National in Come in India
National in Come in India
National in Come in India
Chapter 5 Unit 3
Manish Dua
Macroeconomics is the study of the
economy as a whole.
• Its goal is to explain the economic changes that affect
many households, firms, and markets at once.
Macroeconomics answers questions like the
following:
• Why is average income high in some countries and low
in others?
• Why do prices rise rapidly in some time periods while
they are more stable in others?
• Why do production and employment expand in some
years and contract in others?
When judging whether the economy is doing well
or poorly, it is natural to look at the total income
that everyone in the economy is earning.
For an economy as a whole, income must
equal expenditure because:
• Every transaction has a buyer and a seller.
• Every Rupee of spending by some buyer is a Rupee
of income for some seller.
Gross domestic product (GDP) is a measure of the
income and expenditures of an economy.
Firms Households
Investment (I):
• The spending on capital equipment, inventories, and
structures, including new housing.
Government Purchases (G):
• The spending on goods and services by local, state, and
federal governments.
• Does not include transfer payments because they are not
made in exchange for currently produced goods or services.
Net Exports (NX):
• Exports minus imports.
No Audio
Consumption
68 %
No Audio
Investment
16%
Consumption
68 %
No Audio
Government
Investment Purchases
16% 18%
Consumption
68 %
Government Purchases
Investment 18% Net Exports
16% -2 %
Consumption
68 %
Nominal GDP values the production of goods and
services at current prices.
Nominal GDP
GDP deflator = × 100
Real GDP
Nominal GDP is converted to real GDP as follows:
GDP is the best single measure of the economic
well-being of a society.