P

Introduction
nt oduction
ntrod
uct ion

s
t

t

t t

Introductory Macroeconomics

t
t t
t
t
t
t

P t


t

t
t
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t t

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t t
t t t
t
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t
t

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s s
s s s
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s
s s
s s
s s s
s
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3
Introduction

s

s
s s s s
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s

s




s

s s
s




s s s
s s
s

t t
s
s

Introductory Macroeconomics

The General
Theory of Employment, Interest and Money


s



t


t
t





t




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r




r
t





t






t

t
t

t




t

t


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5
Introduction

S ummary

Introductory Macroeconomics

ttss
Keyy C
Concepts

Exercises
es

Macroeconomics: The Dynamics of Commodity Production

Macroeconomics

7
Introduction

National
c oounti
Nation al Income
I nco me Accounting
un ti g

s


s

s
s

s
s

s

An Enquiry into the

Nature and Cause of the Wealth of Nations

s
s

s

s

9
National Income Accounting

Introductory Macroeconomics

1100

t


t
tt
t
t


t
t

t
t
t

t These are not final goodst


t

common measuring rodt

t t
the sum total of the monetary value of
these diverse commodities gives us a measure of final outputt


t


t double
countingt

t
s t

t


t
t
t
t
t
t
t
t
t

Net Investment = Gross investment Depreciation

t t


t
t
t

11
National Income Accounting

t
t


t change in stock t

t



t
t














t t t
t t
t

t

Introductory Macroeconomics

1122

s

t


t
t t

t t

t
t

t t
t


t
t

t
t

t t t t

t
s


t t

t t t
t t

t

t
t t

t
t

National Income Accounting

13

Introductory Macroeconomics

1144

15
National Income Accounting

t t t t
t t t t t t
t t t
t t t t t t
t t t
t t t t t t tt t t t
t tt t t t t
t t t t t t t
t t t
t t t t t t
t t t
t t t t t t t
t
t t t t t
t t t t t t
t t t t
t t t t t t
t t t
t t t t t t t t t
t
t t

t
t t
t t t

t t

t

t t t
t tt
t t t

t
t t t

t
t t t Circular Flow of Income in a Simple Economy
tt
t t
t t t t t t t t t
t t t t t
t t t t
t t t tt t t t
t t t t t
t t t t t t t t
t t t t tt
t t t t t t t
t t t t t tt
t t t t t
t t tt t t
t
t t t tt t t
t t t t t t
t t t t t

Introductory Macroeconomics

1166

t t








t
s t




t


t
t

t


t






s

t
t t




t


t


t
t

17
National Income Accounting

t
t

t

t t
t

t t
t

t t



t



t t t
t
t t



value of
production of the firm value of intermediate goods used by the firm



r r q s

Farmer
Baker

Introductory Macroeconomics

1188

t
t
t
t t t
t t t t

value of production














change of inventories
of a firm during a year production of the firm during the year sale of the
firm during the year



x x
x x x





t t

19
National Income Accounting

t t t t
t t t t
t t t t t
t t tt t t t t t t
t tt t t
t t
t tt t t t t t t
t t tt
tt t t tt t t
t t tt
tt t t t t
tt t tt t t
t t t t t
t t tt t t tt t
t t t
t t
t t t t tt
t t t
t t t t

tt t t t
t t t tt t t t t
t t t t t t
t t t t t t t
t t t t t t t
t t tt t t t
t t t t
t t
t t t t t
t t t
t t t t t
t t t t t t t
t t t t
t t
t t
t t t t t t
t t t t t t
t t t t
t t t t t
t t t t
t t r t t
t t t t t t t t
t t t
t t t t t t tt t tt t t t
t t t t t t
t t t t t t t
t t t t
t t tt t
t t t


i GV Ai
i Qi Zi
GV Ai Vi Ai

Zi








i GVAi i Di





N
N

GVA GVA GVA

Introductory Macroeconomics

2200

X X X
N
i NV Ai

NVAi GVAi Di
GVAi NVAi Di
i
N
N

GDP

NDP
PPP

Ci

Ii

Gi

RVi

Xi

Ci Ii Gi Xi

Cm
Cm

Im

Gm

Im

Gm

Cm

Im

21
National Income Accounting

N N



G Gm

C C I I G G

C I G C I G

Introductory Macroeconomics

2222

C IGXM

X
M C I G

X G X M





s


M Wi
i Pi Ini Ri
i
s GDP

P W P I R

C I G X M W + P + In + R

t
t
qrt
qrt
qrt
s
Diagramtic Representation of GDP by the Three Methods

















The foreigner is to have a share in your domestic economy.

Discuss this in the classroom.

23
National Income Accounting

S
T

C S T

C IG XMCST
C
IGXMST

I G T M X
G T

M X t
M
X
G T M X

IS

Introductory Macroeconomics

2244

s











s



t








s


s s s P P
P

s
s

s s

r

s

Diagrammatic representation of the subcategories of aggregate income. NFIA: Net

Factor Income from Abroad, D: Depreciation, ID: Indirect Taxes, Sub: Subsidies, UP: Undistributed
Profits, NIH: Net Interest Payments by Households, CT: Corporate Taxes, TrH: Transfers recived
by Households, PTP: Personal Tax Payments, NP: Non-Tax Payments.

s


P

q t

s
s s

25
National Income Accounting

Introductory Macroeconomics

2266

t t
t t
t

t
t
t
t t t r

r r t
t
t
t t t tt t
t t t
t t
t t
t


t r t

t
t

t r

t
t

t t t

t t t
t t t
t t

t
r r t
t
t t

t
t
t t
t
t t
t tt
t t
t
t t



t t t

t


t



P



t
t



t

27
National Income Accounting

t
t

t t

t t





t

How uniform is the distribution of GDP? It still

seems that a majority of the people are poor

and only some have benefited.
t
r

Introductory Macroeconomics

2288

s s


s s

s
s

s



















t

ummary
Summary

s s

s s
s

Key Concepts
Co ce

s
s

National Income Accounting

29

E xe s s
Exercises

Introductory Macroeconomics

3300

e d ix 2.1
.1
Appendix

Macroeconomics: The Dynamics of Commodity Production

Macroeconomic Theory and Policy

Macroeconomics

Macroeconomics
P

Handbook of
Indian Economy

31
National Income Accounting

 r r r
rr Pr
Handbook
of Indian Economy
r

P r
r

Pr

r r r
rr Pr
Handbook
of Indian Economy
Pr

Introductory Macroeconomics

3322

r
r

r
r

Money
M ney and
and Banking
Ba nk in g

barterdouble
exchanges
coincidence of wants

of


medium
exchange

unit of account

Introductory Macroeconomics

3344

t







t

M T kPY
d

35
Money and Banking

M Td

d
M T kT

T
k










d
d

M T T vM T T
v k
T
d
M T
v


d
vM T



t


t
t
t

 Y P









t








X

Introductory Macroeconomics

3366

X
Y



PV X Y

t




approx.

MS

r r

r r

r r
r
d

r r

r M S

r

t

The Speculative Demand for Money

37
Money and Banking

 r r

r r

Md M T M S

Md kPY

r r

r r

t

t

Introductory Macroeconomics

3388

t

t


P
t t t

q rs r s

39
Money and Banking

P P




t


P P








Assets Rs

Liability Rs

Introductory Macroeconomics

4400

Assets (sources) Rs

Liability (uses) Rs

Currency held by Public

qst Vault Cash held by Commercial Banks

t

qs
t

t

t

ad infinitum

PP P PP P P P P P qP P
r sP P P P P P P P P

P P

41
Money and Banking




Currency

Introductory Macroeconomics

4422

Deposits

Money Supply

t t t

t
t
t



t

H P

t H t



t t


t t t

t

H R
qr s s q


r
r rr





t





P

High Powered Money in Relation to Total Money Supply

Money and Banking

43















s
s


s
s





P
Assets (sources) Rs

Introductory Macroeconomics

4444

qrt

Liability (uses) Rs

q q qtt

q q q

H

s

umm a ry
Summary

45
Money and Banking

s

s t
s s
t
s
s st t s
s

s

t t t s s s
t t
s s s
t s
s
t s t s
t t t

s

t
P
s
t
s t


s t
t
s


t t s
s t

n cep
Key Concepts
rci e
Exercises
Introductory Macroeconomics

4466

r




P
r

r r r r Macroeconomics
P r
r r r Macroeconomic Theory and Policy
P Pr r r
r r Principles of Macroeconomics
P r

p en d x 3.1
.1
Appendix

S a a.r a.r a.r a.r
a r r
r
r.S a.r a.r a.r a.r n

S r.S a
or rS a

r

p en d x 3.2
.2
Appendix

Year

PP

P
P
P

M3

P
PPP
P

Principles of Macroeconomics qsst

47
Money and Banking

PPP
PPP
PPP
PPP
PPP
PPP
PPP
PPP
PPP
PPPP
PPP

M1

p en d x 3.3
.3
Appendix
Introductory Macroeconomics

4488

Percentage Changes in
Year

Loan to GOI

Loan to Banks

Foreign Assets

Principles of Macroeconomics P

Income
Inco
Determin
In
co e Determination
Deter min tion

ceteris
paribus

x y

x y

Introductory Macroeconomics

5500

s s s s s s s
s s
s s s s s s
s s s s s
s s s s s
ss
s s s
s s
s s
s s s s
s s s
s
s s
s s s s s
ss s s s
s s s ss
s ss
s s s
s
s s
s
s s s
s s ss
s s
ss s ss
s s s s
s s
s s s
s c c
ss Y s s
C c Y c.Y
s s s s
s s s
s s s s s
s s s ss
s s s s
sss s
s

C c.Y
s s s
s s s s
s s s ss
ss c s s s s

s s s s s
s s s s s s
s
s s s s sP s s
s s s s

r r r r r
r r r r r r r
rr r
r r r r r r
r r r r
r
I

r rr r
r

r r r
r r
AD C I C I r
r r r
AD c.Y
r r r
Y c.Y

51
Income Determination

r Y r
rr r
Y c.Y

r
r
r r r
rr r r r
r r r r r
r rr r Y
rr r r
r r r r
r
r
r rr
r

r r
rr r
r r
r unintended accumulation of inventories
r r r r
r r r r r
Y r r C I
Y C I r
r I r

r r r
r r r
r r r T
r r G r r
r r G r r


t
Yd Y T

t t
G c Y T
G c.T
t t
t t
t t
t
t
Y t

Introductory Macroeconomics

5522

t t
t
a b

t

q

t


b ma m

b t a

along the graph


m A Positively Sloping Straight Line Swings Upwards
m m as its Slope is Doubled
t
m t m
t
t

t t

t t

P t
t

rs

t A Positively Sloping Straight Line Shifts Upwards in
t
Parallel as its Intercept is Increased


t

s
y z x y x

s s s
s s s


s
s t
s t
s s
s s s

How will the producer try to update his
s production plans in order to avoid excess supply
s or demand? Discuss this in the classroom.

53
Income Determination

t z

s s

s z

s
t

s s
Parametric Shift of z and Changing Equilibrium
s Values of x

z t x s
x x z x s s
x z
s s

x y z

x z z

z s
x y s
t y
x
t

x z

st
Relationship between x and z
s





s
t

t
t
t
t
t t

t

t

t t


Y c.Y

Introductory Macroeconomics

5544

t
t t

t t
c t
Y t
C
t I
C I t Y t

Y t
t Y t
t
cY cY

Y t
Y AD t
t Y
Y

P

t
s t
t
t t

55
Income Determination

t t Y AD t t Y
t t t

Y

Y t t t t t
t c t t t
t t t t
t t t t t
t t t t t AD cY t t
t t t t t b ma
t t tt t c t t t
t c t t t t t t
t t t
t t t t t
t t t t t t t
t t AD t t
t tt t
t t
tt AD AD
t t t
t

t t t t
tt t AD
c t tt
t t
t t t t AD
tt t t
t t tt
t t
t t t
t tt Equilibrium Output and Aggregate Demand in the
t Fixed Price Model
t t
t A t AD tt t t E t
t t tt t
Y AD t
t tt t AD t
t t AD t t
tt Y Y F t t t tt Y Y E
t EF E F t t t t t
t t t t E
t t t t
t t t t t t
AD tt t t t t E t
t t tt
t Y AD t
t t t t tt t
t EG EG t t t t t
t t EF E J t t t

Introductory Macroeconomics

5566

r

s






s
















P

Consumption

Aggregate Demand

Output/Income

57
Income Determination

t

t

Y c
c c




t
t t t

Y







P


t
Y




AD Y

s AD cY
s s s
s r r
s s rs s s s s
s s ss
s s Y s rss s
ts ss s
r s

s r s
ss s s
s s r
ss s
rss s r s
ss
s r s
ss s s
s sss s ss s s
s
ss
s

Introductory Macroeconomics

5588

s s Y
P s S Y C Y cY
s s s
S Y C Y cY s
c ss s

s
s

s s
AD s

ss s

s c

s ss

s s
A
s
s AD ss

s
s
s c
Paradox of Thrift Downward Swing of AD Line

s

ummary
Summary
Ex
s s
Exercises

s

P
P

s
s

s s

s


P
s

P

Macroeconomics
P

59
Income Determination

s


s
s

s s s
s s


s

n ts
Keyy Concepts

Th e Governmen
Go vernment :
Government
The
ctio s and
nd Scope
Sco
Fun
unctions

stabilisation



t t
t t
s
s t s
t s s t
t s t t s s s t
t t
t s t s t s t t s
s s
tt t t
t s s t
s t t t s
s
t
P
s t t t s
s s s
s
t
t t
t t
t
t s
t

s t

t
t

t t s
t
t t s
t
s
t
t
t

The Government:
Function and Scope

t
t t
t s t s t

t
t t
t

61



t





t

622
Introductory Macroeconomics

P P P

qr s The Components of the Government Budget







s





s

s s
s

s s

633
The Government:
Functions and Scope

s


r
s
s s s s
t s
s

s

s s
P r
s r
s

s


s
s
s
s s
s
s s ts
t

s
s s

Introductory Macroeconomics

644

t






t





t PPP PPP
q rs rrr
qr r qr r r qsssr
s qsssr rq r s s
s r rqr q s sq q
qr s s rs
s r qrr q
qr q s qq r
q r rq



r r


t

(As per cent of GDP)

1990
-91

2001
-02

2002
-03

2003
-04

r t
r r
r r




r r

The General Theory of Employment, Interest
and Money r
r r
r
surplus
deficit budget

655
The Government:
Functions and Scope

s P

P
P

P
P

P q
P
P

PP

P
P

PP

P
Economic Survey

2000
-01

 r r
r balanced budget
r r
s
t r
rrs r

t s r
t
rs t r
r t G r
How does the Fiscal Policy try to achieve its
rr r r r r
three basic objectives?
r r r
Y r r YD rtrr
r rt
r r r r t r r
r r T r
rrs r t r r r r r

C cYD cY T
YD r
r r r r r
r r r r rs r r r r
r r rs r
rr r r t

AD cY T I G

Introductory Macroeconomics

666

rrs r r
r r rr rs r rr r t r
r r r r
Y AD r r

Y c Y T I G
t t

Y*
cT c I G

r t r G r
r G T t r r G r
rr r rr r
rr r AD r t
r s r r
r E r r r
t t s

Y
G


G
G
Y Y



Y T

s c

s
s
Y * cT

P P

P P

Effect of Higher Government Expenditure

Why is the poor man crying? Suggest

measures to wipe off his tears.

s
G

T s

677
The Government:
Functions and Scope

s Effect of a Reduction in Taxes

s s
s T
cT s s
s s


T
G

t
t
t

s

s
t
t s
t


t G
t
t


Y G cG cG G c c

Introductory Macroeconomics

688

t
c t
t
Y cT cT T c c

G T
Y G


Y c Y T I

s
t t
T tY t

C c Y tY c t Y c

t

c t AD

AD c tY c I

G c tY

c
I G

Y AD

Y c t Y

Y *
Government and Aggregate Demand (proportional
taxes make the AD schedule flatter)
s

Y c tY

Y * Y


s
AD
AD





Y

qrt
qrt

Increase in Government Expenditure (with
proportional taxes)

Effects of a Reduction in the Proportional Tax Rate

699
The Government:
Functions and Scope

s
c

s
c ct c t

G
s

Introductory Macroeconomics

700

c t









s s
s

s





I I G G
C I G C I G















rPr

Y TR

Y

Y

Y

711
The Government:
Functions and Scope

flow stock



P

t t

t

t t

Introductory Macroeconomics

722

t t t
r

P PP P P PP
PP P

P

P

q
r

sr
r

733
The Government:
Functions and Scope

ey Concepts
n cept
Key

S ummary

t






t



t t
t t
t t




t t
t
t





t
t t

tt

t
t t




t t t t

t
t t
t t
t t
t
t
t

Ex
s s
Exercises

Introductory Macroeconomics

744

t t t
t
t
t


t C Y t
t
t
t
t t C
I G TR t

C Y D I G T Y

Macroeconomics

Macroeconomics

Economic Survey
755
The Government:
Functions and Scope

Op en Economy
Ec
Open
Ecoo om
Macr oecon omics
Macroeconomics

t







t

77
Openeconomy
Macroeconomics

t

t




t









t
t



r





t

Introductory Macroeconomics

788

P








where
Your currency in exchange for the dollar?
exchange rates between two currencies
Should
continue like this? Discuss.
foreign exchange
foreign exchange market









t









P
P

79
Open Economy
Macroeconomics

P Pf e





t

ePf


s


s



s

s



s




s
s

t
s
s

s t
s r s s r
s s

s
s s s s s
s s t s s s

s s
s s
s
t s s
s s

s
s s
s
s
s s s s

Introductory Macroeconomics

800

s s s

s
s s s
s

s

s

ss

s s


s
s
t s s


s

Equilibrium under Flexible Exchange Rates

r r rrr rr

P
r r r
t t

rr r t
t s

r r rr r
t sr r

ss r t r
t r

ss r t r t r

t ss r r
t rr t
P
r r

r rr
t s sr Effect of an Increase in Demand for Imports in the
t r e tr Foreign Exchange Market
r r t s r t r t t r
r t sr s e1 t t r t
r r ss t r ss t
r r r r t t t r s t
r ss r t r t t r r
s rr t sr t e t s
r r t s

t tr r tr r
t r r t r t
t r r r r tr
r t s s rr st
s tt r t rs rt t tt r
r t r r r r
r tr ss r s r t r
r r s r r r r ss r t
tt r r r ss t rr r ss
tr rr t r r ss s
tr r r r ss trr s

81
Open Economy
Macroeconomics

t r t r s t
s r r s
r t s tr r t r t
s r r t rr r
s t t rt r s
rs t r t ss ts r t rr
t r r s t t
r t t t ss rt r
t t t t t
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Introductory Macroeconomics

822

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