Tag: macroeconomic theories

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.