Macroeconomic theories - class-XII

Stock variable is defined as a variable which is measured at a particular point of time. Stock is not time dimensional. It influences the flow. Example: wealth, capital, etc.

Final goods include those goods which are either consumed by the households or purchased by the producers for investment purposes. 

If the end-use of the good is for further production or resale, then the good Is an intermediate good. However, if the end-use of the good is consumption or investment, then the good is a final good. 

Milk and Bread are examples of
Non-durable good. Non-durable gods are those goods which are used-up in a
single act of consumption. Bread and milk are used-up in a single act
of consumption. The same milk or bread cannot be used again.

Household is the consumption sector. Household sector receive goods and services from the producer sector for consumption purpose and thus the household sector can be termed as the consumption sector. Households are also the owners of the factors of production.

Capital is not a flow. Capital falls under the stock concept since it relates to a point of time. Capital is not time dimensional. Capital is not related to a period of time like flow.

Wealth is a stock. Wealth falls under the stock concept since it
relates to a point of time. Wealth is not time dimensional. Wealth is
not related to a period of time like flow.

Refrigerator purchased by a confectionery shop is an example of intermediate good since refrigerator is not yet ready for use by the final users. Value is yet to be added. Refrigerator is used as a raw material by a confectionery shop.

Depreciation is a flow since it is measured over a specified period of time. It is time dimensional as it is generally measured over a year.

Foreign embassies in India are a part of India's geographical territory and not economic territory. For example: Embassy of USA in India is a  part of domestic territory of USA and a part of geographical territory of India.

Capital is a stock since it is measured at a point of time. Capital is not time dimensional. It is not measured over a specified period of time like flow. Therefore, capital is a stock concept.

Capital formation is measured over a period of time hence it is a flow concept.

The goods which are consumed by a consumer to satisfy his want is known as consumer goods, while goods used in a production process are intermediate goods. Hence, bread can either be a consumer good or an intermediate good based on its use.

Intermediate goods have a derived demand as their demand depends on demand for final goods.
On the other hand, final goods have a direct demand as they satisfy the wants directly.

A good can be an intermediate good as well as a final good, depending upon its nature of use.
For example, a car purchased by a household is a final good, whereas, It will be an intermediate good if it is purchased by a car dealer. 

Households and firms depend on each other in the circular flow of income in case of a two-sector model. Participants of the
two-sector economy are households and producers.  Flow of money from
producers to households as payments for the purchase of factor services
has been a continuous process. So, there has been the flow of money from
households to producers as payments for the purchase of consumer goods
and services, This non-stop continuity of inter-sectoral flows is called
'circularity of flows'. Hence, total consumption by households is always equal to total production by the producers.

Both 'Expected Obsolescence' and 'Unexpected Obsolescence' are considered for determining the amount of depreciation- this is a false statement since only expected obsolescence is considered for determining the amount of depreciation. It has two components: loss of value of fixed assets due to change in technology and change in demand.

National wealth is not an example of flow variable. It is a stock since it is measured at a point of time. National wealth is
not time dimensional. It is not measured over a specified period of time
like flow. Therefore, national wealth is a stock concept.

Losses are classified as a flow variable since it is measured over a specified period of
time. It is time dimensional as it is generally measured over a year.

Depreciation means loss of fixed assets overtime due to wear and tear. Depreciation is also called consumption of fixed capital. Loss of fixed assets happen on account of normal wear and tear, normal rate of accidental damages and expected obsolescence.

Final goods refer to those goods which are used either for consumption or for investment. Final goods have crossed the boundary of production and are ready for use by their final users. These goods are included in the estimation of national product or national income. Example: Bread and butter used by the consumers.

Sugar purchased by a Sweet shop is an intermediate good, while it is a final good when it is purchased by a consumer as sugar purchased by a sweet shop is used as a raw material and goods used for raw material are classified as intermediate goods as value is yet to be added, while, sugar purchased by a consumer is a final good as it is directly consumed and no value is yet to be added.

Depreciation of fixed capital assets refers to normal wear and tear and
foreseen obsolescence. Depreciation is also called consumption of fixed
capital. Loss of fixed
assets happen on account of normal wear and tear, normal rate of
accidental damages and expected obsolescence.

Goods purchased for the following purpose are final goods:
a) For satisfaction of wants
b) For investment in firm
Final goods are those goods which crossed the boundary of production and are ready to use by their final users, Final goods must lead to either final consumption expenditure or investment expenditure in the economy.

Unforeseen obsolescence of fixed capital assets during production is capital loss. Unforeseen obsolescence which may happen due to natural calamity is not taken into account while calculating depreciation and hence, it causes capital loss.

Capital formation refers to the net addition to the stock of capital goods (like machinery, factories, or infrastructure). Goods held by a consumer for personal use are consumption goods, not capital goods, so they do not contribute to capital formation.

Change in stock is calculated as Closing Stock minus Opening Stock. If the Closing Stock is less than the Opening Stock, the result is negative.

Induced investment is specifically driven by the profit motive and changes in the level of income or output. Autonomous investment, conversely, is independent of profit or income levels.

A frequently used tool that explains the relationship between the level of investment made in the economy and the consequent increase in GDP is the capital-output ratio. The concept of the capital-output ratio expresses the relationship between the value of capital invested and the value of output.

Capital output ratio is the amount of capital needed to produce one unit of output. For example, suppose that investment in an economy, investment is 32% (of GDP), and the economic growth corresponding to this level of investment is 8%.

Here, a Rs 32 investment produces an output of Rs 8. Capital output ratio is 32/8 or 4. In other words, to produce one unit of output, 4 unit of capital is needed. But don’t forget that the Rs 32 invested in the form of machinery will remain there for around ten or twelve years. Such machinery will be giving Rs 1 output in every year.

Hence, B is the correct option.

The Banking Codes and Standards Board of India (BCSBI) is an independent banking industry watchdog that protects consumers of banking services in India. The board oversee compliance with the "Code of Bank's Commitment to Customers".

Keynesian economics advocates for government intervention through fiscal policy, which often includes deficit spending (an unbalanced budget) to stimulate demand during economic downturns.

The General Theory of Employment, Interest and Money, published in 1936, is the seminal work of John Maynard Keynes that laid the foundation for modern macroeconomics.

Classical economists, including Adam Smith and David Ricardo, generally advocated for the principle of a balanced budget, believing that government spending should not exceed revenue.

Autonomous consumption is the level of consumption that occurs even when income is zero. It is independent of income, meaning it is not income-elastic.

The break-even point is defined as the level of income where total consumption equals total income (C = Y), meaning savings are zero.

In developing countries, people generally have lower incomes and a higher proportion of their income is spent on basic necessities, leading to a higher marginal propensity to consume compared to more developed nations.

Exports refer to the goods and services sold by domestic traders to foreign traders; the revenue thus generated is foreign trade revenue. Imports, on the other hand, refers to the purchases made by the domestic traders from foreign traders; which requires foreign trade payments.
Net exports will be positive when revenue from foreign trade is higher than payments, i.e., exports greater than imports.

Government investment is typically determined by policy decisions and public welfare goals rather than profit motives, making it autonomous investment.

Marginal efficiency of capital refers to the rate of return that is expected from an additional unit of investment made or capital utilised. The marginal efficiency of capital, thus, precisely represents the expected rate of return on investment.

Autonomous investment is done without taking into account the income of the investor or the profit that can be generated from investment. This type of investment is majorly done with the objective of public welfare or infrastructure development by the government or public sector.

Net investment is defined as gross investment minus depreciation, representing the net addition to the capital stock through the acquisition of new capital goods.

Intermediate goods are used as inputs in the production of other goods. Steel and cement used in construction are inputs for the final structure (the flyover).

Depreciation refers to the loss in value of fixed capital assets due to wear and tear, obsolescence, or passage of time during the production process.

Near money refers to highly liquid financial assets that are not legal tender (like currency) but can be easily converted into cash, such as savings accounts or treasury bills.

A capitalist economy is characterized by private property, profit motive, and consumer sovereignty. Social justice is typically a goal of socialist or mixed economies, not a defining feature of pure capitalism.

Depreciation is the monetary value of the wear and tear of capital assets, such as machinery and equipment, over their useful life.

Conspicuous consumption refers to the purchase of goods and services for the specific purpose of displaying one's wealth and social status.

A refrigerator in a chemist's shop is used as a capital good to store medicines for business purposes, making it an intermediate good in the context of the shop's operations.