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कक्षा : 12  CBSE  2020-21 संस्कृतम् परियोजना कार्यम् Don't forget to subscribe for updates.  Do like, comment 

The previous chapter concluded that economy that we inherited from British was Backward and Stagnant. Agriculture was principle source of subsistence and large percentage of population was facing abject poverty. Life expectancy was extremely low. Now, we will study about Goals and Achievement of Five year plans in India. Let's begin.... Economic Planning A ccording to Planning Commission,"Economic planning means utilisation of country's resources in different development activities in accordance with national priorities. " Economic Planning is a process under which central authorities (like Planning Commission) defines a set of targets to be achieved within a specific period of time,  keeping in view needs and means of the country.  Planning Commission , established in 1950, is the Central Authority of India which formulates India's Five Year Plans among other functions. In India, Prime Minister is the chairperson of Planning Commission.  Note: In February 2015, ...

Fiscal policy   It refers to the government’s spending and taxing behavior—in other words, its budget policy. (The word fiscal comes from the root fisc, which refers to the “treasury” of a government.) Fiscal policy is generally divided into three categories:  (1) policies concerning government purchases of goods and services (2) policies concerning taxes (3) policies concerning transfer payments (such as unemployment compensation, Social Security benefits, welfare payments, and veterans’ benefits) to households.  Monetary policy  refers to the behavior of the nation’s central bank, the Federal Reserve, concerning the nation’s money supply. Government in the Economy discretionary fiscal policy- Changes in taxes or spending that are the result of deliberate changes in government policy. Government Purchases (G), Net Taxes (T), and Disposable Income (Yd) –  Net taxes (T )  Taxes paid by firms and households to the government minus transfer payments made to ho...

The Saving/Investment Approach to Equilibrium Because aggregate income must be saved or spent, by definition, Y =C + S, which is an identity. The equilibrium condition is Y = C + I, but this is not an identity because it does not hold when we are out of equilibrium. By substituting C + S for Y in the equilibrium condition, we can write: C + S = C + I Because we can subtract C from both sides of this equation, we are left with: S = I Thus, only when planned investment equals saving will there be equilibrium. Notice that S = I at one and only one level of aggregate output, Y = 500. At Y = 500, C = 475 and  I = 25. In other words, Y = C + I; therefore, equilibrium exists. The S = I Approach to Equilibrium Aggregate output is equal to planned aggregate expenditure only when saving equals planned investment (S = I). Saving and planned investment are equal at Y = 500. Adjustment to Equilibrium We will learned how firms might react to disequilibrium. Let us consider the ...

Deriving the Saving Function from the Consumption Function In Figure because S=Y - C, it is easy to derive the saving function from the consumption function. A 45° line drawn from the origin can be used as a convenient tool to compare consumption and income graphically. At Y = 200, consumption is 250.  The 45° line shows us that consumption is larger than income by 50. Thus, S =Y - C = -50. At Y = 800, consumption is less than income by 100. Thus,  S = 100 when Y = 800. Other Determinants of Consumption Lower interest rates reduce the cost of borrowing, so lower interest rates are likely to stimulate spending. Planned Investment (I) The output of an economy consists not only of goods consumed by households, but investments made by firms. The Planned Investment Function For the time being, we will assume that planned investment is fixed. It does not change when income changes, so its graph is a horizontal line.   A firm’s inventory is the stock of goods that it h...

Aggregate Output-   The total quantity of goods and services produced (or supplied) in an economy in a given period. Aggregate output can also be considered the aggregate quantity supplied because it is the amount that firms are supplying (producing) during a period. we use the term aggregate output (income) instead of aggregate quantity supplied, but keep in mind that the two are equivalent.  Also remember that aggregate output means “real GDP.” Aggregate Income-  The total income received by all factors of production in a given period. The Keynesian Theory of Consumption -  We all recognise that for consumption as a whole, as well as for consumption of most specific categories of goods and services, consumption rises with income. This relationship between consumption and income is central to Keynes’s model of the economy. Consumption Function - The relationship between consumption and income. The figure shows a hypothetical consumption function for an individual ho...

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