SHORT NOTES MACRO ECONOMICS

Chapter 1 introduction

1.. Macro Economics It deals with the aggregate economic variables of an economy.

2. Capitalist Country In a capitalist country production activity are mainly carried out by capitalist enterprises.

3. Wage Rate There is sale and purchase of labour services at a price which is called the .v..a. go rate.

4. Wage Labour The labour which is sold and purchased against wages is referred to as wage labour.

5. Great Depression Great depression of 1929 and the subsequent year saw the output and employment levels in the countries of the world as well.

6. Entrepreneurs People who exercise control over major decisions and bear a large part of the risk associated with the firm/enterprise.

7. Revenue The money that is easned is called revenue.

8. Investment Expenditure Expenses which raise productive capacity are called Investment Expenditure.

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plus two equations of II chapter

fiat money and Legal tender

Fiat money does not have any intrinsic value. What value it has depends on public confidence in the currency's issuer. 
Legal tender is any currency declared legal by a government. Many governments issue a fiat currency and then make it legal tender by setting it as the standard for repaying debt.

Ricardian Equivalence Theorem

The Government issues more debt today to finance an increase in the Government Deficit, and Private Saving increases by an equal amount, since the representative Consumer saves more to pay the higher taxes in the future.

          The Ricardian Equivalence Theorem. For example, holding the path of Government purchases constant, if the representative consumer receives a tax cut today, he/she knows that the government will have to make this up with higher future taxes.

how price of related goods influence the demand? see the answer below

Related good can be of two types-

1.      COMPLIMENT GOODS- These are those goods which are used together. E.g. Car and petrol.

2.     SUBSTITUTE GOODS- These are goods which are used in place of other goods. E.g. Tea coffee.

In case of compliment goods,

Price of good 1 is inversely proportional to Demand of good 2.

So if there is an increase in the price of petrol then quantity demanded for Car will automatically decrease applying Law of Demand.

Whereas In case of substitute goods,

Price of good 1 is directly proportional to Demand of good 2.

If there is an increase in the price of tea, quantity demanded for coffee will also increase.

INTERACTIVE ECONOMICS