SS 2 Economics

The theory of the multiplier– states that an increase in consumer or business investment spending in a country would produce a multiplier effect by raising the level of national income.  The multiplier effect can be a result of changes in consumption expenditure, which is known as consumption multiplier or investment changes, which is known as […]

Circular Flow Of Income Circular flow of income shows the independence or relationship between households and business enterprise. Commodity and money flows between households and firms. It shows the flow of payments from business sector to households in exchange for labour and other productive services and the return flow of payments from households to business

As individuals and firms keep account of their economic activities such as their annual report which shows all their activities during the past year, countries too like individuals and firms do record and keep their economic activities. National Income– is defined as the monetary value of the total volume of goods and services produced by

Capital Market- is a market for medium and long-term loans. The capital market serves the needs of industries and the commercial sectors. It comprises all institutions which are concerned with either the supply of or demand for long-term loans. The capital market provides a system by which money for investment is distributed to institutions which

A budget is a financial statement outlining the estimated total revenue and proposed expenditures of a government within a specified period, typically a year.   Functions/Uses/Importance of Budgets: The national budget serves several purposes: Acts as a means of revenue generation. Controls inflation. Functions as a remedy for economic downturns or deflation. Addresses balance of

Taxation is the act of imposing a mandatory levy by the government on the income of individuals, businesses, and goods and services. It entails a compulsory payment made by eligible citizens toward the country’s expenditures, irrespective of the specific benefits received. This contribution is imposed by the government on goods, individuals, and corporate entities without

Public finance is the branch of economics concerned with the financial activities related to income, expenditure, and national debt operations, and their overall impact on the economy. In essence, it involves the management and control of government income and expenditure to achieve policy objectives. This field requires a thorough analysis of the sources of government

What is Inflation? Inflation is the sustained increase in the overall price level of goods and services, resulting from a rise in the money supply without a corresponding increase in production volume.   Types of Inflation: Demand-Pull Inflation Cost-Push Inflation Hyper-Inflation Creeping Inflation Demand-Pull Inflation occurs when there is an excess demand for goods and

Money Market The money market is a trading platform for short-term securities, involving institutions or individuals with funds to lend or a need for short-term borrowing.   Instruments Utilized In The Money Market Treasury Bills Issued by the Central Bank, these instruments enable the government to raise capital for a ninety-day period.   Treasury Certificate

Money Demand Demand for money represents the total amount of money an individual wishes to hold for various reasons. It reflects the inclination to keep resources in a liquid form rather than spending them and is termed Liquidity Preference in economics.   Motives For Holding Money Lord Menard Keynes proposed three main motives for holding

Meaning of Industry An industry comprises a cluster of companies involved in the production of similar commodities, such as the shoe, transport, or cement industry. The term “industry” refers to the productive aspect of business activities, encompassing processes like cultivation, production, processing, or manufacturing of goods.   These goods are classified into consumer goods and

Meaning of Supply of Labour Labor supply can be defined as the overall count of individuals of working age available for employment The size and growth rate of the population. The supply of labor refers to the quantity of labor that workers are willing and able to offer for employment at various wage rates in

The labor market can be defined as the arena where workers and employers interact to determine working conditions. It comprises individuals seeking employment, employers, and governmental entities.   The Concept Of Labor Force The labor force encompasses the total number of working-age individuals in a country who are either employed or capable and willing to

An economic system can be characterized as the organized means by which a state’s production resources are employed to fulfill human needs. The primary economic systems include capitalism, socialism, and mixed economies.   Capitalism or Free Market Economy: Capitalism, also known as a free-market economy, is described as an economic system where private individuals own

Revenue refers to the income derived by a producer or firm from business activities or from the sale of his or its products. Types Of Revenue Tota Revenue (TR): This refers to the total income which a firm derives from the sale of its products. Total Revenue = Price x Quantity (TR = PxQ)