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Key Economic Concepts and Formulas

The document outlines key economic concepts including GDP, NDP, and various methods of calculating national income such as the income and expenditure methods. It also discusses monetary measures like M1 and the credit multiplier, as well as budgetary terms such as budget deficit and fiscal deficit. Additionally, it covers trade balances and the components of the current account balance.

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kumarvishnu02325
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2 views2 pages

Key Economic Concepts and Formulas

The document outlines key economic concepts including GDP, NDP, and various methods of calculating national income such as the income and expenditure methods. It also discusses monetary measures like M1 and the credit multiplier, as well as budgetary terms such as budget deficit and fiscal deficit. Additionally, it covers trade balances and the components of the current account balance.

Uploaded by

kumarvishnu02325
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

CH-3,4

 Gross Domestic Products (GDP) = Net Domestic Products (NDP) + Deprecation


 Net Domestic Products (NDP) = Gross Domestic Products (GDP) - Deprecation
–
Deprecation =>
 Domestic Products = National Products – NFIFA (NFIFA = FIFA – FITA)
 National Products = Domestic Products + NFIFA
 Factor Cost = Market Price – NIT (NIT = IT – S)
 Market Price = Factor Cost + NIT
 GDP Deflator (price index)
 Value Added (GDPMP /VAMMP) => Value of Output – Intermediate Consumption
 Value of Output => Sales OR Sales + Stock (Closing Stock – Opening Stock)
 Sales => P x Q OR Domestic Sales + Export
 Intermediate Consumption => Domestic Purchase + import
 Income Method (NDPFC) => Compensation of Employments + Operating Surplus +
Mixed Income
 Compensation of Employments => Wages & Salaries + Payment in Kind +
Employers’ contribution to social security + Pension on retirement
 Operating Surplus => Rent + Royalty + Interest + Profit
 Profit => Dividends + Corporate/Corporation Profit Tax + Undistributed
Profit/Corporate saving/ Retained earnings
 Expenditure Method (GDPMP) => Final Consumption Expenditure + Gross Domestic
Capital Formation + Net Exports
 Final Consumption Expenditure => Private FCE + Government FCE
 Gross Domestic Capital Formation => Gross Domestic Fixed Capital Formation
+ Stock
OR
 Gross Domestic Capital Formation => Business Fixed Investment +
Government Fixed Investment + Investment on Residential Construction by
Households + Stock
 Net Exports => Export (X) – Import (M)

CH-5,6

 M1 = C + DD + OD
C = Currency (coins & notes) held by public
DD = demand deposits of commercial bank.
OD = Other deposits with reserve bank
 Credit Multiplier => (K) = 1/CRR OR 1/LRR
 Money creation / Demand deposit or creation => K * Cash Reserves

CH-7,8,9

 AD => C+I
 AD = C+I+G+(X-M)
 AS => C+S (AS = Y)
 Equilibrium Y => C + I




 C= + bY
 S= + (1-b)Y
 OR OR

CH-10

 Budget Deficit = Total Expenditure – Total Receipts


 Revenue Deficit = Revenue Expenditure – Revenue Receipts
 Fiscal Deficit = Total Expenditure (RE+CE) – Total Receipts (RR+CR) (capital receipts
other than borrowing) (Fiscal Deficit = borrowing)
 Primary Deficit = Fiscal Deficit – Interest

CH=12

 Trade Balance/Merchandise Balance => X – M (Goods)


 Goods & services Balance => Export (Goods & services) – Import (Goods & services)
 OR
Trade Balance + Balance on non-factor services
 Invisibles Balance => Balance on non-factor services + Balance on factor service
(income) + Balance on current transfers
 Current Account Balance => Trade balance + Invisible Balance
 Overall Balance = current account balance + capital account balance + errors &
omissions

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