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Capitalism: The system where the means of production are privately owned and market determines the economic activities. Globalism: An economic system where the economic activities of a nation are inter connected and inter dependent on each other nation.

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Distinguish between Capitalism and Globalism?

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Capitalism: The system where the means of production are privately owned and market determines the economic activities. Globalism: An economic system where the economic activities of a nation are inter connected and inter dependent on each other nation.

Distinguish between Capitalism and Globalism?

Macro Economics is the study of the economy as a whole. In other words, macro economics deals with aggregates such as national income, employment and output. Macro Economics is also known as ‘Income Theory’.

Define Macroeconomics.

Theory of Income and Employment Theory of General Price level & Inflation Theory of Economic Growth & Development Theory of Distribution Theory of Consumption Function

Give few examples for Macroeconomic theory.

The importance and the need for introducing a macro outlook of an economy are given below: There is a need to understand the functioning of the economy at the aggregate level to evolve suitable strategies and to solve the basic problems prevailing in an economy. Understanding the future problems, needs and challenges of an economy as a whole is important to evolve precautionary measures. Macro economics provides ample opportunities to use scientific investigation to understand the reality. Macro economics helps to make meaningful comparison and analysis of economic indicators. Macro economics helps for better prediction about future and to formulate suitable policies to avoid economic crises, for which Nobel Prize in Economic Sciences is awarded.

State the importance of Macro Economics?

An economy is referred to any system or area where economic activities are carried out. Each economy has its own character. Accordingly, the functions or activities also vary. An economy, the fundamental economic activities are production and consumption.

What is meant by an ‘Economy’?

The subject matters covered in macroeconomics are the areas such as employment, national income, inflation, business cycle, poverty, inequality, disparity, investment and saving, capital formation, infrastructure development, international trade, balance of payments, exchange rate , economic growth etc.,

What are the subject matters covered in macroeconomics?

Circular Flow of Income in a Two-Sector Economy: There are only two sectors namely, household sector and firm sector. Household Sector: The household sector is the sole buyer of goods and services, and the sole supplier of factors of production, i.e., land, labour, capital and organisation. It spends its entire income on the purchase of goods and services produced by the business sector. The household sector receives income from firm sector by providing the factors of production owned by it. Firms: The firm sector generates its revenue by selling goods and services to the household sector. It hires the factors of production, i.e., land, labour, capital and organisation, owned by the household sector. The firm sector sells the entire output to households. In a two – sector economy, production and sales are equal and there will be a circular flow of income and goods. The outer circle represents real flow (factors and goods) and the inner circle represents the monetary flow (factor prices and commodity prices). Real flow indicates the factor services flow from household sector to the business sector, and goods and services flow from business sector to the household. The basic identities of the two-sector economy are as under: Y = C + 1 Where Y is Income; C is Consumption; I is investment.

Briefly explain the two sector circular flow model?

Status of Development: Developed, underdeveloped, undeveloped and developing economies.

Classify the economies based on status of development?

Inflation refers to steady increase in general price level. Estimating the general price level by constructing various price index numbers such as wholesale Price. Index, Consumer Price Index, etc, are needed.

Define the term ‘Inflation’?

The circular flow of income is a model of an economy showing connections between different sectors of an economy. It shows flows of income, goods and services and factors of production between economic agents such as firms, households, government and nations. The circular flow analysis is the basis of national accounts and macroeconomics.

‘Circular Flow of Income’ – Define?

There are three major types of economic systems. They are: 1. Capitalistic Economy (Capitalism): Capitalistic economy is also termed as a free economy (Laissez faire, in Latin) or market economy where the role of the government is minimum and market determines the economic activities. The means of production in a capitalistic economy are privately owned. Manufacturers produce goods and services with profit motive. Example USA, West Germany, Australia and Japan. Socialistic Economy (Socialism): The Father of Socialism is Karl Marx. Socialism refers to a system of total planning, public ownership and state control on economic activities. A Socialistic economy is also known as ‘Planned Economy’ or ‘Command Economy’. In a socialistic economy, all the resources are owned and operated by the government. Public welfare is the main motive behind all economic activities. Example: Russia, China, Vietnam, Poland and Cuba. Mixed Economy (Mixedism): In a mixed economy system both private and public sectors co-exist and work together towards economic development. It is a combination of both capitalism and socialism. It tends to eliminate the evils of both capitalism and socialism.In these economies, resources are owned by individuals and the government. India, Examples: England, France and Brazil.

Describe the different types of economic systems?

Merits of Capitalism: (any 3 points) Automatic Working: Without any government intervention, the economy works automatically. Efficient Use of Resources: All resources are put into optimum use. Incentives for Hard work: Hard work is encouraged and entrepreneurs get more profit for more efficiency. Economic Progress: Production and productivity levels are very high in capitalistic economies. Consumers Sovereignty: All production activities are aimed at satisfying the consumers. Higher Rates of Capital Formation: Increase in saving and investment leads to higher rates of capital formation. Development of New Technology: As profit is aimed at, producers invest on new technology and produce quality goods

Outline the major merits of capitalism?

Globalism is coined by Manfred D Steger in 2002 to denote the new market ideology of globalization that connects nations together through international trade and aiming at global development.

Define Globalism

Stages of Business cycle - Boom, Recession, depression, recovery,

What does the diagram depict

Demerits of Socialism: 1. Red Tapism and Bureaucracy: As decision are taken by government agencies, approval of many officials and movement of files from one table to other takes time and leads to red tapism. 2. Absence of Incentive: The major limitation of socialism is that this system does not provide any incentive for efficiency. Therefore, productivity also suffers. 3. Limited Freedom of Choice: Consumers do not enjoy freedom of choice over the consumption of goods and services. 4. Concentration of Power: The State takes all major decisions. The private takes no initiative in making economic decisions. Hence, the State is more powerful and misuse of power can also take place.

Indicate the demerits of socialism?

1. Ownership of Property and Means of Production: The means of production and properties are owned by both private and public. Public and Private have the right to purchase, use or transfer their resources. 2. Coexistence of Public and Private Sectors: In mixed economies, both private and public sectors coexist. Private industries undertake activities primarily for profit. Public sector firms are owned by the government with a view to maximize social welfare. 3. Economic Planning: The central planning authority prepares the economic plans. National plans are drawn up by the Government and both private and public sectors abide. In general, all sectors of the economy function according to the objectives, priorities and targets laid down in the plan. 4. Solution to Economic Problems: The basic problems of what to produce, how to produce, for whom to produce and how to distribute are solved through the price mechanism as well as state intervention. 5. Freedom and Control: Though private has freedom to own resources, produce goods and ‘ services and distribute the same, the overall control on the economic activities rests with the government.

Enumerate the features of mixed economy?

Status of Development: Developed, underdeveloped, undeveloped and developing economies.

Mention the classification based on Level of National Income.

Capitalism, is total freedom and private ownership of means of production. Capitalistic economy is also termed as a free economy (Laissez faire, in Latin) or market economy where the role of the government is minimum and market determines the economic activities.

What do you mean by Capitalism?

The subject matters covered in macro economic are the area such as employment, national income, inflation, business cycle, poverty, inequality, disparity, investment and saving, capital formation, infrastructure development, international trade, balance of trade, balance of payments, exchange rate and economic growth.

What are the subject matters of macro economic theory?

A model is a simplified representation of real situation. Economists use models to describe economic activities, their relationships and their behaviour. A model is an explanation of how the economy, or part of the economy, works. Most economic models are built with mathematics, graphs and equations, and attempt to explain relationships between economic variables.

Define ‘Economic Model’?

Define National Income

“The labour and capital of a country acting on its natural resources produce annually a certain net aggregate of commodities, material and immaterial including services of all kinds. This is the true net annual income or revenue of the country or national dividend”. -Alfred Marshall.

Write the formula for calculating GNP.

The formula for calculating GNP= (C + I + G + (X-M) + (R-P)).

Trace the relationship between GNP and NNP.

GNP Gross National Product is the total measure of the flow of final goods and services at market value resulting from current production in a country during a year, including net income from abroad NNP Net National Product refers to the value of the net output of the economy during the year. NNP is obtained by deducting the value of depreciation, or replacement allowance of the capital assets from the GNP.

What do you mean by the term ‘Personal Income’?

Personal income

Define GDP deflator.

Deflator

What do you mean by the term ‘Personal Income’?

Personal income is the total income received by the individuals of a country from all sources before payment of direct taxes in a . Personal income is derived from national income by deducting undistributed corporate profit, and employees’ contributions to social security schemes and adding transfer payment.

Define GDP deflator.

GDP deflator is an index of price changes of goods and services included in GDP. It is a price index which is calculated by dividing the nominal GDP in a given year by the real GDP for the same year and multiplying it by 100.

Why is self consumption difficult in measuring national income?

1. Farmers keep a large portion of food and other goods produced on the farm for self consumption. 2. The problem is whether that part of the produce which is not sold in the market can be included in national income or not.