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Yogita Ingle 6 years, 7 months ago
The Great Depression took place in 1929 which adversely affected the developed economies of Europe and North America. There was extreme fall in Aggregate Demand due to fall in income, which led to a vicious circle of poverty. Demand for goods in the market was low. Many factors of production were lying idle, workers were thrown out of their jobs. The consequences of Great Depression gave birth to the study of macroeconomics.
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Yogita Ingle 6 years, 7 months ago
| Real flow | Money flow |
| Flow of factor services from the household sector to the firms and the corresponding flow of goods and services from the firms to the households is called the real flow | When the households provide factor services to the firms, in return they receive factor payments. The factor payments received by the household is then spent on goods and services produced by the firms leading to a circular flow of money between households and firms. |
| Real flow does not have a common medium of exchange. Hence, it has limitations of barter system. | All transactions are settled with the help of money as a common medium of exchange. Hence, it overcomes the limitations of barter system. |
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NNPFc = It is the sum total of factor income of final goods & services produced within the domestic territory of a country during an accounting year inclusive of net factor I'm come from abroad & exclusive of depreciation.
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Yogita Ingle 6 years, 7 months ago
| Microeconomics | Macroeconomics |
| It is study of individual economic units of an economy. | It is study of the economy as a whole and its aggregates. |
| It deals with individual income, individual prices and individual outputs, etc. | It deals with aggregates like national income, general price level and national output, etc. |
| Its central problem is price determination and allocation of resources. | Its central problem is determination of level of income and employment. |
| Its main tools are demand and supply of particular commodity/factor. | Its main tools are aggregate demand and aggregate supply of the economy as a whole. |
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Yogita Ingle 6 years, 7 months ago
Business Fixed Investment: It is the expenditure by producers on the purchase of Fixed Assets like plant and machinery and other capital items.
Inventory Investment : It refers to change in stock during the year. It is closing stock less opening stock. The stock includes: raw material, semi finished goods (work in progress) and finished goods.
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Yogita Ingle 6 years, 7 months ago
The factor payments received by the household is then spent on goods and services produced by the firms leading to a circular flow of money between households and firms.
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