Download 1. Introduction.

MATHEMATIC CENTER D96 MUNIRKA VILLAGE NEW DELHI 110067 & VIKAS PURI NEW DELHI
CONTACT FOR COACHING MATHEMATICS FOR 11TH 12TH NDA DIPLOMA SSC CAT SAT CPT
CONTACT FOR ADMISSION GUIDANCE B.TECH BBA BCA, MCA MBA DIPLOMA AND OTHER COURSES 09810144315
1. What is the difference between microeconomics and macroeconomics?
•
Solution:
Macroeconomics
.
ic
at
m
he 5
at 31
.m 44
w 1
w 0
w 81
09
• It helps to simplify the relationship of country’s total production and the level of
employment to various attributes like price, interest rate, wages, profits etc, by
concentrating on a individual imaginary commodity and what happens to it.
Macroeconomics gives the solution to all the issues that are arising in the market
when the real commodities are bought and sold.
• Especially, when the above mentioned attributes are changing, like increase in the
prices (in what is called an inflation), or decrease in the employment and production
levels (heading for a depression), the variables? movements of the specific variables
for all the individual commodities are similar as are seen for the aggregates for the
economy as a whole.
• The interdependence of various sectors of the economy or the relationship among the
sectors help everyone to understand the happenings to the country’s economy in a
better way, than looking at the economy as a whole.
• Macroeconomics describes the methods to determine the individual output levels,
prices, and an employment level of the various goods.
Micro Economics
• In microeconomics, individual ‘economic agents’ and the nature of the motivations are
the driving force.
• The driving forces are known as micro agents - consumers choosing their respective
optimum combinations of goods to buy, given their tastes and incomes; and
producers trying to make maximum profit out of producing their goods keeping their
costs as low as possible and selling at a price as high as they could get in the
markets.
• It is a study of individual markets of demand and supply and the ‘players’ or the
decision makers, were also individuals who were seen as trying to maximize their
profits and their personal satisfaction or welfare levels.
• A large company may also be known as ‘micro’ as the company is owned and
managed by its own shareholders who may or may not be the interest of the country
as a whole.
2. What are the important features of a capitalist economy?
Solution:
Economy of a capitalist country:
in
•
• The production activities are carried out by the capitalist enterprises in a capitalist
country.
• These types of enterprises are having many entrepreneurs. The entrepreneurs are
having control over the important decisions and they accept the enterprises’ major
risk. The entrepreneurs themselves invest the capital into the business and they
borrow the capital from outside at their own risk.
• The various factors of production such as land, labour and capital are used to get the
outputs and it will be sold in the market to earn Revenue. The earned revenue is
again distributed to the factors of production and the balance amount will be taken
by the entrepreneurs as Profit.
1
CONTACT FOR MATHEMATICS GROUP/HOME COACHING FOR CLASS 11TH 12TH BBA,BCA,
DIPLOMA CPT CAT SSC AND OTHER EXAMS Also home tutors for other subjects in south and west delhi
EMAIL:1 [email protected] web site www.mathematic.in
MATHEMATIC CENTER D96 MUNIRKA VILLAGE NEW DELHI 110067 & VIKAS PURI NEW DELHI
CONTACT FOR COACHING MATHEMATICS FOR 11TH 12TH NDA DIPLOMA SSC CAT SAT CPT
CONTACT FOR ADMISSION GUIDANCE B.TECH BBA BCA, MCA MBA DIPLOMA AND OTHER COURSES 09810144315
• A capitalist economy can be defined as “an economy in which most of the
economic activities have the following characteristics:
• There is private ownership of means of production
• Production takes place for selling the output in the market
• There is sale and purchase of labour services at a price which is called the
wage rate”
.
ic
at
m
he 5
at 31
.m 44
w 1
w 0
w 81
09
3. Describe the four major sectors in an economy according to the macroeconomic
point of view.
Solution:
Major players in the domestic economy:
•
Many developing countries have a significant presence of production units which are
organized according to capitalist principles. The production units are called firms.
In a firm, the entrepreneur (or entrepreneurs) is at the helm of affairs.
o
o
o
The objective of producing any type of goods and services by the entrepreneur
is to sell in the market and to earn profit.
In the process she undertakes risks and uncertainties.
All the factors of production earn their income by carrying out the production
process and by selling the output in the market. The large amount of sales will result in
highest amount of income. It is to be noted that in a capitalist country the factors of
production earn their incomes through the process of production and sale of the resultant
output in the market.
Apart from the above mentioned players, the developed and developing countries are having
the Institution of State.
The role of the state includes:
• Imposing taxes
• Spending money on building public infrastructure
• Running schools, colleges, providing health services
Apart from the above, the state does the following
o
in
Framing laws
Enforcing the laws
Delivering justice
Undertakes production
The states’ roles have to be considered when we describe the country’s
economy. These are also considered as primary functions involved in every country.
•
•
•
•
The major sector in an economy is called the household sector.
• Household: The term represents an individual who is making their own consumption
decisions or a group of individuals who determine their consumption decisions
together.
• Households also save and pay taxes.
• Households consist of people - they work in firms as workers and earn wages.
2
CONTACT FOR MATHEMATICS GROUP/HOME COACHING FOR CLASS 11TH 12TH BBA,BCA,
DIPLOMA CPT CAT SSC AND OTHER EXAMS Also home tutors for other subjects in south and west delhi
EMAIL:2 [email protected] web site www.mathematic.in
MATHEMATIC CENTER D96 MUNIRKA VILLAGE NEW DELHI 110067 & VIKAS PURI NEW DELHI
CONTACT FOR COACHING MATHEMATICS FOR 11TH 12TH NDA DIPLOMA SSC CAT SAT CPT
CONTACT FOR ADMISSION GUIDANCE B.TECH BBA BCA, MCA MBA DIPLOMA AND OTHER COURSES 09810144315
The external sector is also to be considered while we discuss about the Macroeconomics as
it contributes the major part:
1) Exports: The domestic country sells the goods and services to various other countries for
any type of financial consideration.
.
ic
at
m
he 5
at 31
.m 44
w 1
w 0
w 81
09
Imports: The domestic country buys the goods and services to various other countries for
any type of financial consideration.
4. Describe the Great Depression of 1929.
Solution:
•
o
o
o
o
o
The output levels and the employment levels in many countries have fallen
down by large amounts. This was due to the great depression in the year 1929 and this
depression was sustained for few more years. Countries like Europe and North America
were affected much. The demand for the goods and services decreased, many industries
were running idle and the unemployment rate had been increased at the highest
percentage.
In USA, from 1929 to 1933, unemployment rate rose from 3% to 25%.
During the same period, the aggregate output in USA fell down by about 33%.
Due to the great depression, the economists have started to think about the
new way to bring the functioning of the economy back.
Examining the entire functioning of the economy and analyzing the
relationship between the various economic sectors are the major concept under Keynes’
approach. This approach is known as Macroeconomics.
5. What are the important features of a Capitalist Economy?
Solution:
It is an economy in which the production activities are carried out by the capitalist firms.
•
The capitalist economy has the following characteristics.
o
There is private ownership of means of production.
o
Goods are produced to be sold in the market.
o
Sale and purchase of labour services at a price called wage rate.
•
Solution:
MACRO ECONOMICS
Macroeconomics studies the aggregates
of economy like national Income,
employment, Inflation.
MICRO ECONOMICS
in
6. Differentiate between microeconomics and macroeconomics.
Microeconomics is the study of individuals and
small group of individuals, like allocation of
resources change of price.
3
CONTACT FOR MATHEMATICS GROUP/HOME COACHING FOR CLASS 11TH 12TH BBA,BCA,
DIPLOMA CPT CAT SSC AND OTHER EXAMS Also home tutors for other subjects in south and west delhi
EMAIL:3 [email protected] web site www.mathematic.in
MATHEMATIC CENTER D96 MUNIRKA VILLAGE NEW DELHI 110067 & VIKAS PURI NEW DELHI
CONTACT FOR COACHING MATHEMATICS FOR 11TH 12TH NDA DIPLOMA SSC CAT SAT CPT
CONTACT FOR ADMISSION GUIDANCE B.TECH BBA BCA, MCA MBA DIPLOMA AND OTHER COURSES 09810144315
It deals with national income. Expenditure,
Employment. For an objective of Economic
Development.
It deals with prices of various commodities and
factors behind it. It is concerned with the
problem of small units.
It deals with the economy as a whole.
It deals with the single economic unit.
.
ic
at
m
he 5
at 31
.m 44
w 1
w 0
w 81
09
Total output of economy, Distribution of
Output, level of employment, economic
development, etc.
Change in price, Law of Demand and Supply,
Allocation of Resources, Cost Factor Pricing,
etc.
It deals with national income, aggregate
The basis is the price mechanism which
consumption aggregate savings, and
operates with Demand and Supply. The
aggregate investment aggregate expenditure. consumers and producers take their decisions
according to demand and supply.
Theory of Income and employment is the
central theme of Macroeconomics. As it
covers a broader aspect of an economy.
Theory of Pricing is the key of microeconomics.
The change in pricing pattern due to various
factors is the main concerned.
7. Describe the great depression of 1929.
•
Solution:
The output levels in the continent of Europe fell by a huge level. The employment levels also
came to a standstill. Demand for goods was low. North America was also a country that was
affected due to the great depression of 1929. Many factories were kept idle without any
production activities and labourers were jobless. The unemployment rate in the United States
sky rocketed from 3 % to 25%. The output fell by 33% at the same time.
8. Explain the four major sectors in an economy according to the macroeconomic
point of view.
•
Solution:
The four major sectors according to macroeconomics are
The households who are the major players in the working sector earning salary
and paying their taxes. People who own companies and earn profit are also included
in this category.
b.
Firms are basically companies that provide jobs for labourers in producing
products and offering salaried jobs.
c.
Government who are responsible for framing laws, enforcing them and
delivering justice.
d.
External sector. This is mainly divided into exports which comprises of selling
goods to the rest of the world. Another portion of trade is the imports which
concentrate on buying goods utilized for production or to sell internally.
in
a.
4
CONTACT FOR MATHEMATICS GROUP/HOME COACHING FOR CLASS 11TH 12TH BBA,BCA,
DIPLOMA CPT CAT SSC AND OTHER EXAMS Also home tutors for other subjects in south and west delhi
EMAIL:4 [email protected] web site www.mathematic.in