SOME BASIC CONCEPTS OF MACRO ECONOMICS

                                        SOME BASIC CONCEPTS OF MACRO ECONOMICS

                                                                                                    •PRESENTED BY:

RAMESH KUMAR,

PGT (ECONOMICS)

K V FARIDKOT CANTT

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•THERE ARE DIFFERENT CONCEPTS OF MACRO ECONOMICS

•1. Factor income,

•2. Transfer Income,

•3. Current Transfer,

•4. Capital transfer,

•5. Stock,

•6. Flow,

•7.Normal resident,

•8.Final goods and

•9. Intermediate goods.

•10. Gross Investment and 

11. Depreciation.

•                                                 EXPLANATION OF CONCEPTS

•1. Factor income: - Income earned by factors of production during production process by rendering their services. It is bilateral concept.

•2. Transfer Income: - Income received without rending any services. Like scholarship, old age pension and unemployment allowance.

•3. Current Transfer:- Transfer made from the income of the payer and added to the income of recipient for consumption expenditure.

•4. Capital transfer: Capital Transfer are those transfer which are made from the saving of the payers for investment purpose.

•5. Stock: - Any economic variable is measured at a point of time like water in the tanks, money in bank account, distance and money supply etc. It is static concept.

•6.Flow:- Any economic variable which is calculating  during period of time is called Flow variable. Water in river, spending of money, Export and import etc

•7.Normal resident: -  It may be person or institute, who resides more than one year. His / Her  centre of interest lies in  domestic territory of a country. He done all his economics activities from that  country

•8.Final goods :- Final goods are those goods, which are out off production boundary and ready for consumption or you. These goods or services have values, or Price.

•9. Intermediate goods: - Intermediate good are those goods which are not the final goods, but these good help to produce other goods like - sugar cane help to made sugar, leather for shoes, thread for cloths.

•10. Gross Investment : -

•Gross Investment is addition to the stock of capital or capital equipment before making allowance for deprecation.

•It raise the productive capacity of goods and services.

•However investment should not confused with finacials investment , because F I is only transfer of ownership right from one person to another like, shares, bonds, debentures, an old house.

11.  Depreciation : - 

•Depreciation or Consumption of fixed capital is loss in value of fixed capital due to normal wear and tear or change in technology. It is also called ‘capital consumption allowance’. Loss of fixed assets is attributed due to following reasons: -

•(i) Regular wear and tear,

•(ii) Natural rate of accidental damages,

•(iii)  Foreseen obsolescence.

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•Home work

•1. What is meant by factor income and transfer income?

•2.  What are the Current transfer and capital transfer?

•3. What is means by stock and flow?

•4. What is meant by resident? 

•5. What is production boundary?

•6. What is meant by Gross investment?

•7. What are reasons for consumption of fixed capital.

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