CBSE Class 12 Macroeconomics Chapter 2 Basic Concepts Of Macroeconomics

Chapter 2  basic Concepts Of Macroeconomics

 (1).  Factor Income /Payments  And Transfer Income/ Payments:
Factor Income/ Payments: It refers to the money received/ paid against goods and services.
Transfer Income/ Payments: It refers to the money received/ Paid against no goods or services.

Important Points
(1). Taxes received by the government are the transfer incomes of the government as they are received without providing any productive services in return.
(2). Similarly, subsidies paid by the government are transfer payments of the government.

 Difference between Factor Income/ Payments  And Transfer Income/Payments

Final goods And Intermediate Goods

Final goods: refers to those goods which are used either for consumption or for investment.
 Final goods include:
(1). Goods purchased by consumer households as they are meant for final consumption.
(2). Goods purchased by firms for capital formation or investment.

Intermediate Goods: refers to those goods which are used either for resale or for further production in the same year.

Intermediate Goods include:
(1). Goods purchased for resale.
(2). Goods used or further production.

Difference between Final goods And Intermediate goods

Consumption Goods And Capital Goods

Consumption Goods: refers to those goods which satisfy the wants of the consumers directly.
Capital Goods: refers to those goods which help in production of other goods and services.

Difference between consumption goods and Capital goods

Gross Investment, Net investment and depreciation

Gross Investment: gross investment is addition to the stock of capital before making allowance for depreciation.
 GI = Net investment(NI) + depreciation.

Net Investment: The actual addition made to the capital stock of economy in a given period is termed as Net Investment.
NI = Gross Investment - Depreciation.

Depreciation: Refers to a fall in the value of fixed assets due to normal wear and tear, passage of time or expected obsolescence.
Depreciation = Gross value - Net value 

Difference between Depreciation and Capital loss

Net Indirect Tax(NIT)
*Meaning: refers to the difference between indirect taxes and subsidies.
Net indirect tax = Indirect Tax - Subsidies.
* Indirect tax: refers to those taxes which are imposed by the government on production and sale of goods and services.(Sales Tax, Excise Duty,custom Duty,Entertainment Tax etc.)
* Subsidies: refers to the financial assistance given by the government to an enterprise on the production of  a certain commodity.