The process of money creation by the commercial banks starts as soon as people deposit money in their respective bank accounts. After receiving the deposits, as per the central bank guidelines, the commercial banks maintain a portion of total deposits in form of cash reserves. The remaining portion left after maintaining cash reserves of the total deposits is then lend by the commercial bank to the general public in form of credit, loans and advances. Now assuming that all transactions in the economy are routed through the commercial banks, then the money borrowed by the borrowers again comes back to the banks in form of deposits. The commercial banks again keep a portion of the deposits as reserves and lend the rest. The deposit of money by the people in the banks and the subsequent lending of loans by the commercial banks is a never-ending process. It is due to this continuous process that the commercial banks are able to create credit money a multiple time of the initial deposits.

Central problems of an economy arise due to the following reasons :
(a) Limited or Scarce Resources: Resources are scarce in relation to our wants and economy cannot produce all what people want. It is the principal reason for existence of economic problems in all economies.
(b) Alternative uses: Resources can be put to alternative uses. For example, land is used not only for the production of crops but also for construction buildings and factories. As a result, the economy has to make a choice between the alternative uses of the given resources.
(c) Unlimited wants: Human wants are unlimited in number. They are never-ending and they can never be fully satisfied.
For Whom to Produce: This problem is concerned with the distribution of income in an economy. It is concerned with whether to produce goods for high-income groups or low-income groups. The capacity of people to pay for goods depends upon their level of income. Thus, this problem is concerned with distribution of income among factors of production who contribute in the production process. It has two aspects :
(i) Personal distribution: It means how the national income of an economy is distributed among different groups of people in the society.
(ii) Factorial distribution: It relates to income share of different factors of production such as wages for labour, interest for capital, rent for land etc.

The demand for foreign currency fall and supply rises when its price rises because domestic goods become cheaper. It induces the foreign currency to increase their imports from the domestic country. When the price of the foreign currency increases, this implies that the domestic currency has increased in terms of the foreign currency.in other words, it means that the domestic currency has depreciated.
For example, if price of 1US dollar rises from Rs 53 to Rs 59, it implies that exports to US will increase as Indian goods will become relatively cheaper. It will raise the supply of US dollars.

The demand for foreign currency fall and supply rises when its price rises because domestic goods become cheaper. It induces the foreign currency to increase their imports from the domestic country. When the price of the foreign currency increases, this implies that the domestic currency has increased in terms of the foreign currency.in other words, it means that the domestic currency has depreciated. 

For example, if price of 1US dollar rises from Rs 53 to Rs 59, it implies that exports to US will increase as Indian goods will become relatively cheaper. It will raise the supply of US dollars.

An opportunity cost is the cost of an alternative that must be forgone in order to pursue a certain action. In other words, the cost of enjoying more of one good in terms of sacrificing the benefit of another good is termed as opportunity cost of the additional unit of the good.
Example: We have Rs 15,000 with two choices a) to invest in the shares of a company XYZ or b) to make a fixed deposit which gives interest 9%. If the company XYZ gives a return of 15%, we will benefit when we invest in the shares as the alternative would be less profitable. However if company’s return is only 3% when we could have made a return of 9% from FD, then our opportunity cost is (9% - 3% = 6%).

An opportunity cost is the cost of an alternative that must be forgone in order to pursue a certain action. In other words, the cost of enjoying more of one good in terms of sacrificing the benefit of another good is termed as opportunity cost of the additional unit of the good.

Example: We have Rs 15,000 with two choices a) to invest in the shares of a company XYZ or b) to make a fixed deposit which gives interest 9%. If the company XYZ gives a return of 15%, we will benefit when we invest in the shares as the alternative would be less profitable. However if company’s return is only 3% when we could have made a return of 9% from FD, then our opportunity cost is (9% - 3% = 6%).

Precautions.  For correct computation of national income by income method, following precautions need to be taken.
1.    Only factor incomes which are earned by rendering productive services are included. All types of transfer income like old age pension, unemployment allowance etc. are excluded.
2.    Sale and purchase of second-hand goods are excluded since they are not part of production of current year but commission paid on sale of secondhand goods is included as it is reward for rendering productive services. Likewise sale proceeds of shares and bonds are not included.
3.    Imputed rent of owner occupied dwellings and value of production for selfconsumption are included but value of self-consumed services like those of housewife is not included.
4.    Income from illegal activities like smuggling, black marketing, etc. as well as windfall gains (e.g., from lotteries) are excluded.
5.    Direct taxes such as income tax which are paid by the employees from their salaries are included. Likewise corporate tax which is paid by the joint stock company from its profit is included. But wealth tax and gift tax are excluded since they are deemed to be paid from past savings and wealth. Similarly indirect taxes like sale tax, excise duties which tend to increase market prices are not included.

Elastic collision: The collisions in which both momentum and kinetic energy of the system are conserved are called elastic collisions.
The collision between two bodies and subatomic particles are elastic in nature. Indaily life, the collisions betweeen two glass or preferably ivory balls may  be taken as elastic collisions.
Characteristics of elastic collisions:
i) The momentum is conserved.
ii) The total energy is conserved.
iii) The kinetic energy is conserved.
iv) The mechanical energy is not converted into any other form (sound, heat, light) of energy.
v) Forces involved during the interaction are of conservative nature.
Inelastic collision: The collisions in which the momentum of the system is conserved but the kinetic energy is not conserved are called inelastic collisions.
Most of the collisions in every-day life are inelastic collisions. The kinetic energy lost in an inelastic collision appears in some other form of energy such as heat, sound, etc.
Characteristics of inelastic collisions:
i) The momentum is conserved.
ii) The total energy is conserved.
iii) The kinetic energy is not conserved.
iv) A part or or whole of the mechanical energy may be converted into other forms (heat, light, sound), etc.
v) Some or all of the forces involved are non-conservative in nature.

To understand micro macro paradox u have to first understand what is meant by paradox?so lets start.paradox refers to those truths which seems to be delighting and fruitful at a small level but are harmful for economic environment when its results are concerned at level of economy as a whole. now micro macro paradox means those activities that seems  to be fruitful at microeconomic level but are harmful at macroeconomic level.

Price ceiling:  Price ceiling means maximum price of a commodity that the seller can charge from the buyers the government fixes this price much below the equilibrium market price of a commodity. so that, it. becomes within the reach of the poorer sections of the society.
Price Floor:  It means the minimum price fixed by the government for a commodity in the market. It seems paradoxical.
(i) Each firm employs labour up to the point where the marginal revenue product of labour equals the wage rate.
(ii) With supply curve remaining unchanged when demand curve shifts rightward (leftward). the equilibrium quantity increases (decreases) and equilibrium price increases with fixed number of firms.

Price ceiling is the maximum price of a good which sellers can expect from buyers. This price is fixed by the government and is lower than the equilibrium market price of a good (OPe). Hence, the price ceiling leads to excess of demand and contract of supply.
Effects of price ceiling:
i. Price ceiling enables the availability of basic goods at reasonable prices to the poor. This enables to increase the welfare of the people.
ii. When there is a fall in the price level, the demand for a good increases more than the supply of the good. Hence, it creates an excess demand for the good.
iii. A consumer receives only a limited quantity of goods because the fixed quota system is followed. So, the consumer would not be able to satisfy his/her needs.
iv. Goods which are available at ration shops are mostly of a low quality.
v. As the consumer demands are not satisfied, they are willing to pay a high price for satisfying their demand in the market. This results in black-marketing which reduces the actual availability of goods in the market.