Describe the four major sectors in an economy according to the macroeconomic point of view.
The four major sectors of an economy according to the macroeconomic point of view are:
1. Households
2. Firms
3. Government
4. External Sector
Below are the one by one explanations.
1. Households
Households buy goods and services for consumption and also supply factors of production like land, labour, capital, and entrepreneur. Households provide the market for the output of the firms.
2. Firms
Firms are economic units that carry out the production. They employ and organise factors of production and undertake the production process for the motive of profit making.
3. Government
A state/government provides law and order, maintains growth and stability and provides administrative services. The main motive of a government is to undertake developmental projects such as dams, roads, heavy industries that usually have long gestation periods. The government invests in education, health sector and provides these services at nominal price. The motive of a government is to serve and not to make profits.
4. External Sector
This sector is engaged in export and import (external trade) of goods and services. If domestically produced goods and services are sold to the rest of the world, then it is called export. If the goods and services are purchased from the rest of the world, then it is called import.
Differentiate between devaluation and depreciation.
What is a barter system? What are its drawbacks?
Write down some of the limitations of using GDP as an index of welfare of a country.
Explain the relation between government deficit and government debt.
From the following data, calculate Personal Income and Personal Disposable Income.
Rs (crore)
(a) Net Domestic Product at factor cost 8,000
(b) Net Factor Income from abroad 200
(c) Undisbursed Profit 1,000
(d) Corporate Tax 500
(e) Interest Received by Households 1,500
(f) Interest Paid by Households 1,200
(g) Transfer Income 300
(h) Personal Tax 500
Why should the aggregate final expenditure of an economy be equal to the aggregate factor payments? Explain.
Give the relationship between the revenue deficit and the fiscal deficit.
Discuss the issue of deficit reduction.
Are fiscal deficits inflationary?
What is the difference between ex ante investment and ex post investment?
Explain the relation between government deficit and government debt.
Why should the aggregate final expenditure of an economy be equal to the aggregate factor payments? Explain.
What is High Powered Money?
Do you consider a commercial bank ‘creator of money’ in the economy?
Suppose the GDP at market price of a country in a particular year was Rs 1,100 crores. Net Factor Income from Abroad was Rs 100 crores. The value of Indirect taxes – Subsidies was Rs 150 crores and National Income was Rs 850 crores. Calculate the aggregate value of depreciation.
What is the difference between microeconomics and macroeconomics?
Discuss some of the exchange rate arrangements that countries have entered into to bring about stability in their external accounts.
What is a ‘legal tender’? What is ‘fiat money’?
Suppose it takes 1.25 yen to buy a rupee, and the price level in Japan is 3 and the price level in India is 1.2. Calculate the real exchange rate between India and Japan (the price of Japanese goods in terms of Indian goods). (Hint: First find out the nominal exchange rate as a price of yen in rupees).
What is the marginal propensity to import when M = 60 + 0.06Y? What is the relationship between the marginal propensity to import and the aggregate demand function?