Nominal gdp
Qualitative + quantitative changes in the value of gdp
Publishing gdp? Base year?
NSO, 2011-12
Indian GDP measured by
economic growth is measured by real GDP i.e., GDP at constant Market Prices
Incremental Capital Output Ratio (ICOR)
How much capital is required to produce one additional unit in production
Potential GDP
the maximum sustainable level of output that an economy can produce
GDP Gap
Difference b/w potential and real gdp
NER
Price of one currency in terms of another
RER
Price of one currency against a basket of other currencies
RER = NER/PPP
inversely proportional to export competitiveness
PPP
the rate at which the currency of one country needs to be converted into that of a second country to ensure that a given amount of the first country’s currency will purchase the same volume of goods and services in the second country as it does in the first
NER = 1
Green GDP
The green GDP is the measurement of GDP growth with the environmental consequences of that growth factored in. Green GDP accounts for the monetized loss of biodiversity, costs caused by climate change etc.
