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Explain Circular flow of income.

Posted by Kritika Gaurav 7 years, 1 month ago

1 answers

Yogita Ingle 7 years, 1 month ago

Circular flow of income refers to the continuous circulation of production, income generation and expenditure involving different sectors of the economy. Phases of Circular Flow of Income There are three different phases (generation, distribution and disposition) in circular flow of income:
(i) Production phase In this phase, firms produce goods and services with the help of factor services.
(ii) Income phase This phase involves the flow of factor income (rent, wages, interest and profits) from firms to the households.
(iii) Expenditure phase In this phase, the income received by factors of production, is spent on the goods and services produced by firms.
Income is first generated in production units, then distributed to households and finally spent on goods and services produced by these units to make the circular flow complete its course.

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Which one of the followinv is a macro economic variable 1)I dividual ddmand 2)aggregate demand 3)firms output 4)price of a good

Posted by Tokyo Ghoul 7 years, 1 month ago

CBSE > Class 12 > Economics

0 answers

ANSWER

Explain 'credit creation' function of commercial bank

Posted by Maryzorama Khenglawt 7 years, 1 month ago

CBSE > Class 12 > Economics

1 answers

Yogita Ingle 7 years, 1 month ago

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.

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How can you say that 'Central Bank' of a country is an 'Apex Bank' of its monetary system? Explain it.

Posted by Maryzorama Khenglawt 7 years, 1 month ago

CBSE > Class 12 > Economics

1 answers

Kritika Gaurav 7 years, 1 month ago

Central bank is the apex of all the monetary system.It has monopoly power of issuing new notes.Commercial bank donot have power of issueing new notes.All the currency that are issued are legal tender of money.It brings uniformity and develop confidence among people and there is no chance of political interference.Central bank exercised control over money supply of the country.

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Explain the Determination of income and Employment by AD=AS approach. Is it necessary that at this level of income Savings and investment must be equal to each other?

Posted by Maryzorama Khenglawt 7 years, 1 month ago

CBSE > Class 12 > Economics

0 answers

ANSWER

What is micro and macroeconomic

Posted by Paras Jain 7 years, 1 month ago

CBSE > Class 12 > Economics

1 answers

Yogita Ingle 7 years, 1 month ago

(a) Microeconomics

Microeconomics is the study of economic behavior of individuals, households and firms’ in decision making and allocation of resources.

Micro economics is concerned with:

Supply and demand in individual (Textile Market) markets
Individual consumer behaviour. e.g. Consumer choice theory
Individual producer behavior.
Individual labour markets, g. demand for labour wage determination in that individual market

(b) Macroeconomics

Macroeconomics is the branch of economics that deals with the behavior and performance of an economy as a whole.

It is generally the study of central issues like

Employment
Growth rate of National output
GDP
Inflation
General Price level and stability

Meaning	When the government spending is higher than the government revenue, this is known as deficit.	A sum of money owed by the central government of the country to other lenders or countries is known as debt.
What is it?	Cause	Effect
Applies to	Single year	All sums owed
Represents	Country's annual borrowing requirement.	Debt built over the past years.
Constant	Yes, it can be constant if the government spent money in a planned manner.	No, it cannot be constant.
Types	Structural and Cyclical	Internal and External

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