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C.B. Sachdeva's Introductory Macroeconomics: A Comprehensive Guide for Class 12 Students


Before I start writing the article, let me explain what the topic is about. The topic "cbsachdevaclass12economicspdf47" is a combination of words that refer to a book by C.B. Sachdeva, who is an author of introductory macroeconomics textbooks for class 12 students in India. The book is based on the syllabus prescribed by the Central Board of Secondary Education (CBSE), which is a national level board of education in India. The book covers various topics related to macroeconomics, such as national income accounting, money and banking, government budget and the economy, balance of payments and foreign exchange rate, etc. The book is available in PDF format online for free download. The number 47 at the end of the topic may indicate the page number or the chapter number of the book. Now that I have explained what the topic is about, let me write an outline of the article that I will write based on this topic. # Outline of the Article ## Introduction - Define macroeconomics and its importance - Introduce C.B. Sachdeva and his book on introductory macroeconomics for class 12 students - Explain what CBSE is and how it sets the syllabus for class 12 economics - Mention that the book is available in PDF format online for free download - Give an overview of what topics are covered in the book ## National Income Accounting - Explain what national income accounting is and why it is useful - Define gross domestic product (GDP), gross national product (GNP), net national product (NNP), national income (NI), personal income (PI), and disposable income (DI) - Explain how GDP can be measured using three methods: expenditure approach, income approach, and value-added approach - Explain how GDP can be classified into nominal GDP and real GDP - Explain how GDP can be used to measure economic growth and welfare ## Money and Banking - Explain what money is and what functions it performs - Define money supply and its components: currency, demand deposits, time deposits, etc - Explain how money supply is controlled by monetary policy tools: open market operations, bank rate, cash reserve ratio, statutory liquidity ratio, etc - Explain what banking is and what functions it performs - Define commercial banks and central bank and their roles in the economy - Explain how commercial banks create money through credit creation process - Explain how central bank regulates commercial banks through quantitative and qualitative methods ## Government Budget and the Economy - Explain what government budget is and what objectives it serves - Define budgetary deficit and its types: revenue deficit, fiscal deficit, primary deficit - Explain how budgetary deficit is financed by borrowing from domestic and foreign sources - Explain how budgetary deficit affects economic growth, inflation, interest rate, exchange rate, etc - Explain how fiscal policy can be used to influence aggregate demand and output through government expenditure and taxation ## Balance of Payments and Foreign Exchange Rate - Explain what balance of payments is and what components it consists of: current account, capital account, financial account - Define balance of trade and balance of payments equilibrium and disequilibrium - Explain how balance of payments disequilibrium can be corrected by automatic and deliberate measures: exchange rate adjustment, expenditure switching policies, expenditure changing policies, etc - Explain what foreign exchange rate is and what factors determine it: demand for foreign currency, supply of foreign currency, etc - Explain how foreign exchange rate can be classified into fixed exchange rate and flexible exchange rate - Explain how foreign exchange rate affects balance of payments, exports, imports, inflation, etc ## Conclusion - Summarize the main points of the article - Emphasize the importance of macroeconomics and C.B. Sachdeva's book for class 12 students - Provide some tips and resources for further learning and revision - End with a call to action and a thank you note ## FAQs - Q: What is the difference between microeconomics and macroeconomics? - A: Microeconomics studies the behavior of individual economic agents, such as consumers, producers, households, firms, etc. Macroeconomics studies the behavior of the aggregate economy, such as national income, output, employment, inflation, etc. - Q: What is the difference between CBSE and NCERT? - A: CBSE is a board of education that conducts examinations and sets syllabus for class 10 and 12 students in India. NCERT is an organization that develops and publishes textbooks and other educational materials for CBSE and other boards. - Q: What is the difference between GDP and GNP? - A: GDP measures the total value of goods and services produced within a country in a given period of time. GNP measures the total value of goods and services produced by the residents of a country in a given period of time, regardless of where they are located. - Q: What is the difference between fiscal policy and monetary policy? - A: Fiscal policy refers to the use of government expenditure and taxation to influence aggregate demand and output. Monetary policy refers to the use of money supply and interest rate to influence aggregate demand and output. - Q: What is the difference between fixed exchange rate and flexible exchange rate? - A: Fixed exchange rate refers to a system where the value of a currency is determined by the government or a central authority in relation to another currency or a basket of currencies. Flexible exchange rate refers to a system where the value of a currency is determined by the market forces of demand and supply. # Article Based on the Outline ## Introduction Macroeconomics is the branch of economics that studies the behavior and performance of the aggregate economy. It deals with topics such as national income, output, employment, inflation, balance of payments, foreign exchange rate, etc. Macroeconomics helps us to understand how the economy works as a whole and how it is affected by various policies and events. One of the most popular and widely used books on introductory macroeconomics for class 12 students in India is written by C.B. Sachdeva. He is an author of several textbooks on economics for different levels of education. His book on introductory macroeconomics for class 12 students is based on the syllabus prescribed by the Central Board of Secondary Education (CBSE). CBSE is a national level board of education in India that conducts examinations and sets syllabus for class 10 and 12 students. CBSE aims to provide quality education that fosters creativity, innovation, and excellence among students. CBSE also follows the guidelines of the National Council of Educational Research and Training (NCERT), which is an organization that develops and publishes textbooks and other educational materials for CBSE and other boards. C.B. Sachdeva's book on introductory macroeconomics for class 12 students covers various topics related to macroeconomics in a simple and lucid manner. The book explains the concepts, theories, models, diagrams, formulas, examples, exercises, etc. in an easy-to-understand way. The book also provides summaries, revision notes, practice questions, previous year questions, etc. to help students prepare for their examinations. The best part is that C.B. Sachdeva's book on introductory macroeconomics for class 12 students is available in PDF format online for free download. Students can access the book anytime and anywhere without any hassle. They can also print or save the book on their devices for future reference. In this article, we will give you an overview of what topics are covered in C.B. Sachdeva's book on introductory macroeconomics for class 12 students. We will also provide you some tips and resources for further learning and revision. So, let's get started! ## National Income Accounting National income accounting is a system of measuring and recording the economic activity of a country in a given period of time. It helps us to know how much income is generated by different sectors of the economy, how much output is produced by different industries, how much expenditure is made by different agents, etc. National income accounting also helps us to compare the economic performance of different countries or regions over time. One of the most important concepts in national income accounting is gross domestic product (GDP). GDP measures the total value of goods and services produced within a country in a given period of time. GDP can be measured using three methods: the economy, such as consumption, investment, government spending, and net exports. - Income approach: This method adds up all the incomes earned by different factors of production in the economy, such as wages, rent, interest, and profit. - Value-added approach: This method adds up the value added by each industry or sector in the economy, which is the difference between the value of output and the value of intermediate inputs. GDP can be classified into two types: nominal GDP and real GDP. Nominal GDP measures the value of goods and services produced in a country at current prices. Real GDP measures the value of goods and services produced in a country at constant prices. Real GDP is more accurate than nominal GDP for measuring economic growth and welfare, as it eliminates the effect of inflation or deflation. GDP can be used to measure economic growth and welfare of a country. Economic growth refers to the increase in the output or income of a country over time. Economic growth can be calculated by finding the percentage change in real GDP over time. Welfare refers to the well-being or satisfaction of the people in a country. Welfare can be measured by finding the per capita real GDP, which is the real GDP divided by the population. ## Money and Banking Money is anything that is generally accepted as a medium of exchange, a unit of account, and a store of value. Money performs three functions in the economy: - Medium of exchange: Money facilitates transactions by eliminating the need for barter or double coincidence of wants. Money enables people to buy and sell goods and services easily and efficiently. - Unit of account: Money provides a common measure of value or a standard of comparison for goods and services. Money enables people to express prices and costs in a uniform way. - Store of value: Money allows people to save and transfer purchasing power over time. Money enables people to hold wealth in a convenient and liquid form. The total quantity of money available in an economy at a given point of time is called money supply. Money supply consists of various components, depending on how liquid or easily convertible into cash they are. The most common components of money supply are: - Currency: This includes coins and paper notes issued by the government or the central bank. - Demand deposits: These are deposits held by commercial banks that can be withdrawn on demand by cheque or ATM. - Time deposits: These are deposits held by commercial banks that have a fixed maturity period and cannot be withdrawn on demand. - Other deposits: These are deposits held by other financial institutions, such as post offices, cooperative banks, etc. Money supply is controlled by monetary policy, which is the use of money supply and interest rate to influence aggregate demand and output in the economy. Monetary policy is conducted by the central bank, which is the apex monetary authority in a country. The main tools of monetary policy are: - Open market operations: These are the buying and selling of government securities or bonds by the central bank in the open market. When the central bank buys securities, it injects money into the economy, increasing money supply and lowering interest rate. When the central bank sells securities, it withdraws money from the economy, decreasing money supply and raising interest rate. - Bank rate: This is the rate at which the central bank lends money to commercial banks for short-term purposes. When the central bank raises the bank rate, it makes borrowing more expensive for commercial banks, reducing money supply and increasing interest rate. When the central bank lowers the bank rate, it makes borrowing cheaper for commercial banks, increasing money supply and decreasing interest rate. the central bank. When the central bank increases the CRR, it reduces the amount of money that commercial banks can lend out, reducing money supply and increasing interest rate. When the central bank decreases the CRR, it increases the amount of money that commercial banks can lend out, increasing money supply and decreasing interest rate. - Statutory liquidity ratio (SLR): This is the percentage of deposits that commercial banks have to maintain as liquid assets, such as cash, gold, government securities, etc. When the central bank increases the SLR, it reduces the amount of money that commercial banks can lend out, reducing money supply and increasing interest rate. When the central bank decreases the SLR, it increases the amount of money that commercial banks can lend out, increasing money supply and decreasing interest rate. Banking is a system of financial intermediation that involves accepting deposits from savers and lending them to borrowers. Banking performs four functions in the economy: - Mobilization of savings: Banking encourages saving by offering interest and security to depositors. Banking also facilitates saving by providing various types of deposit accounts, such as savings account, current account, fixed deposit account, recurring deposit account, etc. - Allocation of credit: Banking allocates credit to various sectors and activities in the economy according to their productivity and profitability. Banking also provides various types of loans, such as personal loan, home loan, car loan, education loan, business loan, etc. - Creation of money: Banking creates money by lending out more than what they receive as deposits. This is possible because only a fraction of deposits are required to be kept as reserves by the central bank. This process is called credit creation. - Facilitation of payments: Banking facilitates payments by providing various modes of payment, such as cheque, demand draft, debit card, credit card, net banking, mobile banking, etc. There are two types of banks in the economy: commercial banks and central bank. Commercial banks are financial institutions that accept deposits from the public and lend them to borrowers for profit. Central bank is the apex monetary authority in a country that regulates and supervises the banking system and conducts monetary policy. Commercial banks play an important role in the economy by providing credit to various sectors and activities. They also create money through credit creation process. The credit creation process can be explained as follows: - Suppose a commercial bank receives a deposit of Rs 1000 from a customer A. - The bank has to keep a certain percentage of this deposit as reserve with the central bank. This percentage is called CRR. Suppose CRR is 10%. Then the bank has to keep Rs 100 as reserve and can lend out Rs 900 to another customer B. - Customer B uses this loan to buy goods or services from another person C. Person C deposits this money in another commercial bank. - The second bank also has to keep 10% of this deposit as reserve and can lend out Rs 810 to another customer D. - This process continues until no more loans can be given out. The total amount of money created by this process can be calculated by using a formula: Money multiplier = 1/CRR Total money created = Initial deposit x Money multiplier In this example, Money multiplier = 1/0.1 = 10 Total money created = Rs 1000 x 10 = Rs 10,000 Thus, by lending out more than what they receive as deposits, commercial banks create money in the economy. Central bank plays an important role in the economy by regulating and supervising the banking system and conducting monetary policy. The main functions of the central bank are: - Issuer of currency: The central bank has the sole authority to issue currency notes and coins in a country. It also regulates their circulation and distribution in the economy. - Banker to the government: The central bank acts as a banker to the government by managing its accounts and transactions. It also lends money to the government for short-term purposes and advises it on economic matters. the banks by holding their reserves and providing them liquidity support. It also regulates and supervises their functioning and ensures their stability and solvency. - Monetary policy maker: The central bank makes and implements monetary policy to influence money supply and interest rate in the economy. It uses various tools of monetary policy, such as open market operations, bank rate, CRR, SLR, etc. to achieve its objectives of price stability, economic growth, employment generation, etc. ## Government Budget and the Economy Government budget is a statement of the estimated receipts and expenditures of the government for a given fiscal year. A fiscal year is a period of 12 months for which the government plans its budget. In India, the fiscal year starts from April 1 and ends on March 31. Government budget serves four objectives in the economy: - Allocation function: Government budget allocates resources among different sectors and activities in the economy according to their social and economic priorities. For example, government budget allocates funds for public goods and services, such as defense, education, health, infrastructure, etc. - Distribution function: Government budget distributes income and wealth among different groups of people in the economy according to their needs and abilities. For example, government budget provides subsidies, transfers, welfare schemes, etc. for the poor and disadvantaged sections of the society. - Stabilization function: Government budget stabilizes the economy by maintaining a balance between aggregate demand and aggregate supply. For example, government budget uses fiscal policy to counter the effects of inflation, deflation, recession, etc. - Growth function: Government budget promotes economic growth by creating an enabling environment for investment and production. For example, government budget provides incentives, infrastructure, public goods, etc. for the private sector. One of the most important concepts in government budget is budgetary deficit. Budgetary deficit refers to the excess of total expenditure over total receipts of the government in a given fiscal year. Budgetary deficit indicates the borrowing requirement of the government to finance its expenditure. Budgetary deficit can be classified into three types: - Revenue deficit: Revenue deficit refers to the excess of revenue expenditure over revenue receipts of the government in a given fiscal year. Revenue expenditure is the expenditure that does not create any asset or reduce any liability for the government. Revenue receipts are the receipts that do not create any liability or reduce any asset for the government. Revenue deficit indicates that the government is not able to meet its current expenditure from its current income. - Fiscal deficit: Fiscal deficit refers to the excess of total expenditure over total receipts excluding borrowings of the government in a given fiscal year. Fiscal deficit indicates that the government is not able to meet its total expenditure from its total income excluding borrowings. - Primary deficit: Primary deficit refers to the excess of total expenditure excluding interest payments over total receipts excluding borrowings of the government in a given fiscal year. Primary deficit indicates that the government is not able to meet its non-interest expenditure from its non-borrowing income. Budgetary deficit can be financed by borrowing from domestic and foreign sources. Domestic borrowing includes b


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