Currency deposit ratio: The currency deposit ratio shows the amount of currency that people hold as a proportion of aggregate deposits.
Reserve deposit ratio (RDR)  :  It is ratio of total deposits which commercial banks keep as reserve.

Differences between the inflationary gap and deflationary gap.

1. Open Market Operations: Open Market Operations is when the RBI involves itself directly and buys or sells short-term securities in the open market. This is a direct and effective way to increase or decrease the supply of money in the market. It also has a direct effect on the ongoing rate of interest in the market. Let us say the market is in equilibrium. Then the RBI decides to sell short-term securities in the market. The supply of money in the market will reduce. And subsequently, the demand for credit facilities would increase. And so correspondingly the rate of interest would also see a boost. On the other hand, if RBI was purchasing securities from the open market it would have the opposite effect. The supply of money to the market would increase. And so, in turn, the rate of interest would go down since the demand for credit would fall.
2. Repo rate: Repo rate is the rate at which Reserve Bank of India (RBI) lends funds to commercial banks for a period ranging from 1 day to 14 days. It is quite an effective quantitative tool for controlling credit creation. If the RBI wants to decrease the level of credit creation in the country, then it increases the Repo Rate which makes the credit dearer. As the cost of borrowings increase, the people's demand for credit goes down. This also leads to a fall in liquidity. All this leads to falling in the rate of credit creation. On the other hand, if the RBI wants to increase the level of credit creation in the economy then it decreases the repo rate which makes the credit cheaper. As the cost of borrowings falls, people's demand for credit goes up. This leads to an increase in the rate of credit creation.

State of industries in India on the eve of Independence is explained below :

• The role of the public sector in development of industries was restricted to the railways, power generation, communications, ports and some other departmental undertakings. There was no growth of industrial base in India.
• Before the advent of British in India, the traditional handicraft industries enjoyed a world wide reputation for their quality and standards of craftsmanship.
• There were hardly any capital goods industries to promote further industrialisation, since the British had no interest in the development of Indian economy.

The scope of macroeconomics includes the following parts:

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Clearly, the study of the problem of unemployment in India or general price level or problem of balance of payment is macroeconomic study because these relate to the economy as a whole.

Importance of Macroeconomics:

•  It helps to understand the functioning of a complicated modern economic system. It describes how the economy as a whole functions and how the level of national income and employment is determined on the basis of aggregate demand and aggregate supply.
• It helps to achieve the goal of economic growth, higher level of GDP and higher level of employment. It analyses the forces which determine economic growth of a country and explains how to reach the highest state of economic growth and sustain it.
• It helps to bring stability in price level and analyses fluctuations in business activities. It suggests policy measures to control Inflation and deflation.
• It explains factors which determine balance of payment. At the same time, it identifies causes of deficit in balance of payment and suggests remedial measures.
• It helps to solve economic problems like poverty, unemployment, business cycles, etc., whose solution is possible at macro level only, i.e., at the level of whole economy.
• With detailed knowledge of functioning of an economy at macro level, it has been possible to formulate correct economic policies and also coordinate international economic policies.
• Last but not the least, is that macroeconomic theory has saved us from the dangers of application of microeconomic theory to the problems of the economy as a whole.

1. Problem of double coincidence of want: Double coincidence of wants means both the buyer and seller should be ready to exchange the goods. Under this, one has to possess a good or service of equal value, which the supplier also desires. In other words, in a barter system, exchange can take place only if there is a double coincidence of wants between two transacting parties. The likehood of a double coincidence of wants, however, is bleak and makes the exchange of goods and services very difficult.
2. Lack of common measure of value: We know all the goods have different values and these days the value of each good is expressed in the monetary unit. Measurement of value was the main difficulty of the barter system. In the absence of the common measure, the seller has to express value of his good in all other goods. For example, if you want to sell your horse you have to express its value-
   1 Horse = 2 cows
   1 Horse = 5 bags of wheat
   1 Horse = 20 kg of iron
3. Lack of standards of deferred payments: Deferred payments refer to those payments which are made sometimes in future. Payment of loans is also referred as deferred payments. Without the use of money the system of deferred payments is not possible as:
   1. The borrower may not be able to arrange goods of exactly same quality at the time of repayment.
   2. There may be conflicts regarding which specific commodity is to be used for repayment.
   3. The commodity to be repaid, may loose or gain its value at the time of repayment.
4. Lack fo store of value: Under barter system, it is difficult for people to store wealth for future use because:
   1. Most of the goods don't possess durability.
   2. Storage fo goods require time and efforts.
5. Indivisibility of goods: Most of the goods are not divisible. Suppose, a household wants to sell his horse and wanted to get cloth and shoes in exchange, then it would be impossible to divide the horse in two parts to buy two different goods.

“Consumption of fixed capital is the decline, during the course of the accounting period, in the current value of the stock of fixed assets owned and used by a producer as a result of physical deterioration, normal obsolescence or normal accidental damage.

The five main difficulties found in barter system are as follows:

• Double Coincidence of Wants
• Lack of a Standard Unit of Account
• Impossibility of Subdivision of Goods
• Lack of Information
• Production of Large and Very Costly Goods not Feasible.

T.R. Jain 

Equilibrium means the state of balance or state of no change. The equilibrium level of income or output is that level at which the planned savings and planned investments are equal.
There are two alternative approaches of national income determination and the first approach determines equilibrium level by the equality of aggregate demand and aggregate supply of output.
It is derived from the Aggregate Demand and Supply approach in the following way:
In a simple economy, there are two elements of national income consumption and investment. An economy is said to be in equilibrium when aggregate expenditure equals aggregate income or aggregate money value of all goods and services. Aggregate Demand (AD) in a two-sector economy is defined as the sum of Consumption Expenditure and Investment Expenditure (I) i.e. AD = C + I, whereas Aggregate Supply (AS) is defined as the sum of Consumption (C) and
Saving (S) i.e AS = C + S.
Mathematically, AD = AS
or, C + 1 = C + S
Hence, I = S
or S = I

In the graph given, OP or OP' is the equilibrium level of income E is the equilibrium point where Aggregate Demand equals Aggregate Supply Equality between AS and AD implies the equality between S and I. When we extend the line EP vertically downward, it meets at point E' with S and L It is the equilibrium point of saving and investment approach OP or OP' represents the level of income at which the economy is in equilibrium.

A smaller institution that usually offers undergraduate degrees is considered a college. In contrast, an institution that offers both undergraduate and graduate degrees is considered a university. They offer undergraduate programs that will lead a student towards a master's degree or a doctorate.

Zamindari System was introduced by Cornwallis in 1793 through Permanent Settlement Act. It was introduced in provinces of Bengal, Bihar, Orissa and Varanasi. Zamindars were recognized as owner of the lands. Zamindars were given the rights to collect the rent from the peasants.

Basically, Domestic Product and National Product are distinguished on the basis of the Net factor Income From Abroad (NFIA). While Domestic Product includes factor income paid only to the domestic residents of the native country with the domestic territory of a country, on the other hand, National product besides including the factor income paid to the domestic residents, also includes the factor income paid to the domestic residents residing on the foreign lands. In simple words, Domestic Product excludes NFIA, whereas, National Product includes NFIA. 
Algebraically, Domestic Product = National Product – NFIA**
 ⇒National Product – (Factor Income earned by the domestic residents – Factor Income paid to the foreign residents)
and National Product = Domestic Product + NFIA**
 ⇒ Domestic Product + (Factor Income Earned by the domestic residents – Factor Income paid to the foreign residents)
** where, NFIA refers to the difference of factor income earned from foreign and the factor income paid to the foreigners.

An externality is said to occur when the actions of one entity bears an impact on other entities. These externalities can be positive as well as negative. Negative externalities occur when the consumption or production of a good causes a harmful effect to a third party. It is an action of one person adversely affecting the others.
Examples of negative externalities:
1) If you play loud music at night your neighbour may not be able to sleep.
Thus, by endangering and affecting the life of the people living in the surrounding areas, it reduces the overall welfare of the society and creates negative externality.
2) If you produce chemicals and cause pollution, then as a side effect, local fishermen will not be able to catch fish. This loss of income will be the negative externality. The hazardous chemicals in water bodies and the surroundings adversely affect the health of the people. Also, it contributes to the environmental degradation along with increasing the pollution levels in the country.

Precautions (Item to be included/excluded). While calculating national income by value added method, value of following items should be included:
(i)    Imputed rent of owner occupied houses because all houses have rental value irrespective of its use by self or tenant.
(ii)    Imputed value of goods and services produced for self-consumption or for free distribution;
(iii)    Value of own-account production of fixed assets by enterprises, government and the households;
(iv)    Only value added and not value of output by production units should be included;
(v)    Do not include sale of second-hand goods as they are not fresh production activity. However, brokerage or commission paid to facilitate sale is included because it is a fresh production activity.
Since national income measures and reflects the current achievements of an economy during a year, value of following items should be excluded from its purview.
(i)    Sales and purchases of second-hand goods. They are not a part of production of the current year. Moreover, their value had already been included in national income of the year in which they were produced. However, if the transaction has been made through a broker, his commission or brokerage should be included because he has rendered productive service. Again services for self-consumption like those of housewives are not included as it is difficult to estimate their market value.
(ii)    Sale of bonds by a company. This is merely a financial transaction which does not contribute directly to the flow of goods and services. Again services for self consumption like those of house wife are not included as it is difficult to estimate their market value.
(iii)    Income of a smuggler. It is an illegal activity and all illegal activities (like smuggling, gambling, black marketing, etc.) are excluded from national income.

Goods which are within the boundary line of production with it value yet to be added and are unavailable for uses by their final users are called intermediate goods.
These goods are consumed by another firm and are used as intermediate goods in the production process or for further sale. For example, papers purchased by newspaper agency for printing news are intermediate goods. Value of intermediate goods is merged with the value of final goods. Here the value of intermediate good is not included in the estimation of national income.