Bank Theory

National Income and GDP Concepts 1. What is National Income? National Income is the total value of all final goods and services produced by a country during a given period (usually one year), including income earned from abroad. 2. Major Aggregates of National Income GDP (Gross Domestic Product): Value of all final goods/services produced within the domestic territory. GNP (Gross National Product): GDP + Net Factor Income from Abroad (NFIA). NNP (Net National Product): GNP - Depreciation. National Income at Factor Cost: NNP at Market Price - Indirect Taxes + Subsidies. Example: GDP = ₹2,000 crore NFIA = ₹100 crore Depreciation = ₹150 crore Indirect Taxes = ₹180 crore, Subsidies = ₹30 crore GNP = 2000 + 100 = ₹2100 crore NNP = 2100 - 150 = ₹1950 crore National Income at Factor Cost = 1950 - 180 + 30 = ₹1800 crore 3. Methods of Computing National Income Production Method: NI = Gross Value Added (GVA) of all se...

Business Cycles and Economic Policies 1. Characteristics of a Business Cycle A business cycle refers to the fluctuations in economic activity that an economy experiences over a period of time. It consists of expansions and contractions in GDP and other macroeconomic indicators. Business cycles are recurrent and periodic but not regular. They affect employment, output, income, and prices. They are global in nature, often influenced by international trade and finance. Governments use policy tools to minimize their adverse effects. 2. Phases of a Business Cycle Expansion: Increase in GDP, employment, investment, and income. Peak: Economy reaches its maximum output; inflation may rise. Recession: Decline in GDP for two consecutive quarters; rising unemployment. Trough: Lowest point in economic activity; recovery begins. Recovery: Economy begins to grow again, leading into the next expansion. Example: India...