FINAL GOODS

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.

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 NATIONAL INCOME

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.

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National Income can be calculated from three different Aspects:

• As the sum total of value added by all producing units in the economy.
• As the sum total of factor incomes generated in the economy during the period of a financial year.
• As the sum total of expenditure on the final goods and services produced in an economy in a financial year.

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MONEY

Money is something i.e., commonly accepted as medium of exchange.

BARTER SYSTEM

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.

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BANK AND BANKING

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.

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Aggregate Demand (AD)

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