The process of money creation by the commercial banks starts as soon as people deposit money in their respective bank accounts.  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.

Government budget is of immense help in fighting the inflationary and deflationary tendencies. Inflationary tendencies emerge in the economy when aggregate demand exceeds aggregate supply. Thus government tries to decrease aggregate demand to remove inflationary pressures in the economy. To curb the inflationary tendency, the government can prepare a surplus budget. A surplus budget is one in which estimated receipts exceed the estimated expenses. Such a budget reduces the money supply in the economy. With a fall in the money supply, the purchasing power of people also falls, leading to a fall in the level of aggregate demand. As aggregate demand falls, the price level or the rate of inflation also falls.

Deflationary pressures emerge in the economy when aggregate demand falls short of aggregate supply. So, the government through its budgetary policies tries to increase AD. To curb the deflationary tendency, the government can prepare a deficit budget. A deficit budget is one in which estimated expenses exceed the estimated receipts. Such a budget increases the money supply in the economy. With the increase in money supply, the purchasing power of people also rises, leading to an increase in the level of aggregate demand. As aggregate demand rises, the price level also rises and the rate of deflation begins to fall.

Factor income is the income received by owners of the factors of production in the form of rent,wages, interest and profit for the services rendered in the production process. Transfer payments are those unilateral payments corresponding to which there is no value addition in the economy e.g gifts and donations.

Per capita income is income per citizen. When the national income is divided with the total population of the country, we get per capita income or the average income.

1. Microeconomics studies the particular market segment of the economy, whereas Macroeconomics studies the whole economy, which covers several market segments.
2. Microeconomics assumes all the macro variables to be constant as national Income, consumption, saving, etc, whereas Macroeconomics assumes that all tile micro variables to be constant as households, firms, prices of Individual products, etc.
3. Microeconomics deals with an individual product, firm, household, industry, wages, prices, etc., while Macroeconomics deals with aggregates like national income, national output, price level, etc.

Economic Development: The main objective of Indian planning is to achieve the goal of economic development economic development is necessary for under developed countries because they can solve the problems of general poverty, unemployment and backwardness through it.

Following are the components of the Expenditure Method that are used to calculate national income:

1. Private Final Consumption Expenditure- Private final consumption expenditure includes the money value of consumer goods and services purchased by households and non-profit institutions for current use.
2. Government Final Consumption Expenditure- It refers to expenditure on final goods and services by the government, like expenditure on the purchase of goods for consumption by the defence personnel.
3. Investment Expenditure- Investment means an addition to the stock of capital goods and inventory. Investment may be of the following four types:
   1. Business fixed investment
   2. Inventory investment
   3. Public investment
   4. Residential construction investment.
4. Net Exports- Net exports means the difference between exports and imports.

Deferred payments refer to those payments which are made sometimes in the future. Money has made deferred payments much easier than before.  Credit has become the life and blood of a modern capitalist economy.  In millions of transactions, instant payments are not made. The debtors make a promise that they will make payment on some future date. In those situations money acts as a standard of deferred payments. It has become possible because money has general acceptability, its value is stable, it is durable and homogeneous. This function of money has led to the emergence of financial market which deals in borrowing and lending of money.

Legal Reserve Ratio is the requirement of cash reserves which a commercial bank is obligated to maintain.

Explanation:

In the present case, the Reserve requirement is 0.2 and deposits are Rs.1000.

Thus mathematically, Cash Reserve = Reserve requirement x Bank deposits

Hence, the quantum of money to be maintained by the commercial bank is Rs.200 (0.2x1000).

The Legal Reserve Ratio is composed of two components such as Cash Reserve Ratio(CRR) and Statutory Liquidity Ratio(SLR). These ratios are fixed by the Reserve Bank of India(RBI).

These are those goods which have crossed the boundary line of production and are ready for use by their final users.  These goods are not resold by the firms for profit during the accounting year.
Example: Shoes used by the households or tractor used  by the farmers.

Factor cost is the total amount which the manufacturer had to invest in production of a good or commodity. It doesn’t include any taxes imposed on the final product. But, the market price is the final cost at which the manufacturer sells the goods to customers. And these are inclusive of all the applicable taxes. Further, the final Price is decided by also keeping the subsidies offered by the government into account.

The three methods of measuring National income are as follows:

1. Income Method .
2. Product method or Value Added Method.
3. Expenditure Method.

The main objective of Indian planning is to achieve the goal of economic development economic development is necessary for under developed countries because they can solve the problems of general poverty, unemployment and backwardness through it.

The best predictor of current investment at the firm level is lagged investment. This lagged-investment effect is empirically more important than the cash-flow and Q effects combined.

Ex-ante refers to future events, such as the potential returns of a particular security, or the returns of a company. Transcribed from Latin, it means “before the event.” Much of the analysis conducted in the markets is ex-ante, focusing on the impacts of long-term cash flows, earnings and revenue.

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.

Net Indirect Tax is the difference between the Indirect tax and subsidy. To find out Market Prices (MP), indirect taxes are added and subsidies are subtracted from Factor Cost (FC) as explained above.

Rao and R.C. Desai are the economists who estimated India’s national income and per capita income during the colonial period.

Deflationary gap is the shortfall in AD from the level required to maintain full employment equilibrium in the economy. In other words, it is equal to the difference between AD at full employment and AD at underemployment. In such a situation, there is involuntary unemployment in the economy. When an economy undergoes a deflationary shock, the implications can be both positive and negative for consumers and businesses. Disinflation usually occurs during a period of recession and manifests itself by slowing down the rate at which prices increase; this occurs as a result of a decrease in consumer sales.

the implications can be both positive and negative for consumers and businesses. Disinflation usually occurs during a period of recession and manifests itself by slowing down the rate at which prices increase; this occurs as a result of a decrease in consumer sales.

Land productivity indicates the land's capacity to support and sustain life and is beneficial for ascertaining land degradation

EXPLANATION:

Land productivity is dependent on numerous factors such as its natural qualities, that is if the land is leveled and flat, it will be more productive than an undulant land; irrigation means also impact the land productivity.

Lands depending on canals, tanks, tube wells, and so on are more productive than lands which depend on rainfall; lands located near the marketplace is more productive than lands situated in distant areas, since lands situated near the market needs less money and time to transport the produce to the market; land productivity also depends on its proper utilization; if enhancements such as hedging, irrigation channels, consolidation of land holdings, and so on are done on lands, its productivity rises; if enhanced methods of cultivation such as fertilizers, mechanized plows, quality seeds, and so are used land productivity increases; the efficiency of labor is another determining factor for land productivity.

If labor is effectual in sowing seeds, cutting crops, spraying pesticides, watering plants, and so on at the correct time, land productivity increases; agricultural policies of the govt. also impacts the land productivity. If govt. passes laws for consolidating holdings, passing land ownership to cultivators, regulating land rents, abolishing intermediaries, and so on land productivity increases. Likewise, land productivity increases if the govt. backs and supports research in agriculture and offers credit facilities to agriculturists.

Buying and selling of securities by the central bank