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🔴 BA/BSC 2nd Semester

🔴 Paper Code = (GE/CC-2)

🔴 Subject = Economics

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2) Different measures of money supply.

Answer = The total stock of money in circulation among the public at a particular point of time is called money supply. The measures of money supply in India are classified into four categories M1, M2, M3 and M4 along with M0. This classification was introduced in April 1977 by Reserve Bank of India.

Let’s discuss these one by one:

(a) Reserve Money (M0): It is also known as High-Powered Money, monetary base, base money etc.
M0 = Currency in Circulation + Bankers’ Deposits with RBI + Other deposits with RBI
It is the monetary base of economy.


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(b) Narrow Money (M1):
M1 = Currency with public + Demand deposits with the Banking system (current account, saving account) + Other deposits with RBI
(c) M2 = M1 + Savings deposits of post office savings banks

(d) Broad Money (M3)
M3 = M1 + Time deposits with the banking system
M4 = M3 + All deposits with post office savings banks

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Liquidity of these Measures of Money Supply = The liquidity means how fast an instrument can be converted into cash. The liquidity of these measures are in order M1>M2>M3>M4 i.e. M1 is most liquid and M4 is least liquid.

🔴 University of Calcutta

🔴 BA/BSC 2nd Semester

🔴 Paper Code = (GE/CC-2)

🔴 Subject = Economics

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🔴 Group - B

3. Circular flow of income.

🔴 University of Calcutta

🔴 BA/BSC 2nd Semester

🔴 Paper Code = (GE/CC-2)

🔴 Subject = Economics

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6. Value added method of estimating national income.

Answer = This method is used to measure national income in different phases of production in the circular flow. It shows the contribution (value added) of each producing unit in the production process.

i. Every individual enterprise adds certain value to the products, which it purchases from some other firm as intermediate goods.

ii. When value added by each and every individual firm is summed up, we get the value of national income.

Value added Method is also known as:
(I) Product Method;
(ii) Inventory Method;
(iii) Net Output Method;
(iv) Industrial Origin Method; and
(v) Commodity Service Method.

Concept of Value Added:
Value added refers to the addition of value to the raw material (intermediate goods) by a firm, by virtue of its productive activities. It is the contribution of an enterprise to the current flow of goods and services. It is calculated as the difference between value of output and value of intermediate consumption.

Value Added = Value of Output – Intermediate Consumption

Example of Concept of Value Added:
Suppose a baker needs only flour to produce bread. He purchases flour as inputs worth? 500 from the miller and then by virtue of its productive activities, converts the flour into bread and sells the bread for Rs. 700.

In the given example:

1. Flour is an input (Intermediate goods) and its value of Rs. 500 are termed as value of ‘Intermediate Consumption’.
2. Bread is the Output and its value of Rs. 700 are termed as ‘Value of Output’.
3. Difference between the value of output and intermediate consumption is termed as ‘Value Added’. It means, that the baker has added a value of Rs. 200 to the total flow of final goods and services in the economy.

🔴 University of Calcutta

🔴 BA/BSC 2nd Semester

🔴 Paper Code = (GE/CC-2)

🔴 Subject = Economics

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🔴 University of Calcutta

🔴 BA/BSC 2nd Semester

🔴 Paper Code = (GE/CC-2)

🔴 Subject = Economics

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7. What are the assumptions of a Simple Keynesian model? How is equilibrium income determined in this model?

🔴 University of Calcutta

🔴 BA/BSC 2nd Semester

🔴 Paper Code = (GE/CC-2)

🔴 Subject = Economics

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🛑 Yaha Per Sabhi Bcom General Ke Students Hai Kya?

🔴 University of Calcutta

🔴 BA/BSC 2nd Semester

🔴 Paper Code = (GE/CC-2)

🔴 Subject = Economics

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9. Define inflation.

Answer :- Inflation is the decline of purchasing power of a given currency over time. A quantitative estimate of the rate at which the decline in purchasing power occurs can be reflected in the increase of an average price level of a basket of selected goods and services in an economy over some period of time.


9. Distinguish between demand pull inflation and cost push inflation.

Only 1 Questions are left

🔴 University of Calcutta

🔴 BA/BSC 2nd Semester

🔴 Paper Code = (GE/CC-2)

🔴 Subject = Economics

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8. Discuss the Quantity theory of Money.

Answer = In monetary economics, the quantity theory of money (often abbreviated QTM) is one of the directions of Western economic thought that emerged in the 16th-17th centuries. The QTM states that the general price level of goods and services is directly proportional to the amount of money in circulation, or money supply. For example, if the amount of money in an economy doubles, QTM predicts that price levels will also double. The theory was originally formulated by Polish mathematician Nicolaus Copernicus in 1517,[1] and was influentially restated by philosophers John Locke, David Hume, Jean Bodin. The theory experienced a large surge in popularity with economists Anna Schwartz and Milton Friedman's book A Monetary History of the United States, published in 1963.[2][3]

The theory was challenged by Keynesian economists,[4] but updated and reinvigorated by the monetarist school of economics, led by economist Milton Friedman. Critics of the theory argue that money velocity is not stable and, in the short-run, prices are sticky, so the direct relationship between money supply and price level does not hold.[5] In mainstream macroeconomic theory, changes in the money supply play no role in determining the inflation rate as it is measured by the CPI.

Alternative theories include the real bills doctrine and the more recent fiscal theory of the price level.

🔴 University of Calcutta

🔴 BA/BSC 2nd Semester

🔴 Paper Code = (GE/CC-2)

🔴 Subject = Economics

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8. What are the limitations of this theory?

Answer = See Photo for Answer

🔴 University of Calcutta

🔴 BA/BSC 2nd Semester

🔴 Paper Code = (GE/CC-2)

🔴 Subject = Economics

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♦️ All questions are solved.

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Misunderstanding 👍

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🔴 University of Calcutta

🔴 Bcom Honours 2nd Semester

🔴 Paper Code = (CC 2.1 CH)

🔴 Subject = Cost and Management Accounting 1

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🔴 University of Calcutta

🔴 Bcom General 2nd Semester

🔴 Paper Code = (CC 2.1 CH)

🔴 Subject = Cost and Management Accounting 1

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🔴 University of Calcutta

🔴 Bcom Honours 2nd Semester

🔴 Paper Code = (CC 2.1 CH)

🔴 Subject = Cost and Management Accounting 1

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Honours
Q. 3