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Business Economics (S. Y.B.COm. -, , Sem. I, , 2, 1., , INTRODUCTION, , is a social, , household. Economics, 'Oikonomos' meaning, Economics is a 'Greek word, human wants and, with unlimited, deals, It, behaviour., deals with man's, , their, , Science. It, , satisfaction., Economics is divided into two branches, , 1), , Microeconomics, , and, , :, , Macroeconomics, , 2), , individual, economic, problems at, studies, international level., studies them at national and, , levels,, , and, , Microeconomics, macroeconomics, , The terms, , microeconomics, , and, , macroeconomics were, , originated byRagnar Firsch in, , 1933., 2., , MICRO-ECONOMICS, means, , economics- in the small, , and microeconomics, The word 'micro' means small behaviour, of individuals, households, firms, Microeconomics deals with the, , 3., , and, , small unit and observe the details, industries, i.e. in microeconomics, economists pick up a, what to produce, how, It studies how individual make their choices about, , of its, , operation., produce, and, , microeconomics, , produce, and what price to charge. Various, and supply, marginal cost,, concepts such as demand, supply, elasticity of demand, , to, , for whom to, , various, , market forms, etc. are of great significance to managerial economics., , According to E. BOULDING,, , "Micro economics is the, , study, , of, , particular firm,, , particular household, individual price, wage, income, industry, and. particular, commodity.", It is called as price theory. It is also called as Partial equilibrium analysis., Importance Macroeconomics, 1., , Micro economics occupies a very important place in the study of economic theory., , 2., , It has both theoretical and practical importance., It explains the functioning of a free enterprise economy., It tells how millions of consumers and producers in an economy take decisions about, the allocation of productive resources among millions of goods and services., , 3., 4., , 5., , It explains how through market mechanism goods and services produced in the, community are distributed., , 6., , It explains the determination of the relative prices of the various products and, productive services., , 7., , It helps in the formulation of economic policies calculated to promote efficiency in, production and the welfare of the masses., MACRO-ECONOMICS, The word, , 'Macro means large and, , macroeconomics, , means, , economics in the, , large., , Macroeconomics studies the economics as a whole. Itis aggregative in character and takes, the entire economic as a unit of study. In other words, Macroeconomic studies not one, , economiCunit likea firmm or an industry but the whole economicsystem. Therefore it deals, with totals or aggregates output and employment, total consumption, savings and, investment, national income and general price level., According to E. BOULDING "Macro economics deals not with individual quantities, as such but with aggregates of these quantities, not with individual income but with, national income not with individual prices but with price levels, not with, individual, outputs but with national output.", It is called as Income theory. It is also called as general, , equilibrium analysis.

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Introduction to Macro-Economics, , 3.1 Importance/Significance of Macroeconomics, Macroeconomics occupies an important place in economics analysis., A study of macro-cconomics provides the following uses or advantages., 2., , Macroeconomics gives us a bird's eye view of the economic world., It helps in understanding the functioning of a complicated economic system., , 3., , It helps the government in the formulation of useful economic policies such as fiscal, , 1., , policy, monetary policy, import export, , development., , policies etc.,, , to, , promote, , economic, , It helps to develop and expand the microeconomic theories., 5., , lt helps us to analyse and understand how a complex economic sytem, , works, , as a, , dynamic whole., 6., , It helps to analyse the cause of fluctuations in the business cycle., , 7, , It helps us to analyse and understand the effect of inflation and deflation and also, suggests measures to control inflation and deflation., , 8., , It helps the economists and the government to study the growth of the GDP for, , formulating monetary policies., 9, , It helps to solve the economic problems of unemployment, inflation, poverty, etc. by, , formulating proper policies., 10. It explains the various aspects of international trade such as balance of payment., 11. Macro-economics provide information about the national income, aggregate demand, , and supply, aggregate savings and investment, general price level and so on for, international comparison., 12. Macro-economics helps us to analyse and understand the overall performance of an, economy., 13. It helps to achieve the goal of economic growth, higher level of GDP and higher level, of employment., 14. Macro-economics analysis is utmost importance to the economist who wishes to, , contribute to the solutions of economic problems., , 3, Scope/Subject Matter of Macroeconomics, The scope of macro-economics lies in the study of the following aspects:, Theory of National Income, , Macroeconomics studies the different theories of national income. It studies the, concepts of national income such as gross domestic product, gross national product and so, , on. It also studies the measurement of national income. The study of macroeconomics is, very important for evaluating the overall performance of the economy in terms of national, income., 2., , Theory of Empolyment, , Macroeconomics explain the different theories related to employment e.g. Classical, , theory, Keynesian theory and other modern theory. Macroeconomics studies the causes, and effects of unemployment and provide measures to overcome them. It studies the, various factors which determine employment such as effective, demand, aggregate, demand and aggregate supply., 3., Theory of Money, , Macroeconomics studies the functions of money and the theories relating to demand, and supply of money. It deals with the factors which, determine the, and the mechanism through which the, is, , money supply, , demand, , created in the economy., , for money

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Busincss Economics (S.Y. B.Com. -, , 4, , Sem. I n, , 'R'R, , 4., , Theory of general price level, Macroeconomics studies the nature, cause and effect of inflation and deflation in an, , economy. Macroeconomics also suggests policy measures (monetary, fiscal and direct, , There, , different theories of, , are, , measures) to control inflation and deflation., control, determination of price level. Keynesian theory of effective demand, , is very popular among, , them, 5., , Theory of Distribution, Macroeconomics studies the theories of distribution. The macro theory of distribution, , explains how the national income is distributed among different groups of people of a, , ountry. It explains how the share of rent, wages, interest and profit inthe national income, is determined. It also gives us remedies of unequal distribution of income, wealth and, resources., , Theory of economic fluctuation, , 6., , Economic fluctuation refers to business cycle/ trade cycle. Macroeconomics studies, various theories of business cycle such as Schumpeter theory. It discuss the causes of, economic fluctuations and also provide measures to overcome them to achieve economic, , stability., 7., , Theory of economic growth, , Macroeconomics deals with the different theories related to economic growth and, development. It explains the various issues relating to economic growth such as poverty,, , unemployment, inflation and so on. Theory of economic growth helps us to study the, economic progress of a nation., 8., , Theory of international trade, , Macroeconomics studies the different theories of international trade. Macroeconomics, studies the principles related to international trade and other components such as the, , problems of balance of payments, the effect of exchange rate, role of central bank in the, foreign exchange market, terms of trade and so on., KEY TERMS, Microeconomics - The word 'micro' means small and microeconomics means, , economics in the small. Microeconomics deals with the behaviour of individuals,, , households, firms. i.e. in microeconomics, economist pick up a small unit and, observe the details of its operation., Macroeconomics - The word "Macro means large and macroeconomics means, , economics in the large, Macroeconomics studies the economics as a whole. It is, aggregative in character and takes the entire economic as a unit of study. In other, words, Macroeconomics studies not one economic unit like a firm or an, industry, but the whole economics system., MODEL QUESTIONS, , Ouestions, , and Answers available with scratch card, , provided for downloading., , provided, , in the book. Please, , 1., , What is macroeconomics? Explain the scope of macroeconomics., , 2., , What is macroeconomics?, , 3., , Distinguish between micro and macroeconomics., Write short notes on, , 4, , follow instructions, , Explain the significance of macroeconomics., , 1., , Importance of macroeconomics, , 2., , Scope of macroeconomics.

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Cireular flow of neome, and, , xpenditure, SYNOPSIS, 1. Introduction, 2. Meaning, 3., , Importance/Significance of Circular flow of Income, , 4. Circular flow of income and, , expenditure in two-sector economy (without saving, , and investment), 5. Circular flow of income and, , expenditure in two sector economy (with saving and, , investment), 6. Circular flow of income and, 7., , expenditure in three-sector closed economy, , Circular flow of income in four-sector open, economy, , 8. India, , as an, , open economy, , Key Terms, Model Questions, , Objective Questions, , lOuestions and Answers available, provided for downloading., , Freel!, with scratch card, , provided, , in the, , book. Please follow, , instructions

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Circular Flow of Income and Expenditure, 1., , INTRODUCTION, Modern, , economy, , is, , essentially a money economy. A money economy 1s, characterised by the circular, flow of money. It involves a continuous flow ofDasIcaluy, its, money, payments in economic activities. Modern economic life is, Thus, in, , the, want-satistying, activity, goods produced by one are exchangedinterdependent., for the consumption of the, other. There, are, thus, two, major classes in the economic process. These are : consumers, (or households) and producers (or, firms). Households receive income in the form of, , wages, interest and, , spent by, , rent,, profits by selling their factor services to the firms. The income is then, goods and services produced by the firm's sector. Thus, firms, , them for, buying, receive income by, , selling, , their, , There, , output., is, thus, a circular, expenditure between the two sectors, (firms & households) of the, , flow of income and, , economy., , 2., , MEANING, , Circular flow, , means, , in an economy., , unending flows of goods and services, income and expenditure, , Circular flow of income refers to a, continuous, income and the flow of, goods and services between different sectors of an flow of money, in a circular manner., economy, The circular flow of income, and, expenditure has two aspects: real flow and money, (monetary) flow., , Real Flow, Real flow refers, , to the flow of factor, services from households to business firms and, and, services from the business firm to, goods, households. It is also called, flow or output flow., , the flow of, , product, , Money Flow, The money flow refers to the flow of, money between different sectors of the, In other words, it refers to the, economy., flow of money from the firms to the, households in the form, of rent, wages, interest and, profit. The money flow is in the opposite direction of the real, flow., , Injections, Injections are additions of income into the circular flow. It increases, the size of, circular flow. Injections may be in the form of, investments, government expenditures and, exports., , Leakages, Leakages, , circular flow., , are, , withdrawals, , of income from the circular flow., It reduces the size of, , Leakages may be in the form of savings, taxes and, , imports., , 3IMPORTANCE/SIGNIFICANCE OF CIRCULAR FLOW, 1., , Followings are the importance of circular flow of income, Shows Smooth functioning of the, Economy, , The circular flow shows the snmooth, functioning of an economy. It shows whether the, economy is working efficiently or whether there is, any disturbance in the, economy., working of the, 2., , Knowledge of Interdependence, , The circular flow models, help to understand, an economy. The different, sectors include, external sector., , sector of, , interdependence, , households,, , between different, , firms,, , government, , and

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Business Economics (S. Y.B.Com. -SSem., , g'o', , 3., , ), , Injections and Leakages, Circular flow provide information on injections and leakages., Injections are investments, government expenditures and exports., , Leakages are savings, taxes and import., Sizes of National Income, , 4., , The magnitude of circular flow determines the size of national income. The circular, , flow show how national income is calculated., 5., , Importance of policies, The study of circular flow highlights the importance of monetary policy and fiscal, policy to bring about the equality between income and expenditure., 6., , Circular flow, , Circular flow shows the flow of goods and ervices and factors of production between, different sectors such as firms and households., 7., Level of economic activity, Circular flow, tells us about the level of economic activities in an economy., 8., , Redistribution of income, Circular flow shows the redistribution of income in a circular manner between the, , households and production unit., CIRCULAR FLOW OF INCOME IN TWO-SECTOR ECONOMY, (WITHOUT, SAVING AND INVESTMENT AND EXPENDITURE), The circular flow of income is, based on the following, , explain by considering, , a, , assumptions:, , simple, , model. This model is, , There are two sectors (a), households and (b) firmns, Households are owners of factors of production, Production takes place only in the firms, There is no savings, There is no government intervention, There is no international trade., Based on these assumption this model can be better explained with the help of a, diagram 2.1., , Produc1On-Land,, and, Labour, Capital, , FactorsofProduo, , of production, , nentsfor factors 0f,, int, w a g e s ,, , rent,, , Households, , rest and profit, , CLOSED ECONOMY, , Payment for goods ana, , ervices, , Flow of goods and services, Fig. 2.1, , Bntrepreneurshin, Firms

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Business Economics (S. Y.B. Com. Sem, 12, , will borrow, that the foreigners, , from domestic, , savers, , will take place it m e a n s, finance their purchases of exports., , surplus, , by domestic sect, sector and purchased, foreign, the, by, to the foreign sector. Whe, mport are goods produced, the domestic sector, from, income, of, flow, domestic, sector will, mport represent, In this case the, take, place., deficit, trade, X),, (M>, export, import exceed, borrow from abroad to finance their excess of import., For, , stability, , in the circular flow of income,, , leakage, , =, , injections, (households, firm, , and government)., A, , tour sector economy, , is said to be in, , equilibrium, , when, , lekages, , are, , equal, , to, , injections, , Leakages (L) include Savings (S), Taxes (T) and Imports (M)., , Injection () include Investment (), Government expenditure (G), , and, , Export (X), , Symbolically, S+T+M = I+G+X, , The economy will be in equilibrium when leakages are equal to injections ie. L I, 8., , INDIA AS AN OPEN ECONOMY, , Prior to 1990, India was same what a closed economy in the sense that it was not, , exposed to the global trade and investment on a large scale. Contribution of its external, sector was just marginal., , Since the last 26 years, Indian economy is liberalised and it is integrated with the, , global economy. Its contribution of the external sector to the national income is expanding., According to the Economic Survey for 2011-12, India has become the fourth largest, economy in the world due to strong economic growth. Between 1980 and 2010, India, achieved a growth of 6.2 per cent, while the world as a whole, registered a growth rate of, 3.3 per cent. As a result, India's share in, GDP more than doubled from 2.5, global, per cent, in 1980 to 5.5 per ocent in 2010. The, per capita income of India stood at $1,527 in 2011., Consequently, India's rank in terms of per capita income stood at 94 in 2009 in comparison, to China's rank of 74 for the same, year. Despite this achievement, the per capita income of, India remains low as the country is still the, the 20, poorest, , top developinng, countries of the world. The Survey further indicated thatamong, slowdown, in Euro zone,, any, which accounts for 19 per cent of the, global GDP, could impact the Indian economy., KEY TERMS, , Real flow: Real flow refers to the flow of, factor services from, households to business, firms and the flow of, and, services, from the business firm to, goods, households. It is, also called product flow or, flow., , output, Monetary (money) flow : The money flow refers, , to the flow of, different sectors of the economy. In other, money between, it, the firms to the households in the form of words, refers to the flow of money from, flow is in the opposite direction of the real rent, wages, interest and profit. The money, flow., Closed economy : A closed economy is an, economy that does not interact with the, economy of any other country. A closed, economy is one without international trade, i.e. neither export nor, import take place., Open economy : An open economy is an, in which, place. In the open economy export and economy, international trade take, as well as, import, receipts are taken into consideration., international payment and