Giving reason, explain how the following should be treated in estimating national income:
Purchase of tractor by a farmer
Purchase of tractor by a farmer should be included in the estimation of National Income. This is because it is a part of Gross Domestic Capital Formation.
Giving reason, explain how the following should be treated in estimating national income:
Expenditure on fertilizers by a farmer.
Explain the concept of ‘deficient demand’ in macroeconomics. Also explain the role of Bank Rate in correcting it.
| S.No. | Items | (Rs crores) |
| (i) | Factor income from abroad | 15 |
| (ii) | Private final consumption expenditure | 600 |
| (iii) | Consumption of fixed captial | 50 |
| (iv) | Government final consumption expenditure | 200 |
| (v) | Net current transfers to abroad | (-)5 |
| (vi) | Net domestic fixed capital formation | 110 |
| (vii) | Net factor income to abroad | 10 |
| (viii) | Net imports | (-)20 |
| (ix) | Net indirect tax | 70 |
| (x) | Change in stocks | (-)10 |
Explain the distinction between autonomous and accommodating transactions in balance of payments. Also explain the concept of balance of payments deficit in this context.
Explain the concept of ‘excess demand’ in macroeconomics. Also explain the role of ‘open market operation’ in correcting it.
