Economics is a social science concerned with the production, distribution, and consumption of goods and services. It studies how individuals, businesses, governments, and nations make choices about how to allocate resources.
Goods and service purchased for the purpose of final consumption and final investment are final goods. By consumption, we mean purchases for satisfaction of human wants of both durable and non-durable goods and services. By investment, we mean purchases of capital goods (i.e. producer durables) and net addition to stocks.
National Income is the sum total of factor incomes earned by normal residents of a country (within the domestic territory and from rest of the word) during the period of an accounting year.
FACTOR INCOME VS TRANSFER INCOME
Factor Income: These are the incomes received by the owners of factors of production for rendering their factor services to the producers. In other words, these are earned income, e.g. income from land is rent, salaries of Indians working in foreign embassy which is located in India.
Money is something i.e., commonly accepted as medium of exchange.
Before the evolution of money, goods were exchange for goods. This system of exchange was known as barter system. Barter economy is termed as C-C economy, i.e. commodities were exchanged for commodities. Economic exchanges without the mediation of money are referred to as barter exchanges.
Bank is an institution which receives funds from the public and gives loans and advances to those who need them. The supply of money in a country depends on the banking system as a whole and the monetary policy of the Central Bank in general.
Aggregate Demand is the value of total expenditure on all goods and service in an economy during a fiscal year. Aggregate demand of the economy depends upon the level of employment. There is direct or positive relationship between the level of employment or output in the economy and the aggregate demand. It signifies that aggregate expenditure will increase with rise in the level of employment and fall with the decline in the level of employment. Aggregate demand is the summation of consumption and investment. Read More
In macroeconomics, short – run may be defined as a period of time when ‘technology’ as a factor remains constant.
Short – run in an economy can be defined as the period of time during which, level of output is determined only by the level of employment. Higher the level of employment, higher would be the level of output and vice – versa.