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For example, all the durable goods like cars, trucks, refrigerators, buildings, aircrafts, 10. 7. (b) Capital Goods: The goods and services purchased include both durable goods and non-durable goods and services. 10. (i) Total production of goods and services by firms = Total consumption of goods and services by Household Sector. • Business expenses of the employees on tours and entertainment. For example, Distance, Amount of Money, Money Supply, Water in Tank, etc. Following are not included under the category of Normal residents: For example, bread used by a consumer household is a final goods, but the same used by a bakery for making a sandwich is a intermediate goods. 1. Current transfers: Transfers made from the current income of the payer and added to the current income of the recipient (who receive) for consumption expenditure are called current transfers. • Disposition means expenditure made. each week) to work in the neighbouring country are the normal residents of their own countries. MACRO ECONOMICS Test your understanding of Basic economic concepts with these 9 questions. (iii) In layman terms, the domestic territory of a nation is understood to be the territory lying within the political frontiers (or boundaries) of a country. If the economy is not producing the ⦠For example, Indian Embassy in Russia is a part of the domestic territory of India. 2. (iii) Officials, diplomats and members of the armed forces of a foreign country. Models are useful because they help us to dispense with irrelevant details and to focus on important economic relations more clearly. Macroeconomic environment ppt Babasab Patil. by Mankiw/Kneebone/McKenzie. Presentation Summary : PowerPoint Presentations for . Each post has a link to a free set of PowerPoint slides that can potentially be used in teaching. It refers to flow of money, income or the flow of goods and services across different sectors of the economy in a circular form. Basic Concepts of Macroeconomics The economic wealth or well-being of a nation thus does not certainly rely upon the meagre ownership or possession of resources; the point is how these resources are utilised in causing a flow of manufacturing and how, as a result, income and wealth are caused from that procedure. For India, they There are two types of transfers: Even foreigners can be the residents if they pass the above stated economic criterion. (c) There is a difference between the terms normal resident (resident) and citizen (or national). (c) According to the production boundary, if a good does not cross the imaginary line around the production unit and reaches to other firm within the production boundary, is known as intermediate good. A model is a description of reality with some simplification. Positive Statements- Based on facts. Unit 1: Basic Economic Concepts What is Economics? Basic Economic Concepts PPT Presentation Summary : Basic Economic Concepts. Concept of macroeconomics Bibek Oli. 12. (v) Foreigners who are the employees of non-resident enterprises and who have come to the country for purposes of installing machinery or equipment purchased from their employers. (i) Production boundary plays a vital role to differentiate between intermediate and final goods. (i) The resident lives or is located within the economic territory for more than one year and Choice: In simple term this is the most important economic concepts & fundamental for understanding economics.If we take the holistic approach, the whole basis of economics depends on the concept of scarcity. (ii) Market for factors of production, factor market. (i) One example is embassies. (c) According to production boundary, if a good crosses the imaginary line around the production unit and reaches to final consumer or investment made by a producer within the imaginary line of production unit is known as the final good. Final Goods They are motor cars, refrigerators, television sets, washing machines, air-conditioners, kitchen equipments, computers, communication equipments etc. Introduction And Structure Of MacroEconomics: Mankiw begins the chapter with the claim that international trade can make everyone better off. (iii) Disposition Phase: (b) Investment or capital formation (like building, machinery purchased by a firm) Scribd is the ⦠(i) Personal Consumption (like bread purchased by consumer household), or (if) Investment Or Capital Formation (like building, machinery purchased by a firm) Factor Income • Household Sector. Examples: Old Age Pension, Scholarship, Unemployment allowance. (a) Producer sector engaged in the production of goods and services. Economics: the discipline that deals with the allocation of scarce resources for the ⦠Transfer income: Income received without rendering any productive services is known as Transfer Income. Economic territory or Domestic Territory: About this unit. (b) It is static in nature, i.e., it do not change. When reading the chapter, here are some aspects to consider: 1. (i) Further processing (like sugar used for making sweets); or (c) Value of goods received from foreign governments in form of gifts or as transfers. Military vehicles and light weapons. As against it, if a good does not cross the imaginary line around the production unit and reaches to other firm within the production boundary, it is known as intermediate good. (iii) Firms hire factor services from Households. (b) Expenditure on Military Equipment missiles, rockets, bombs, warships, submarines, military aircrafts, tanks, missile carriers and rocket-launchers etc. 4. ‘Consulate’ is an office or building used by consul (an officer commissioned by the government to reside in a foreign country to promote the interest of the countiy to which he belongs). (c) The government sector engaged in activities like taxation and subsidies (a) Real/Product/Physical Flow productive processes. as residents (and not as nationals) of these countries. (ii) The resident carries out the basic economic activities of earnings, spending and accumulation from that location Repair and maintenance of capital stock mean expenditure incurred for maintaining fixed assets and keep them in good working order. • Durable goods: These goods have an expected life time of several years and of relatively high value. These give direct satisfaction to a consumer. (ii) Factor Payments by Firms = Factor Incomes of Household Sector. 1. 7. • Transfers made from the income of the payer and added to the income of the recipient (who receive) for consumption expenditure are called current transfers. (i) When a person is born in India, he acquires automatic citizenship of India. Macroeconomics is a branch of Economics that deals with the structure, behaviour, decision-making, and performance of an economy as a whole. Macroeconomics is the part of economic theory that studies the economy as a whole, such as national income, aggregate employment, general price level, aggregate consumption, aggregate investment, etc. (d) As we know, intermediate goods are purchased by one production unit from another production unit within the production boundary. 11. In this unit, you'll learn fundamental economic concepts like scarcity, opportunity cost, and supply and demand. 3. Accordingly, he established the Calvin K. Kazanjian Economics Foundation Inc, in 1949 as a philanthropic, nonpolitical educational organization to support efforts that ⦠1. (iii) It is not necessary that a resident must also be the national of that country. (c) There is time dimension in flow variables. Under the field of macroeconomics, the production possibility frontier (PPF) represents the point at which an economy is most efficiently producing its goods and services and, therefore, allocating its resources in the best way possible. Similarly, planes operated by Malaysian Airlines between India and Japan are a part of the domestic territory of Malaysia. And amidst all these preparations, there will be someone or some committeeoverseeing or managing the entire event at a large scale or macro level. 9. His blog features short articles relating to economics teaching, including news, data, examples, and illustrations. (i) Production Phase: Consider a basic scenario of your schoolâs annual day celebrations. OpenEconomy Macroeconomics Basic Concepts Group 5 Waramori, Mandane ⦠Stock Based on ‘freedom’ criterion, the scope of economic territory is defined to cover: 1. In case they continue to stay for one year or more in the host country, they will be treated as normal residents of the host countiy). The production boundary is the imaginary line around the production unit. These phases are illustrated in the figure given here. In research and exploratory activities (like oil exploration in different parts of India by the Oil and Natural Gas Commission) or improving the technology of a particular production process. See our User Agreement and Privacy Policy. Examples: Rent, interest, wages and profit. Accordingly, money flows back to the producing sector as household expenditure as shown in the flowchart. NCERT Solutions for Class 6, 7, 8, 9, 10, 11 and 12, CBSE NotesCBSE Notes Macro EconomicsNCERT Solutions Macro Economics. An economy may be divided into different sectors depending on the nature of study. Sixth Canadian Edition. 1. Rather, these purchases are meant for investment and are termed as final product. Chapter 1 - basic concepts about macroeconomics for BBA, No public clipboards found for this slide. This phase deals with expenditure on the purchase of goods and services by households and other sectors. • Commodities consumed. Its main instruments are aggregate demand and aggregate supply. (c) There is no time dimension in stock variables. (ii) A person born outside India applies for citizenship and Indian Law allows him to become Indian Citizen. This includes the expenditure on new parts of the fixed assets. 13. Economics is the study of scarcity and choice Scarcity means that there is a finite amount of a good or service (Basically they are limited). 6. (i) Money flow refers to the flow of factor income, as rent, interest, profit and wages from the producing sector to the household sector as monetary rewards for their factor services as shown in the flowchart. Government of India does not enjoy the above freedom in the foreign embassies located within India. • Commodities used in basic scientific research. • Non-durable goods: Goods which can not be used again and again, i.e., they lose their identity in a single act of consumption are known as non-durable goods. 2. (ii) According to the production boundary, if a good crosses the imaginary line around the production unit and reaches to final consumer or investment made by a producer within the imaginary line of production unit, it is known as final good. Supply Chain Management - an Introduction: Lecture 01 - The origin and history of Logistics and Supply Chain Management have been discussed in brief. • Capital transfers are defined as transfers in cash and in kind for the purpose of investment to recipients, made out of the wealth or saving of the donor. They are treated as part of the economic territories of their respective countries. 6. (ii) Distribution Phase: It means the flow of income in the form of rent, interest, profit and wages, paid by producer sector to the household sector. Some Basic Concepts Of MacroEconomics. whose function is to release weapons. Note: Households are taken as the owners of factors of production. 2. bound with an audacious hope that the subject under scrutiny is a rational entity which seeks to improve its overall well-being (i) Meaning: Consumption goods are those which satisfy the wants of the consumers directly. For example, replacement of the tyres of a truck is an intermediate consumption, but not the replacement of its engine. (a) Consumption Goods: • It deals with the production of goods and services by the producer sector. (b) The above definition is based on the criterion “freedom of circulation of persons, goods and capital”. Money flow (nominal flow): Money flow refers to the flow of factor income, as rent, interest, profit and wages from the producing sector to the household sector as monetary rewards for their factor services. (b) Resale in the same year (If car purchased by a car dealer for resale). Structure of macro economy: As we know, Macroeconomics is concerned with economic problems at the level of an economy as a whole. Normal Resident/Resident • Embassies, consulates and military establishments of a country located abroad. Open-Economy Macroeconomics: Basic Concepts. that the more people understood about basic economics the happier and more prosperous they would be. Looks like you’ve clipped this slide to already. (iii) These two sectors are dependent on each other in the following ways: 5. Or in other words, the big picture. Consumption goods: Consumption goods are those goods which satisfy the wants of consumers directly. including repair and maintenance of capital stock: Non-durable goods and services are those which have an expected life time of use of less than one year. Thus, the basis of classification between these two goods is not the commodity itself, but the use made of it. 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(a) Real flow (i) Further processing; or (b) In other words, final goods are those, which require no further processing and are available in an economy for consumption purpose or investment. • This is a Money Flow from other sectors to the producer sector. Transfer Income (ii) A person is treated resident of a country on the basis of economic criterion. There are two types of Circular flow: There are three types of phases of Circular flow. Real flow or physical flow: Real flow of income implies the flow of factor services from the household sector to the producing sector and corresponding flow of goods and services from the producing sector to the household sector. For example, scholarships, gifts, old age pension, etc. In macroeconomics, similar economic agents are aggregated to sectors and different goods are aggregated to index numbers like Gross Domestic Product. 8. Examples of these transfers in kind are food, clothing, medicines, vegetable oils, butter, toys sent by the government of one country to the other in times of natural calamities or as a token of goodwill and friendship between two countries. (ii) Let us consider a simple economy consisting only of 2 sectors: (i) Foreign visitors in the country for such purposes as recreation, holidays, medical treatment, study tours, conferences, sports events, business etc. For example, Fishing boats operated by Indian fishermen in international waters of Indian Ocean will be considered a part of domestic territory of India. (they are supposed to stay in the host country for less than one year. (They are supposed to stay for less than one year. Avoids value air-fields and submarines used to produce goods and are ready for sale in the market For example, purchases of building, machinery, etc. In the given diagram, there are 3 production units. You can change your ad preferences anytime. It is a Money Flow. Unit I: Basic Economic Concepts. Similarly, planes operated by Air India between Russia and Japan are part of the domestic territory of India. (a) Citizenship is basically a legal concept based on the place of birth of the person or some legal provisions allowing a person to become a citizen. | PowerPoint PPT presentation | online tutorial (ii) Capital Transfers Ed Dolan teaches global macroeconomics, managerial economics, money and banking, and other courses in several European countries. (a) A Normal residenf, whether a person or an institution, is one whose centre of economic interest lies in the economic territory of the country in which he lives. 3. But, it is a Money flow, if we study it in terms of the market value of the goods produced. (iv) International bodies like World Bank, World Health Organisation or International Monetary Fund are not considered residents of the country in which these organisations operate but are treated as residents of international territory. Logistics and supply chain management concepts have been defined clearly and the basic concepts of supply chain explained with excellent examples. 4. (a) Any economic variable which is calculated at a particular point of time is known as stock. Lecture 1 definitions and scope kamran. Macroeconomics is ânon-experimentalâ: like, e.g., history, macro-economics cannot conduct controlled scienti ï¬c experiments (people would complain about such experiments, and with a good reason) and focuses on pure observation. Because historical episodes allow diverse interpretations, many conclusions of macroeconomics are not coercive. However, the staffs of these bodies are treated as normal residents of the country in which the international body operates. \çå±²Most of the material in this chapter is not analytical. 5. However, the goods received for distribution to consumer households without renovation or alternation should not be included in intermediate consumption as these goods go into the final consumption of consumer households. (a) These are the goods that are used for: Point to Remember for Final Goods and Intermediate Goods rights of operation. Bread is final good as it lies outside the purview of production boundary. (b) In other words, intermediate goods are the ones, which require further processing and are not available in an economy for the purpose of consumption. Principles of Macroeconomics. Within this limit, wheat and flour are intermediate goods. (b) It is a bilateral [Two-Sided] Concept. (b) The centre of economic interest implies in two things: If you continue browsing the site, you agree to the use of cookies on this website. (ii) International organizations like UNO, WHO, etc. Macroeconomics slide Thao Nguyen. For example, international body like World Health Organisation located in India is not normal resident of India but Americans working in its office for more than a year will be treated as normal residents of India. (i) Current transfers (ii) Capital transfers Unit 1. • Ships and aircrafts owned and operated by normal residents between two or more countries. (b) It is a unilateral [one-sided] concept. These are medical care, transport and communications, education, domestic services rendered by hired servants, etc. Start test. (i) Capital goods are defined as all goods produced for use in future productive processes. located within the geographical boundaries of a country. Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. • Advertisements, market research and public relationship meant for improving the goodwill of the business enterprises. Many students find the subject difficult because they donât have CBSE Class 12 Macroeconomics chapter wise notes. They cannot be seen or touched, i.e., they are intangible in nature. In most cases, everyone is involved in one activity or the other. Macroeconomics Unit 1 - Basic Economic Concepts ðquestionEconomics answerThe science of scarcity and the study of choices questionScarcity answerThe condition ⦠(ii) Household supply factor services to firms. The life of the new parts may be around one year or slightly more and the value should be relatively small. (b) It is a bilateral [Two-Sided] Concept. Capital transfers: Capital transfers are defined as transfers in cash and in kind for the purpose of investment to recipient made out of the wealth or saving of a donor. In this unit, we introduce the economic way of thinking and some of the foundational concepts of economics: scarcity, tradeoffs, and comparative advantage. Open Economy Macroeconomics:basic Concepts Site 2 Home PPT. The thick border drawn around these three units is the Production Boundary. • Producer Sector. Final goods: These are those which are used for: You and your friends may either volunteer for backstage help or participate in one or more events. This is based on the ability of trade to allow positions to be achieved that are outside a countryâs production possibility frontier. In case they continue to stay for one year or more, they will be treated as normal residents of the host country). 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