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✅List of Abbreviations Used in Economics 👉🏻 National Income and Related Aggregates GDP: Gross Domestic Product GDP MP: Gross Domestic Product at Market Price GDP FC: Gross Domestic Product at Factor Cost NNP MP: Net National Product at Market Price NNP FC: Net National Product at Factor Cost NDP MP: Net Domestic Product at Market Price NDP FC: Net Domestic Product at Factor Cost PI: Personal Income PDI: Personal disposable Income GVA: Gross value added NVA: Net value added 👉🏻 Money and Banking LRR: Legal Reserve Requirement CRR: Cash Reserve Ratio SLR: Statutory Liquidity Ratio OMO: Open Market Operation RBI: Reserve Bank of India GOI: Government of India MD: Money Demand MS: Money Supply 👉🏻Income and Employment Determination APC: Average Propensity to Consume APS: Average Propensity to Save MPC: Marginal Propensity to Consume MPS: Marginal Propensity to Save AD: Aggregate Demand AS: Aggregate Supply 👉🏻Government Budget and Economy PSUs: Public Sector Undertakings FRBMA: Fiscal Responsibility and Budget Management Act 👉🏻Balance of Payment BOP: Balance of Payment BOT: Balance of Trade PPP: Purchasing Power Parity NEER: Nominal Effective Exchange Rate FDI: Foreign Direct Investment

✅List of Abbreviations Used in Economics 📍Unit 1. Introduction PPF: Production Possibility Frontier PPS: Production Possibility Set PPC: Production Possibility Curve IC: Indifference Curve 📍Unit 2. Consumer’s Equilibrium and Demand MRS: Marginal Rate of Substitution MRT: Marginal Rate of Transformation TU: Total Utility MU: Marginal Utility ED: Elasticity of Demand ES: Elasticity of Supply 📍Unit 3. Producer Behaviour and Supply TP: Total Product AP: Average Product MP: Marginal Product TC: Total Cost TVC: Total Variable Cost TFC: Total Fixed Cost MC: Marginal Cost SAC: Short-Run Average Cost SMC: Short-Run Marginal Cost AFC: Average Fixed Cost AVC: Average Variable Cost LRAC: Long-Run Average Cost LRMC: Long-Run Marginal Cost RTS: Returns to Scale IRS: Increasing Returns to Scale CRS: Constant Returns to Scale DRS: Diminishing Returns to Scale TR: Total Revenue AR: Average Revenue MR: Marginal Revenue MRPL: Marginal Revenue Product of Labour VMPL: Value Marginal Product of Labour

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GDP GDP, also known as gross domestic product, is the total market value or monetary value of all the finished goods and services produced within the borders of a country during a specific time period. The total goods and services comprise all the government spending, net exports, investments, and private expenditures. The three approaches to determine GDP are as follows: Expenditure approach Income approach Output approach Let us discuss these in brief in the following lines: Expenditure approach The expenditure approach calculates the GDP by calculating the sum of all the services and goods produced in an economy. The GDP formula is mathematically represented as: Y = C + I + G + (X − M) Where, Y = Gross domestic product C = Consumption I = Investment G = Government spending X = Exports M = Imports The components are described in brief here. Consumption is denoted by C. It stands for all the private spending, which includes services, non-durable and durable goods. Government expenditure is denoted by G and includes employee salaries, construction of roads and railways, airports, schools, and expenditures in the military. Investment is denoted by I and refers to all the investments that are spent on housing and equipment. Net export is denoted by (X – M), which is the difference between the total imports and exports. Income approach The income approach of GDP calculation is based on the total output of a nation with the total factor of income received by the residents or citizens of a nation. The formula for calculating GDP by the income approach is: GDP = Compensation of employees + Rental and royalty income + Business cash flow + Net interest Output approach The output approach emphasises the total output of a nation by finding the value of the total value of goods and services produced in a country. The formula for calculating GDP by the output approach is: GDP = GDPmp of primary sector + GDPmp of secondary sector + GDPmp of tertiary sector GDPmp (for all the sectors is calculated as) = Sales + Change in stock – Intermediate consumption ➖➖➖➖➖➖➖➖➖➖➖➖ ℑoin us 🔜 @Economics_Notes_Quiz

Price Elasticity of Demand The price elasticity of demand is the percentage change in the quantity demanded of a good or service by the percentage change in the price. In other words, the price elasticity of demand is the rate at which the demand increases or decreases with the corresponding change in price. The demand for a product can either be elastic or inelastic. When the change in demand is seen to be proportionately larger in comparison to the change in price, then it is said to be elastic. When the change in demand is smaller than the change in price, then it is said to be inelastic. The slope of the demand curve is the price elasticity of demand. As the demand curve steepens, there is a rapid change in demand, which shows elasticity. Whereas a flatter curve leads to the change in demand at a slow rate, thereby denoting inelastic demand. Mathematically, the price elasticity of demand is represented as follows: Price elasticity of demand (PED) = %∆ in Qd/%∆ in P Where, %∆ in Qd = Percentage change in the quantity demanded %∆ in P = Percentage change in price The PED or price elasticity of demand is always negative. In other words, it means that there exists an inverse relationship between the price and the demand. The value of PED, which is less than one, is considered as relatively inelastic demand, while a value more than one suggests relatively elastic demand. ➖➖➖➖➖➖➖➖➖➖➖➖ ℑoin us 🔜 @Economics_Notes_Quiz

➡️ Aggregate Demand and its Components Aggregate demand is the sum of all final goods and services, minus intermediate goods and services, that are available to final users within a country at a given point in time. This is the total dollar value of all purchases of both household and business spending and government spending. Aggregate demand can be generated by changes in income (factors affecting expenditure) or any combination of other factors that change how much people spend on various goods and services. ✅Components Of Aggregate Demand There are four components in Aggregate Demand ➖Private Consumption Expenditure (C) ➖Investment Expenditure(I) ➖Government Expenditure(G) ➖Net Exports (X-M) ✅Aggregate Demand = C+I+G+(X-M) ➖Private consumption expenditure (C) or Household consumption expenditure It refers to the expenditure on the final consumer’s goods and services by the households to satisfy their wants. ➖Investment expenditure (I) It refers to the expenditure incurred on capital goods by private firms to increase their production capacity. These capital goods are in the form of machinery, building, land, etc. ➖Government expenditure (G) refers to the expenditure incurred by the government on the purchase of goods and services to meet the needs of the people in the economy. ➖Net Exports (X-M) It refers to the difference between exports and imports i.e., X-M Where X stands for Exports and M stands for Imports. ✅Aggregate Demand In Two-Sector Model In a two-sector model, it is assumed that Aggregate demand is a function of Consumption and Investment also. Aggregate Demand In Two-Sector Model = C+ I Where, C= consumption expenditure I = Investment ✅Important Concepts About Aggregate Demand ➖Aggregate demand is a function of Consumption and investment only. ➖The investment expenditure is assumed to be autonomous which means it will remain constant at all the levels of income. ➖The investment curve will be a straight line, parallel to the X-axis as it is not affected by the change in income level. ➖Consumption will be positive even at zero level of income as the minimum level of consumption is done for survival. This consumption is known as ‘Autonomous consumption’. ➖The slope of the consumption curve is positive which shows that when income increases consumption also increases. ➖The starting point of the AD curve is above zero as there is always a minimum level of consumption and investment in the economy.

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