Determination Of National Income

National Income Accounting

Different Concepts Measurement Of Limitations and Challenges

of National Income National Income In India Of National Income Computation

*Limitations
- It does not consider health, safety,
pollution, standard of living, education etc.
Gross GNP = GDP + Net Factor Income From Abroad.
Production - Per Capita Income could be incorrect.
GDP = Irrespective of Nationality, Goods &
GNP (value added) - Illegal services are not considered
Services Produced Within Domestic Territory
GDP Of a Country are to be Considered. - unreported income is also not considered.
Prd- It is a sum total of
net value added at factor - Volunteer work is ignored.
cost across all producing
Net NNP = GNP - Depreciation units within domestic ternyory.
Less - Intermediate Purchase
MNP NDP NDP = GDP - Depreciation

Factor Cost = MP - Net Indirect Taxes

Price Nominal= Market Price Will Vary
From Case To Case
MP FC Nom Real Real = Market Price Will Income
Remain Constant. Inc- It is a summation of factor
Expenditure
income paid out by all the
Exp- It is the aggregate
Per Capita Income PCI =
Total National Income production units within the
of Final expenditure
(PCI) Population domestic territory of a country
(Cons+Savings)
Disposable DPI = as wages, interest, rent& profit.
Personal Income
Personal Income - *It includes payments to
Personal Income Taxes
non-resident also.

** Irrespective of any method

GDP will remain same.

2.
 The Keynesian Theory Of Determination Of National Income

Sector Mode Total Views

2,10,000+
- 20 Million

2 4
+
2,50,000

40,000 +

Firm - Swapnil Patni Classes

Firm
- 12,000+

Household household
Y= C+I Government
3 export /
Firm import
Household Y= C+I+G+NET EXP
Government i.e Export - import
Y= C+I+G
Misc
ie. C = Consumption
I = Investments CONSUME MULTIPLIER
G = Government Multiplier refers to the phenomenon whereby a
MPC APC change in an injection of expenditure will lead to a
C proportionally large change in the level national income.
MPC = C
Y APC =
Y More leakage= less Multiplier.
MPC = 1-MPS APC = 1-APS

SAVE CONSUMPTION
FUNCTION

MPS APS C=a+by

MPS =
S APS =
S a= constant
Y Y b=Propensity to consume
MPS = 1-MPC APS = 1-APC y= Total Disposable Income
13.
 Chapter 2 - Public Finance - Unit 2

What is Market Failure? Reasons For Market Failure Types Market Failure
Mismatch of
Demand & Supply
Demand Supply
Monopoly Externalities Public Goods Side Side
-Eg. - Eg. Agra,
-Firms that have *Public Goods Wagholi Bhopal
market power are
Types Social Cost *Private Goods pune
Production consumption = *Pure Goods
price makers and Private Cost *Impure Goods
therefore,
can (Eg.Direct Cost Of
Positive Negative Positive Negative
Production) *Mix Goods
charge a price A positive A negative A positive A Negative + *Common Access
production externality consumption consumption External Cost
that gives them externalities
*Global Public Goods
externality initiated in externality (Eg.Petha Agra)
positive economic initiated production initiated in are *Free Rider Goods
extensively
profits.
Excessive in which consumption
experienced
production imposes an that
market power by us in
Incomplete Information
that external confers our day to
causes the confers cost on external day life.
single producer or external others benefits Such negative
benefits consumption
a small number of
may be on
externalities
Meaning Asymetric Adverse Selection
on received by others may
producers to others another in be received initiated in
consumption
produce and sell may consumption in
which produce
Old Car Eg. Insurance
be or in consumption
less output than external
received production. or in costs on Incomplete Information
would be produced in in production. others may
Complete information is an important element of competitive
a competitive market. production be received
market. Perfect information implies that both buyers and sellers
or in in
-Market power can consumption
have complete information about anything that may
consumption.
cause markets to be or in influence their decision making.
production. Asymmetric information occurs when there is an imbalance in
inefficient because it
keeps price higher information between buyer and seller i.e. when the buyer knows
and output lower than more than the seller or the seller knows more than the buyer.
the outcome of This can distort choices.
Adverse selection is a situation in which asymmetric information
equilibrium of
about quality eliminates highquality goods from a market.
supply and demand.

28.
 Chapter 2 Public Finance Unit 3

Government Intervention To Correct Market Failure

Minimize Market Correct Merit & Demerits Correcting Equitable

Power Externalities Goods Information
Distribution
Failure
1 How To Correct Externalities
-As we are aware, Merit Goods Demerit Goods Examples Are High Income Low Income
market power - exercised Pollution Tax Permits Complete
More Tax LOW TAX
-The second Subsidies on Heavy Duties Disclosure
either by sellers or Disadvantages and +
approach to HOSPITALS, on about Product More Duties Unemployment
buyers - is an important - Complex Library Drugs, on wrapper on Luxury Compensation
establishing Products +
factor that contributes to - Admin prices is tradable etc. Liquor, itself.
Job
- Not a genuine emissions permits
Tobacco Reservation
inefficiency because it
Solution (also known as
Prospects
results in higher prices - Inelastic
n capand trade). Advertisement
than competitive prices. Product These are should not be
-Because of the social - Prod in other marketable vague & not
Countries
costs imposed by licenses to emit should be clear
monopoly,governments limited quantities in nature
of pollutants and
intervene by 2 Meaning
can be bought and
establishing rules and -Governments have
sold by polluters.
regulations designed to numerous methods
to reduce the effects
promote competition and
of negative externalities Advantages
prohibit actions that are and to promote positive Total Views
2,10,000+
- 20 Million

likely to restrain externalities. - flexibility and reward

-most commonly referred efficiency +
competition. - cheap and simple to
2,50,000
negative externality is
These legislations differ pollution implement 40,000 +

from country to country. - strong incentives for - Swapnil Patni Classes

innovation - 12,000+
-For example,in India, - extra profits made by
we have the Competition low pollution
Act,2002

38.
 Unit 4 – Fiscal Policy

Instruments Types Limitations of Crowding How to

Fiscal Policy out reduce
• Government • Expansionary Inequalities
Expenditure • Contractionary • Instant
• Tax • Capital • DT
• Debt • Long Duration • IDT
• Budget • Govt. • Other
Perpetual
burden
• Foreigners
Disincentive
• Expansion –
Inflation
• Predict –
Inflation/
Deflation

46.
 Chapter 3 Money Market Unit 1 The Concept Of Money Demand

Money Market

The Concept of Money Demand

The Theories of Post Keynesian Development in the

Factions Of Money Demand For Money Demand For Money theory of Demand of Money

- Convenient medium - For Expenses. QTM / Cambridge Keynesian Theory Inventory Demand For
Friedman
of Exchange. - To have Command Fisher Approach Money
- It is a Common over Real Goods.
measure of Value. - For unforeseen
MV=KPV - People Hold Money Cost Of Consider Liquidity
- It is a standard of Situation. MV=PT
(Constant for 3 motives Brokerage Permanent Pref/ Tobin
Deferred Payment.
Saving) 1)DSY TO STAY ( Should Income
- 2)Precautionary be Considered -If Interest
it focus 3)I Speculative while Deposit - Determinate rate is high
on stoke Demand for in bonds ) of Demand then the
future for supply Invest in
opportunity. - ROI - Wealth bond or
-Brokerage - Price else hold
- Optimum - Inflation - More
Combination - ROI Interest
of Bonds Rate =
& Cash. More
Bonds

2,10,000+
Total Views - 20 Million

+
2,50,000

40,000 +

- Swapnil Patni Classes

- 12,000+

54.
 Unit 2 - The Instruments of Trade Policy
A) Tariffs
 Specific Tariff
 Ad valorem tariff
 Mixed Tariffs
 Compound Tariff or a Compound
Duty
 Technical/Other Tariff
 Tariff Rate Quotas
 Most-Favored Nation Tariffs
 Variable Tariff
 Preferential Tariff
 Bound Tariff
 Applied Tariffs
 Escalated Tariff
 Prohibitive tariff
 Important subsidies
 Tariffs as Response to Trade
Distortions
 Anti-dumping Duties
 Countervailing Duties
B) Non Tariffs Measures
Technical Measures Non-technical Measures
• Sanitary and • Import Quotas
Phytosanitary • Price Control Measures
(SPS) Measures • Non-automatic Licensing and
• Technical Barriers To Prohibitions
Trade (TBT) • Financial Measures
• Measures Affecting Competition
• Government Procurement Policies
• Trade-Related Investment Measures
• Distribution Restrictions:
• Restriction on Post-sales Services:
• Administrative Procedures
• Rules of origin
• Safeguard Measures
• Embargos
88.
 Chapter 4 - Unit 3 – Trade Negotiations

RTA GATT What is What is Structure Guidelines Concern of

Problems the WTO? of WTO of WTO WTO
objectives
of WTO? • Ministry

• Standard • General
• Employment
• Income
• GDP Goods Services Intellectual
• Demand

97.
 Chapter 4 - Unit 4 – Exchange Rate and Its Economic Effects

What is Types Why do Nominal Impact of Foreign

exchange you need Vs. Real Change exchange
rate foreign exchange market
Fixed Floating
exchange? rate
Rate Rate

Devaluation Appreciation Depreciation

Depreciation

Decided by Changes
Govt. from time
to time

105.
 Unit 5 - International Capital Movements

A) Types C) Foreign E) Modes of Foreign G) Potential

of Foreign Portfolio Direct Investment Problems
Capital Investment (FDI) Associated
(FPI) with FDI
New Old
- IKAI - Walmart &
Flipkart

B) Foreign D) Reasons F) Benefits of

Direct for Foreign Foreign Direct
Investment Direct Investment
(FDI) Investment

113.