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Definition
Macroeconomics
Importance of
macroeconomics
1)
Growing importance of
macroeconomic issues
2) Persistence of macroeconomic
problems
3) Growing complexity of economic
system
4) Need for government intervention
with the market system
5) Use of macroeconomics in business
management
Macroeconomic issues
1)
2)
3)
4)
5)
6)
National Income
Intermediate
Components of GDP
Y=C+I+G+NX
C= Consumption by household on
goods and services
I=Investment includes capital
equipment, inventories and structures
G=Spending on goods and services by
the government
NX=Export-Import
factor
income
from
Personal income
Personal
PI=NNP-(Undistributed
company
profits+Surplus
of
public
undertaking+Rentals of public
property)
Disposable personal
income
DPI=Personal
income-personal direct
taxes
DPI=Consumption+Saving
At constant
prices(19992000prices)
1990-91
5,15,032
10,83,572
2006-07
37,90,063
28,64,309
GNP Deflator
The
100
Real GNP=Nominal GNP/GNP
Deflator
Calculate
From the following, compute i) real GNP
ii) GNP deflator
Year
PIN
Nominal GNP
Wholesale
199394=100)
2002-03 2284614
2003-04 2531168
166.8
175.9
Methods of measuring
national income
income= Rent
+Wages+
Interest+
Profit+Depreciation
Total factor income is divided into :
1.
Labour incomes :
a) wages and salaries paid to the residents
of the country including bonus and
commission and social security payments
b) supplementary labour income including
employer contribution to social
method
d) net interest paid out by commercial
banks
e) net rent from land building
f) undistributed before tax profits of
corporation
g) Interest on bonds and saving deposits
3)Mixed income: farming enterprises , sole
proprietorship, other profession including
legal and medical practices, trading and
transport etc.
Expenditure method
We
Y=C+I+G+X-M
Value added
method
Expenditure
method
Income method
Agriculture
250
Consumption exp
630
Industry
350
Gross investment
210
Rental income
80
Interest income
100
Service sector
400
Govt purchase
160
NY
830
Add:
Indirect taxes less
subsidies
90
Add:
200708
GDP(Mark 498709
et prices) 0
5630063
6457352
7674148
8912178
Growth
Rate (%)
12.9
14.7
18.8
16.1
GDP(facto 389663
r cost
6
2004-05
prices)
4158676
4507637
4885954
5222027
Growth
rate
6.7
8.4
8.4
6.9
40775
46117
53331
60972
16.1
9.3
Sectoral distribution of
Indias NI
Agriculture
Industry
Service
1950-51
53.1
16.6
30.3
1990-91
29.6
27.7
42.7
2010-11
14.5
27.8
57.7
2011-12
13.9
27.0
59.0
Household consumption
exp
550 billion
250 billion
100 billion
Depreciation
150 billion
Indirect taxes
160 billion
Subsidies
40 billion
Exports
200 billion
Imports
250 billion
150 billion
Compute
i) GDP at market price
ii)GDP at factor price
iii)GNP