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1Goods and its features
What kind of things are called as goods? There are three answers for this question:
Thing should be the result of labour It should satisfy the needs
It should be exchanged on the market.
Goods are the results of production and they are produced to be sold on the market.
Goods have two features, such as exchange value and consumption value. The exchange value means the interchange of goods to the other goods (later for money).
The goods value is defined by the labour, which is used in the production process. There are two types labour, such as real labour and abstract labour. The real labour helps to create a product, abstract labour calculate how much money, forces (physical and mental works) are used in the production of the goods so it is foundation of defining goods value.
The goods value is defined by social necessary working time. The social necessary working time is the time when the most number of goods are produced by using widespread equipments and with average rate of intensity of labour.
There are the following factors are influenced on the value: productivity of labour, intensity of labour and labour complication.
2. Property and its forms
Property is not a thing, it is a relation between people concerning the thing. It means the relations between people in the production process of material and non material goods (services)
The property as economic term means production relations between people in possession of the production results and the production assets.
The property has two elements:
Subject - a person, corporation, local and government organs. (Who is user?)
Object(target)- a real estate(earth, water, forest resources, buildings and etc), moveable (money, securities and other needed properties).
Property as juridical term: All economic relations between people based on property. These relations are regulated from the government side through juridical tools. They are normative acts, laws, documents and etc.
The property from economic point of view is divided into following stages:
the lowest stage is conducting a business alone
the highest stage is cooperation.
According to these stages there are three types of the property such as:
Individual that takes all the results of the production or any other activities.There are two types of individual property: individual property based on owner’s labour (owner does all work, duties) and individual property based on others labour (owner engages other workers)
Shared using all production factors of owners together to achieve planed aims.There are several types of shared property: partnership, joint-stock company, joint venture
Common In case of common type of the property all members of the society use the results of the activity. Common property is divided into government property, municipal, family.
3. Basic economic organizations
Economic Organization is the act of coordinating the other factors of production – land, labor and capital. Organization performs a very important function in modern production, which is carried on a large-scale. Organization is done by the entrepreneur. The entrepreneur may be described as the captain of industry. The economic development of many rich nations like the U.K. and the U.S.A was made possible only by the activities of the entrepreneurs. Sometimes the entrepreneur is also known as “organizer” or “undertaker”.
Types of Economic organization
Economic organization may be broadly classified into the following types:
1. Individual
2. Partnership
3. The Joint Stock Company
4. The Joint Venture Organization
5. Common
Individual takes all the results of the production or any other activities.
Partnership is a commercial unit. The aim of partnership is to get a profit. The establishment fund of the partnership is formulated from the capital(money) of each participant.
Joint-stock company It is a commercial company, where its establishment fund
is divided into shares. Only joint-stock company has right to issue shares.
Joint venture is an enterprise where national and foreign businessmen combine their capital to produce goods and services.
In case of common type of the property all members of the society use the results of the activity. Common property is divided into government property, municipal, family.
The government property is an object, which is used to provide social stability and national security in the society. They are military, health, education, agricultural spheres and others.
Municipal property is a property rights of local management. The objects of municipal properties are water supply system, canalization, gas supply system,
electricity supply system, transportation and others.
4. Methods of economic theory
The Economic science includes:
- A branch economic sciences (the economic industry, transport, agriculture, construction and others);
- functional (the finances, credit, accounting, аудит, statistics, marketing and others)
interindustry (the economic geography, demography, management and others).
The methodological base of all economic sciences is economic theory as system of scientific explanations to economic people’s activity. It studies the causal relationship and regularity of the economic development processes, economic relations appearing between subjects in the process of their economic activity, enables to forecast the development of the country economics.
The Economic theory - is a base of economic policy since the last is based on objective acting economic laws, takes into account the different interests a society, expects different variants of decisions appearing economic problems and choice of the optimum variant of their decision.
The Functions of economic theory are:
cognitive - reveals itself in studying of the economic laws, the methods of economic activity, without which is impossible all other types of vital activity;
methodological - is the science of development of the methods, ways scientific instrument, required for investigations all economic sciences; - practical - is a direct ensuring of economic policy, production management on macro- and мmicroeconomic levels;
world outlook function - is a forming scientific economic way of thinking.
Subject of economic theory - is a study of the economic laws and economic relations, acting in a process of public production and motivation of the choice managing subjects the ways of the optimum limited resources usage for the reason of satisfactions increasing individual’ and society’s needs. In an economic theory analysis is realized on two levels: micro- and macro economic. Microeconomics studies the mechanism of organization economy conduct by the separate economic subject (the enterprises, companies, businessmen), investigates intercepting the consumers and companies in a market system: interaction of the supply and demand, problems of the pricing, market’s conjuncture and factors, defining it and etc. The aim of the microeconomic analysis - is detailed study behavior of the individual economic units to reveal the separate specific components of the economic system. Macroeconomics studies the economic state of the country’s economy as a whole i.e. economic relationship between economics branches and spheres: processes of social reproduction, usage of the national income, taxes, profit, investment, salaries and the price, inflation and unemployment, and etc.
Positive economics. The aim of positive economics is to explain how society makes decisions about consumption, production, and exchange of goods.
Normative economics. It offers recommendations based on value judgements.
The following statement combines positive and normative economics: “The elderly have very high medical expenses, and the government should subsidize their health bills”.
5. Types of Production factors
Land
Land is the economic resource encompassing natural resources found within a nation’s economy. This resource includes timber, land, fisheries, farms and other similar natural resources. Land is usually a limited resource for many economies. Although some natural resources, such as timber, food and animals, are renewable, the physical land is usually a fixed resource. Nations must carefully use their land resource by creating a mix of natural and industrial uses. Using land for industrial purposes allows nations to improve the production processes for turning natural resources into consumer goods.
Labor
Labor represents the human capital available to transform raw or national resources into consumer goods. Human capital includes all able-bodied individuals capable of working in the nation’s economy and providing various services to other individuals or businesses. This factor of production is a flexible resource as workers can be allocated to different areas of the economy for producing consumer goods or services. Human capital can also be improved through training or educating workers to complete technical functions or business tasks when working with other economic resources.
Capital
Capital has two economic definitions as a factor of production. Capital can represent the monetary resources companies use to purchase natural resources, land and other capital goods. Monetary resources flow through a nation’s economy as individuals buy and sell resources to individuals and businesses. Capital also represents the major physical assets individuals and companies use when producing goods or services. These assets include buildings, production facilities, equipment, vehicles and other similar items. Individuals may create their own capital production resources, purchase them from another individual or business or lease them for a specific amount of time from individuals or other businesses.
Entrepreneurship
Entrepreneurship is considered a factor of production because economic resources can exist in an economy and not be transformed into consumer goods. Entrepreneurs usually have an idea for creating a valuable good or service and assume the risk involved with transforming economic resources into consumer products. Entrepreneurship is also considered a factor of production since someone must complete the managerial functions of gathering, allocating and distributing economic resources or consumer products to individuals and other businesses in the economy.
6. Goods production: essence, conditions, features
The second type of the social economy is goods production. In the goods production the goods are made to be sold. The economic relations between people are take place throw market, that’s аhв this sвstem has the following stages of goods movement: production-exchange-use. The conditions of the goods production development: 1. Public division of labour ( producers specialised on making one type of goods ) 2. Private property (the results of the production are owned by holders) The goods production was the basis of the market development. There are several types of market economy. They are: 1. Non developed market economy (the half of the production results are consumed by the producers and the others are sold on the market). 2. Developed market economy (free market economy). Such kind of market economy has peculiarities as working force is a good, the producer engage(ɧɚɧɢɦɚɬɶ) hired worker, and the most production results are sold. 3. Regulated market economy (mixed economy). Here is combined the private sector and government sector. There are several forms of the government regulations. They are issue a law, conduct a tax and finance systems of the country. Several forms of regulated market economy used in the world such as social oriented (Germany), to support a business (the USA), to protect a big business interests (Japan, Sweden) 4. Deformation market economy (administered-command economy) What kind of things are called as goods? There are three answers for this question: 1. Thing should be the result of labour, 2. It should satisfy the needs, 3. It should be exchanged on the market. Goods are the results of production and they are produced to be sold on the market. Goods have two features, such as exchange value and consumption value. The exchange value means the interchange of goods to the other goods (later for money). The goods value is defined by the labour, which is used in the production process. There are two types labour, such as real labour and abstract labour. The real labour helps to create a product, abstract labour calculate how much money, forces (physical and mental works) are used in the production of the goods so it is foundation of defining goods value. The goods value is defined by social necessary working time. The social necessary working time is the time when the most number of goods are produced by using widespread equipments and with average rate of intensity of labour. There are the following factors are influenced on the value: productivity of labour, intensity of labour and labour complication. The value theory was created by the famous economists such as A. Smith, D. Ricardo. Later it was researched by K. Marx. There were two branches in explanation of the goods value. They are Marxism and marginalism. The Marxism considered the goods value movement, they didn’t paв attention on consumption value. It based on labour value theory. The marginasism said that not only labour identify the value of the goods. There are subjectvism factors which influence on the goods value, e.g. bad (ɬɭɯɥɨɟ) egg is expensive in China, a little piece of diamond is expensive, but a cold water costs cheap and others. Why? Because there is a especial party in China and in order to supply diamond it demands a lot of expenditures, to get needed amount of cold water are more easy. There is a link between number of goods and their usefulness. It explains the law of low level of diminishing. According to the law when the numbers of goods are increased the utility of each product is decreased.
7. Subject of economic theory and main key words
In your daily life you must have experienced that as a human being you hold many desires and requirements but the means to satisy them are limited. For example, let us assume that you are a student of an undergraduate programme and as you are still studying, you don't have any regular source of income except for the monthly pocket money of Rs. 750 which your parents are giving to you every month. This pocket money is the only monetary source for you to take care of your monthly expenses. Thus, we can say that you have limited monetary resource of Rs. 750 per month to satisfy your various desires and requirements. Let us further assume that your various desires and requirements are follows:
You want to see the latest movie which has been declared a box office hit
You want to buy a new car similar to the one which your friend owns and uses
You want to purchase mobile phone cum tablet which has been recently launched by XYZ company in the market
You want to eat out with your friends in good restaurant located near your college
You need to buy certain course books as you semester end examinations are near
You have to spend on taking print out of the six class assignments which are due for submission to the college by end of this month.
In nutshell, your desires and requirements are many and your means are limited (Rs. 750 that you get every month as pocket money). In such a case, you will have to prioritize your desires and requirements on the basis of their importance and the gains associated with them. In other words, you will be able to satisfy only some of your desires and requirements and not all as you have limited means or resources. Thus in above example you might be position to satisfy only following few desires and requirements:
Buying course books for the examination preparation
Paying for taking print out of the six class assignments due for submission
And either seeing the movie released recently or eating out with your friends.
This action of yours through which you allocated your limited resource (pocket money of Rs. 750 per month) in order to satisfy your various desires and requirements while ensuring maximization of your gain or return is the crux of the subject Economics.
Economics is thus a social science which studies human behaviour when an individual is encountered with unlimited desires but holds limited means to satisfy them. Economics studies that how individuals (i.e; an Individual human being or an individual firm or an Industry etc) optimise their resources to maximize their gains.
8. Economic types of product: goods, services.
We desire to have all the things to satisfy our present and future wants. Thus, our desire is for all those things that satisfy our wants.
All these things are either material goods or services. If something is not wanted by anybody it will not be called a good or service.
A head of dirt will not be called as it is not wanted by any human being. Thus all the goods have the ability to satisfy some of our wants. Likewise, all services have the ability to satisfy some of our wants.
Therefore, we can divide the things that we wants into two categories:
(i) Goods and
(ii) Services. Goods are material things wanted by human beings. They can be seen or touched. Services are non-material things. These cannot be seen or touched only their effects are felt. When we are hungry, we take food. When we fall sick, we take medicines. When we study, we use book, notebook, pen, paper etc. All these are examples of goods which satisfy some of our wants. All the things which satisfy human wants are good.
However, wants for haircut, washing of cloths, mending of shoes, stitching of cloths, studying in a school or a college etc. are not satisfied by goods. These are satisfied by the services performed by a barber, washer man, cobbler, tailor and teacher etc. So some of our wants are satisfied by goods and some by services. Hence, all the human wants can be satisfied by goods and services.
Classification of Goods and Services:
Goods and services are of many types. However, these can be classified into some broad groups.
These are discussed below:
(i) Free Goods and Economic goods:
The goods which have unlimited supply and are provided as free gift of nature. The goods which are not man-made and do not have to pay anything to get them. These goods are known as ‘Free Goods’. For example, air, sea, water, sunlight, sand in the desert etc. On the other hand, goods like vegetables, grains, minerals, fruits, fishes etc. which are neither man-made nor unlimited supply of nature are known as ‘Economic Goods’ All these goods are sold and purchased in the market only.
(ii) Free Services and Economic Services:
Services which cannot be bought in the market and which are only rendered out of love, affection etc. are known as ‘Free Services’. For example, all services given by the parents to their children are free services. However, all the services that can be bought in the market are ‘Economic Services’. Services rendered by doctors, teachers, lawyers, barbers, cobblers etc. are the example of economic services.
ADVERTISEMENTS:
(iii) Consumer Goods and Capital Goods:
The goods which are directly used by the consumer for the purposes of consumption are known as ‘Consumer Goods’ The example of consumer goods are bread, biscuit, butter, jam, rice, fish, egg, shoes, shirts, fan, book, pen, cooking gas etc. On the other hand, all the goods which are not directly used to satisfy consumption but which are used in further production are called ‘Producer Goods’ or ‘Capital Goods’. The examples are seeds, fertilizers, tools, machines, raw materials etc.
9) Market economy system and its elements
A market economy is a system where the laws of supply and demand direct the production of goods and services. Supply includes natural resources, capital, and labor. Demand includes purchases by consumers, businesses and the government. Businesses sell their wares at the highest price consumers will pay. At the same time, shoppers look for the lowest prices for the goods and services they want. Workers bid their services at the highest possible wages that their skills allow. Employers seek to get the best employees at the lowest possible price.
Capitalism requires a market economy to set prices and distribute goods and services. Socialism and communism need a command economy to create a central plan that guides economic decisions. Market economies evolve from traditional economies. Most societies in the modern world have elements of all three types of economies. That makes them mixed economies.
Six Characteristics
The following six characteristics define a market economy.
1. Private Property. Most goods and services are privately-owned. The owners can make legally-binding contracts to buy, sell, or lease their property. In other words, their assets give them the right to profit from ownership. But U.S. law excludes some assets. Since 1865, you cannot buy and sell human beings. That includes you, your body, and your body parts. (Source: "Market Economy," University of Auburn.)
2. Freedom of Choice. Owners are free to produce, sell and purchase goods and services in a competitive market. They only have two constraints. First, is the price at which they are willing to buy or sell. Second is the amount of capital they have.
3. Motive of Self-Interest. Everyone sells their wares to the highest bidder while negotiating the lowest price for their purchases.Although the reason is selfish, it benefits the economy over the long run. That's because this auction system sets prices for goods and services that reflect their market value. It gives an accurate picture of supply and demand at any given moment.
4. Competition. The force of competitive pressure keeps prices low. It also ensures that society provides goods and services most efficiently. As soon as demand increases for a particular item, prices rise thanks to the law of demand. Competitors see they can enhance their profit by producing it, adding to supply. That lowers prices to a level where only the best competitors remain. This force of competitive pressure also applies to workers and consumers. Employees vie with each other for the highest-paying jobs. Buyers compete for the best product at the lowest price. For more, see What Is Competitive Advantage: 3 Strategies That Work.
5. System of Markets and Prices. A market economy relies on an efficient market in which to sell goods and services. That's where all buyers and sellers have equal access to the same information. Price changes are pure reflections of the laws of supply and demand. Find out the Five Determinants of Demand.
6. Limited Government. The role of government is to ensure that the markets are open and working. For example, it is in charge of national defense to protect the markets. It also makes sure that everyone has equal access to the markets. The government penalizes monopolies that restrict competition. It makes sure no one is manipulating the markets and that everyone has equal access to information. (Source: National Council on Economic Education.)
Examples:
The United States is the world's premier market economy. One reason for its success is the U.S. Constitution. It has provisions that facilitate and protect the market economy's six characteristics. Here are the most important:
Article I, Section 8 protects innovation as property by establishing a copyright clause.
Article I, Sections 9 and 10 protects free enterprise and freedom of choice by prohibiting states from taxing each others' goods and services.
Amendment IV protects private property and limits government powers by protecting people from unreasonable searches and seizures.
Amendment V protects the ownership of private property. Amendment XIV prohibits the state from taking away property without due process of law.
Amendments IX and X limit the government's power to interfere in any rights not expressly outlined in the Constitution.
10) Demand and demand law
The law of demand states that a higher price leads to a lower quantity demanded and that a lower price leads to a higher quantity demanded.
Demand curves and demand schedules are tools used to summarize the relationship between quantity demanded and price.
Demand for goods and services
Economists use the term demand to refer to the amount of some good or service consumers are willing and able to purchase at each price. Demand is based on needs and wants—a consumer may be able to differentiate between a need and a want, but from an economist’s perspective they are the same thing. Demand is also based on ability to pay. If you cannot pay, you have no effective demand.
What a buyer pays for a unit of the specific good or service is called price. The total number of units purchased at that price is called the quantity demanded. A rise in price of a good or service almost always decreases the quantity demanded of that good or service. Conversely, a fall in price will increase the quantity demanded. When the price of a gallon of gasoline goes up, for example, people look for ways to reduce their consumption by combining several errands, commuting by carpool or mass transit, or taking weekend or vacation trips closer to home. Economists call this inverse relationship between price and quantity demanded the law of demand. The law of demand assumes that all other variables that affect demand are held constant.
Demand schedule and demand curve:
A demand schedule is a table that shows the quantity demanded at each price.
A demand curve is a graph that shows the quantity demanded at each price.
The difference between demand and quantity demanded
In economic terminology, demand is not the same as quantity demanded. When economists talk about demand, they mean the relationship between a range of prices and the quantities demanded at those prices, as illustrated by a demand curve or a demand schedule. When economists talk about quantity demanded, they mean only a certain point on the demand curve or one quantity on the demand schedule. In short, demand refers to the curve, and quantity demanded refers to a specific point on the curve.
11) Supply and supply law
The law of supply states that a higher price leads to a higher quantity supplied and that a lower price leads to a lower quantity supplied.
Supply curves and supply schedules are tools used to summarize the relationship between supply and price.
Supply of goods and services
When economists talk about supply, they mean the amount of some good or service a producer is willing to supply at each price. Price is what the producer receives for selling one unit of a good or service. A rise in price almost always leads to an increase in the quantity supplied of that good or service, while a fall in price will decrease the quantity supplied. When the price of gasoline rises, for example, it encourages profit-seeking firms to take several actions: expand exploration for oil reserves, drill for more oil, invest in more pipelines and oil tankers to bring the oil to plants where it can be refined into gasoline, build new oil refineries, purchase additional pipelines and trucks to ship the gasoline to gas stations, and open more gas stations or keep existing gas stations open longer hours. Economists call this positive relationship between price and quantity supplied—that a higher price leads to a higher quantity supplied and a lower price leads to a lower quantity supplied—the law of supply. The law of supply assumes that all other variables that affect supply are held constant.
Supply schedule and supply curve
A supply schedule is a table that shows the quantity supplied at each price.
A supply curve is a graph that shows the quantity supplied at each price.
The difference between supply and quantity supplied
In economic terminology, supply is not the same as quantity supplied. When economists refer to supply, they mean the relationship between a range of prices and the quantities supplied at those prices—a relationship that can be illustrated with a supply curve or a supply schedule. When economists refer to quantity supplied, they mean only a certain point on the supply curve, or one quantity on the supply schedule. In short, supply refers to the curve, and quantity supplied refers to a specific point on the curve.
12) Price and its calculation
Price is the quantity of payment or compensation given by one party to another in return for goods or services. In modern economies, prices are generally expressed in units of some form of currency. (For commodities, they are expressed as currency per unit weight of the commodity, e.g. euros per kilogram.) Although prices could be quoted as quantities of other goods or services this sort of barter exchange is rarely seen.
13. Entrepreuneur and its main functions and types
One who brings resources,labor, material and other assets intocombinations that make their value greater then before and also one who introduceschanges, innovation and new order. Entrepreneurship is viewed as a functioninvolvingidentification and use of opportunitieswhich exist in the market. Entrepreneursbear risksin converting theideas into action and pursuing opportunities.
Functions of an entrepreneur
Identifying entrepreneurial opportunity
There are many opportunities in the world of business. An entrepreneur senses the opportunities faster than others do. And therefore, keeps his eyes and ears open and apply imagination, creativity and innovativeness in attaining business success.
Turning ideas into action
An entrepreneur should be capable of turning his ideas into reality. He collects information regarding the ideas, products, practices to suit the demand in the market. Further steps are taken to achieve the goals in the light of the information collected.
Feasibility study
The entrepreneur conducts studies to assess the market feasibility of the proposed product or services. He anticipates problems and assesses quantity, quality, cost and sources of inputs required to run the enterprise. Such a blue print of all the activities is termed as a business plan or a project report.
Resourcing
The entrepreneur needs various resources in terms of money, machine, material, and men to running the enterprise successfully. An essential function of an entrepreneur is to ensure the availability of all these resources.
Setting up of the Enterprise
For setting up an enterprise the entrepreneur may need to fulfill some legal formalities. He also tries to find out a suitable location, design the premises, install machinery and do many other things.
Managing the enterprise
One of the important function of an entrepreneur is to run the enterprise. He has to manage men, material, finance and organize production of goods and services. He has to market each product and service, after ensuring appropriate returns (profits) of the investment.
Growth and Development
Once the enterprise achieves its desired results, the entrepreneur has to explore another higher goal for its proper growth and development. The entrepreneur is not satisfied only with achieving a set goal but constantly strives for achieving excellence.
Types of entrepreneurs
Necessity based /Opportunity based
Profit oriented /Social entrepreneurs
Serial entrepreneurs
Intrapreneurs
First generation / family business
Pinchot (1985) defines an intrapreneur as a "person who focuses on innovation and creativity and who transforms a dream or an idea into a profitable venture, by operating within the organizational environment."
14.Microeconomics and its main key words
Microeconomics (from Greek prefix mikro- meaning "small") is a branch of economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. One goal of microeconomics is to analyze the market mechanisms that establish relative prices among goods and services and allocate limited resources among alternative uses. Microeconomics shows conditions under which free markets lead to desirable allocations. It also analyzes market failure, where markets fail to produce efficient results. Microeconomics stands in contrast to macroeconomics, which involves "the sum total of economic activity, dealing with the issues of growth, inflation, and unemployment and with national policies relating to these issues". Microeconomics also deals with the effects of economic policies (such as changing taxation levels) on the aforementioned aspects of the economy. Particularly in the wake of the Lucas critique, much of modern macroeconomic theory has been built upon 'microfoundations'—i.e. based upon basic assumptions about micro-level behavior.
Supply and demand is an economic model of price determination in a perfectly competitive market. It concludes that in a perfectly competitive market with no externalities, per unit taxes, or price controls, the unit price for a particular good is the price at which the quantity demanded by consumers equals the quantity supplied by producers. This price results in a stable economic equilibrium.
Elasticity is the measurement of how responsive an economic variable is to a change in another variable. Elasticity can be quantified as the ratio of the percentage change in one variable to the percentage change in another variable, when the later variable has a causal influence on the former. It is a tool for measuring the responsiveness of a variable, or of the function that determines it, to changes in causative variables in unitless ways. Frequently used elasticities include price elasticity of demand, price elasticity of supply, income elasticity of demand, elasticity of substitution or constntelasticity of substitution between factors of production and elasticity of intertemporal substitution.
The cost-of-production theory of value states that the price of an object or condition is determined by the sum of the cost of the resources that went into making it. The cost can comprise any of the factors of production: labour, capital, land. Technology can be viewed either as a form of fixed capital (ex:plant) or circulating capital (ex:intermediate goods).
A monopoly (from Greek monos μόνος (alone or single) + polein πωλεῖν (to sell)) exists when a single company is the only supplier of a particular commodity.
Benefits of Monopoly Market- Prices in monopoly market are stable as there is only one firm and so there is no competition. Due to the absence of competition there are high profits and leads to high number of sales monopoly firms tend to receive super profits from their operations.
An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). Oligopolies can create the incentive for firms to engage in collusion and form cartels that reduce competition leading to higher prices for consumers and less overall market output.
15. Macroeconomics and its main key words
Macroeconomics (from the Greek prefix makro- meaning "large" and economics) is a branch of economics dealing with the performance, structure, behavior, and decision-making of an economy as a whole. This includes regional, national, and global economies.Macroeconomists study aggregated indicators such as GDP, unemployment rates, national income, price indices, and the interrelations among the different sectors of the economy to better understand how the whole economy functions. Macroeconomists develop models that explain the relationship between such factors as national income, output, consumption, unemployment, inflation, savings, investment, international trade and international finance. While macroeconomics is a broad field of study, there are two areas of research that are emblematic of the discipline: the attempt to understand the causes and consequences of short-run fluctuations in national income (the business cycle), and the attempt to understand the determinants of long-run economic growth (increases in national income). Macroeconomic models and their forecasts are used by governments to assist in the development and evaluation of economic policy.Macroeconomics and microeconomics, a pair of terms coined by Ragnar Frisch, are the two most general fields in economics. In contrast to macroeconomics, microeconomics is the branch of economics that studies the behavior of individuals and firms in making decisions and the interactions among these individuals and firms in narrowly-defined markets
National output is the total amount of everything a country produces in a given period of time. Everything that is produced and sold generates an equal amount of income.
Macroeconomic output is usually measured by gross domestic product (GDP) or one of the other national accounts. Economists are interested in long-run increases in output study economic growth.
The amount of unemployment in an economy is measured by the unemployment rate, i.e. the percentage of workers without jobs in the labor force. The unemployment rate in the labor force only includes workers actively looking for jobs. People who are retired, pursuing education, or discouraged from seeking work by a lack of job prospects are excluded.
16. Market: essence and types
A market is one of the many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services (including labor) in exchange for money from buyers. It can be said that a market is the process by which the prices of goods and services are established. Markets facilitate trade and enable the distribution and resource allocation in a society. Markets allow any trade-able item to be evaluated and priced. A market emerges more or less spontaneously or may be constructed deliberately by human interaction in order to enable the exchange of rights (cf. ownership) of services and goods. Markets generally supplant gift economies and are often held in place through rules and customs, such as a booth fee, competitive pricing, source of goods for sale (local produce or stock registration), and the threat of military or police force if these rules are broken.
Markets can differ by products (goods, services) or factors (labour and capital) sold, product differentiation, place in which exchanges are carried, buyers targeted, duration, selling process, government regulation, taxes, subsidies, minimum wages, price ceilings, legality of exchange, liquidity, intensity of speculation, size, concentration, exchange asymmetry, relative prices, volatility and geographic extension. The geographic boundaries of a market may vary considerably, for example the food market in a single building, the real estate market in a local city, the consumer market in an entire country, or the economy of an international trade bloc where the same rules apply throughout. Markets can also be worldwide, for example the global diamond trade. National economies can be classified, for example as developed markets or developing markets.
In mainstream economics, the concept of a market is any structure that allows buyers and sellers to exchange any type of goods, services and information. The exchange of goods or services, with or without money, is a transaction.[1] Market participants consist of all the buyers and sellers of a good who influence its price, which is a major topic of study of economics and has given rise to several theories and models concerning the basic market forces of supply and demand. A major topic of debate is how much a given market can be considered to be a "free market", that is free from government intervention. Microeconomics traditionally focuses on the study of market structure and the efficiency of market equilibrium; when the latter (if it exists) is not efficient, then economists say that a market failure has occurred. However it is not always clear how the allocation of resources can be improved since there is always the possibility of government failure.
Types
Physical consumer markets[edit]
food retail markets: farmers' markets, fish markets, wet markets and grocery stores
retail marketplaces: public markets, market squares, Main Streets, High Streets, bazaars, souqs, night markets, shopping strip malls and shopping malls
big-box stores: supermarkets, hypermarkets and discount stores
ad hoc auction markets: process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder
used goods markets such as flea markets
temporary markets such as fairs
Physical business markets[edit]
physical wholesale markets: sale of goods or merchandise to retailers; to industrial, commercial, institutional, or other professional business users or to other wholesalers and related subordinated services
markets for intermediate goods used in production of other goods and services
labor markets: where people sell their labour to businesses in exchange for a wage
ad hoc auction markets: process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder
temporary markets such as trade fairs
Non-physical markets[edit]
media markets (broadcast market): is a region where the population can receive the same (or similar) television and radio station offerings, and may also include other types of media including newspapers and Internet content
Internet markets (electronic commerce): trading in products or services using computer networks, such as the Internet
artificial markets created by regulation to exchange rights for derivatives that have been designed to ameliorate externalities, such as pollution permits (see carbon trading)
Financial markets[edit]
Financial markets facilitate the exchange of liquid assets. Most investors prefer investing in two markets:
the stock markets, for the exchange of shares in corporations (NYSE, AMEX, and the NASDAQ are the most common stock markets in the US)
and the bond markets
There are also:
currency markets are used to trade one currency for another, and are often used for speculation on currency exchange rates
the money market is the name for the global market for lending and borrowing
futures markets, where contracts are exchanged regarding the future delivery of goods are often an outgrowth of general commodity markets
prediction markets are a type of speculative market in which the goods exchanged are futures on the occurrence of certain events. They apply the market dynamics to facilitate information aggregation.
Unauthorized and illegal markets[edit]
grey markets (parallel markets): is the trade of a commodity through distribution channels which, while legal, are unofficial, unauthorized, or unintended by the original manufacturer[citation needed]
markets in illegal goods such as the market for illicit drugs, illegal arms, infringing products, cigarettes sold to minors or untaxed cigarettes (in some jurisdictions), or the private sale of unpasteurized goat milk
17)Organisation of production process and its role in the development of the economy
Production organization, or the organization of production, is at the heart of businesses involving the manufacturing process of goods. According to the American economist pioneer Richard Ely in his book, "Elementary Principles of Economics," the concept of production organization is applicable in modern economics in a number of ways. As the term suggests, production organization is simply the manner in which you organize the process of production of goods or services in your business. It is through production organization that you are able to effectively coordinate the factors of production, which include raw materials, labor and capital. Consequently, you will derive significant benefits from the organization of the production process. Household economy is the simplest form of production organization consisting of land, labor and capital, that is in ownership and control by the same person. You can engage in this level of production organization, for example, by organizing your family to provide labor and technical advice to produce agricultural products to provide food for the household. Production of goods and provision of services at community level leads to the elevation of production organization by creation of other concepts such as division of labor and specialization. Evolution
The advancement of production organization as an economic concept has led to various improvements in factors of production such as labor and capital as a result of globalization. The global demand for labor has, for example, brought about mass employment, leading to the creation of industries such human resource management. This has been useful to production firms because the department enables employees to understand the needs of the company and facilitate improvements in production by motivation through better pay packages and providing better working conditions.
Benefits
The single most important benefit of production organization to your business is efficiency. Production organization is essentially planning every step of the production process to maximize on the available resources, to lower production costs and to minimize loss. When you organize the production process, you are able to keep track of the inventory so it is neither too low nor too high. Production organization also helps you to identify which production processes such as labor or technology need adjustments to enhance efficiency.
Challenges
Production organization is capable of affecting your company’s production process in numerous ways owing to factors such as specialization. For example, a decline on the number of research farms offering high quality seed materials can affect farmers’ ability to produce sufficient food and cash crops. This can affect a community’s ability to access food at affordable prices and result in an increase in wage bill thus, affecting production costs.
18) Production forces and production relations
According to this idea of Marxism-Leninism, the productive forces are the driving force of world history. In increasing magnitude, the mechanical means of production are supposed to contradict the mode of production and thus in the end forcefully bring about socialism as a solution to this contradiction.
Now, one may comprehend capitalism as a contradiction between forces and relations of production: private property monopolizes the social forces of production in the form of cooperation, natural science and technology. But what comes of this is just the accumulation of capital, which clamps on the increasing scale of social labor for its expansion. And this is the outright opposite of a breakdown of the capitalist mode of production, as should supposedly follow from the conflict between forces and relations of production.
The mistake of the whole idea is that a means of production is said to determine a purpose of production. Just as if, with a strongly developed machinery, socialism were a naturally and quasi-automatically self-adjusting mode of production, but in the case of substandard means of production, capitalism or feudalism match perfectly. Nothing at all directly follows from the steam engine or the microchip – what purposes those involved want to apply or don’t want to put up with any longer is the whole reason for the establishment or overthrow of a mode of economics.
19) Forms of social production: natural economy and goods production
There are two types of social economy. They are a natural production and a goods production. The first object of the social production was a natural economy. In the natural production producers make goods for their own consumption. The product has only three stages of goods movement: production-distribution-use. This type of production was used in primitive society ,slave-owning) and feudal system ,The natural form of production doesn’t possibilitв to have high level of development and it is an isolated type of the system. Such kind of production form still exists in the world economy especially in the economy of non developed countries.
2/Goods production: reasons and conditions of its formation, main features. Essence of the goods and its features. The second type of the social economy is goods production. In the goods production the goods are made to be sold. The economic relations between people are take place throw market, that’s аhв this sвstem has the following stages of goods movement: production-exchange-use. The conditions of the goods production development: 1. Public division of labour ( producers specialised on making one type of goods ) 2. Private property (the results of the production are owned by holders) The goods production was the basis of the market development. There are several types of market economy. They are: 1. Non developed market economy (the half of the production results are consumed by the producers and the others are sold on the market). 2. Developed market economy (free market economy). Such kind of market economy has peculiarities as working force is a good, the producer engage(ɧɚɧɢɦɚɬɶ) hired worker, and the most production results are sold.
3. Regulated market economy (mixed economy). Here is combined the private sector and government sector. There are several forms of the government regulations. They are issue a law, conduct a tax and finance systems of the country. Several forms of regulated market economy used in the world such as social oriented (Germany), to support a business (the USA), to protect a big business interests (Japan, Sweden)
4. Deformation market economy (administered-command economy) What kind of things are called as goods? There are three answers for this question: 1. Thing should be the result of labour, 2. It should satisfy the needs, 3. It should be exchanged on the market. Goods are the results of production and they are produced to be sold on the market. Goods have two features, such as exchange value and consumption value. The exchange value means the interchange of goods to the other goods (later for money). The goods value is defined by the labour, which is used in the production process. There are two types labour, such as real labour and abstract labour. The real labour helps to create a product, abstract labour calculate how much money, forces (physical and mental works) are used in the production of the goods so it is foundation of defining goods value. The goods value is defined by social necessary working time. The social necessary working time is the time when the most number of goods are produced by using widespread equipments and with average rate of intensity of labour. There are the following factors are influenced on the value: productivity of labour, intensity of labour and labour complication. The value theory was created by the famous economists such as A. Smith, D. Ricardo. Later it was researched by K. Marx. There were two branches in explanation of the goods value. They are Marxism and marginalism. The Marxism considered the goods value movement, they didn’t paв attention on consumption value. It based on labour value theory. The marginasism said that not only labour identify the value of the goods. There are subjectvism factors which influence on the goods value, e.g. bad egg is expensive in China, a little piece of diamond is expensive, but a cold water costs cheap and others. Why? Because there is a especial party in China and in order to supply diamond it demands a lot of expenditures, to get needed amount of cold water are more easy. There is a link between number of goods and their usefulness. It explains the law of low level of diminishing. According to the law when the numbers of goods are increased the utility of each product is decreased.
20) Joint stock company: essence and typesA joint-stock company (JSC) is a form of company or joint venture involving two or more individuals that own shares of stock in the business. Certificates of ownership ("shares") are issued by the corporation in return for each financial contribution, and the shareholders are free to relocate their ownership interest at any time by selling their shares to others.
At present, company law the existence of a joint-stock company is often identical with incorporation (i.e. possession of authorized personality separate from shareholders) and limited liability (meaning that the shareholders are only liable for the company's debts to the value of the money they invested in the company). And as an outcome joint-stock company is generally known as corporations or limited companies.
Some jurisdictions still provide the opportunity of registering joint-stock companies without limited liability. In the United Kingdom and other countries which have adopted their form of company law, these are known as unlimited companies. In the United States they are, to some extent confusingly known as joint-stock companies. (Company means a company formed and registered under this act or an existing company. – Company Act 1994)
1. Chartered Company: The companies that form by the order of the king of England are called the charter company. These companies were formed before 1844. For example, East India Company, Chartered Bank of England, the charter of the British South Africa Company, given by Queen Victoria (More information here)
2. Statutory Company: Companies that are formed by the order of the President, or by the Legislative Committee or by bill of Parliament are called Statutory Company. These Companies are operated by those laws. For example, municipal councils, universities, central banks and government regulators, Central Bank. (More information here)
3. Registered Corporation: Companies that are formed under the prevailing law of the company are called the registered company. The corporation that has filed a registration statement with the SEC prior to releasing a new stock issue. It is two types-
i) Unlimited Company: The liabilities of the shareholders of this company are unlimited. For example, British all-terrain vehicle manufacturer Land Rover, GlaxoSmithKline Services Unlimited.ii) Limited Company / limited corporation: The liabilities of the shareholders are limited. For example, Charitable organisations, Financial Services Authority. This liability of a company can be of two types.
a) By Guarantee
b) By share value. The company limited by share can be of two types.
• Private Limited Company, where the number of shareholder ranges from two to fifty. The share of these companies can’t be traded in the stock market.
Public Limited Company, where the number of shareholder ranges from seven to share limitation. The share of the public limited company is traded in the stock market.
21. Capital (funds): essense and types
Capital is the resources used in creation goods and services in the long term. It has two types: physical and monetary. Physical capital is the machinery, equipment and buildings used in production. Each type of enterprise has funds to organize and make goods or services. The funds are divided to production funds and circulation funds. Production funds consist of production (production means such as machine tools, computers, working tables and others) funds and non-production funds (accommodation, sanatorium, health centre and others). Production funds have direct relation to the production process, but non-production funds also important part of the funds as they influence to labour productivity at the enterprise. Monetary capital is pecuniary expression of non-financial assets and money in cash. The process of the continuous circulation is called turnover of the capital and it expresses through the formula
22. Fixed (main) capital and variable capital
It refers to any kind of real or physical capital(fixed asset) that is not used up in the production of a product. It contrasts with circulating capital such as raw materials, operating expenses and the like.
So fixed capital is that portion of the total capital outlay that is invested in fixed assets (such as land, buildings, vehicles, plant and equipment), that stay in the business almost permanently - or at the very least, for more than one accounting period. Fixed assets can be purchased by a business, in which case the business owns them. They can also be leased, hired or rented, if that is cheaper or more convenient, or if owning the fixed asset is practically impossible (for legal or technical reasons).
Constant capital contrasts with variable capital, v, the cost incurred in hiring  HYPERLINK "https://en.wikipedia.org/wiki/Labor_power"labor power. The higher value of output, compared to input costs, is (other things being equal) attributable to the exploitation of living labor-power only. Variable capital is "variable" because its value changes (varies) within the production process. A misapplication of labour, or the devaluation of types of labour activity by the market can mean the loss of part of the capital invested, or all of it.
23. Money: essence and functions
In a fully developed capitalist economy money has different purposes. Money can serve as a numérair, that means one can buy such and such amount of goods with a certain sum of money. Secondly, money can serve as a medium of exchange. Thirdly, it serves as a store of value. Fourth, money can serve as a means of creating new values through credit mechanism. Let us concentrate on only two aspects, namely as a medium of exchange and as credit mechanism. In a fully capitalist society, almost every body is directly or indirectly employed and gets a certain amount of disposable income. With the income generated from direct or indirect labour, households buy commodities, pay rents and other bills. The rest will be saved on account. Hence money as a medium of exchange determines the circulation and velocity of commodities, and has certain influence on the prices of goods. If the income of the directly employed is very low, workers could not afford to buy other goods other than for direct consumption. This will in turn hamper production activity, its quick circulation and has effects on the prices of goods. Since, industries do not find effective demand for their products they will be compelled to slow their production activity. Deflation and unemployment will become inevitable
24. Investment: essence and types
Investment is amount of money that is spent to purchase new capital goods by enterprises. Types are Financial and real investment and Direct and portfolio investment. Financial investment is money of government, private companies or person which is directed to buy stocks (акции), bonds (oблигации) and other securities. Real investment is money which is used to increase real production funds Direct investment is the money of foreigners that is used in national economy. Portfolio investment is the money which is directed to buy foreign companies’ stocks, bonds and other securities.
Investment sources are: free money of people,profit of individual enterprises, profit of joint enterprises, profit of public enterprises. Thelevel of investment depends on the following factors: level of profit, interest rate, tax rate, and political, economical stabilities in the society.
25) The factors that influence the level of investment
Amount of Surplus Income
Your level of investment will be largely determined by how much surplus income you have each month after paying bills and setting aside a bit of cash for emergencies. The greater your surplus income, the higher your potential level of investment. If you do not have a lot of surplus income, your investment level will be restricted until your surplus income rises. Avoid investing so heavily that you have difficultly meeting your current financial obligations.
Economy
The economy affects everyone, and it can affect your level of investment. During tough economic times, household incomes may drop due to economy-related layoffs or cutbacks, resulting in a decrease in the funds available for investments. Alternatively, during an economic boom your income is more likely to increase. If your surplus income rises more than your cost of living, you can afford to increase your level of investment without sacrificing your current lifestyle. Your cost of living is at least partially dictated by inflation. Inflation occurs for multiple reasons, such as supply constraints or increasing demand for products, but regardless of the cause, it raises your cost of living. As everyday products become more expensive, if your income does not rise to compensate the amount of surplus income you have to invest will decrease.
Risk Tolerance
Not everyone has the same risk tolerance; some people are conservative, while others are more aggressive in how they invest their funds. Asset classes can also be categorized on a scale of risky to safe. Stocks and commodities are considered more risky than high-grade bonds or T-bills, for example. This is because your return is unknown when you purchase stocks or commodities, but your return is known at the outset with bonds and T-bills. Your willingness to assume potential losses in higher-risk investments such as stocks, commodities and related mutual funds determines your investment level in each asset class. If you have a low risk tolerance, most of your funds will be put into investments like certificates of deposit (CDs), T-bills, high-grade bonds and money market mutual funds. If your risk tolerance is high, more funds can directed to toward stocks and commodities. No matter what your risk tolerance, diversification is an important element of any portfolio.
Future Needs
Whether your future plans involve a new condo, new car or retirement to a lake house, addressing your future financial needs today allows you to plan for those moments. The more funds your future plans require, the higher your investment level needs to be now to reach that goal. Contributing less now is likely to result in having less money in the future. The one wildcard is the return you are able to achieve on your investments. When investing in stocks and mutual funds, you won't know in advance what your return on those investments will be. The return you achieve on those investments is a significant factor in how much your money grows and your ability to reach your financial goals.
Expected Return
A diversified portfolio contains investments that are safe and typically yield lower long-run returns, as well as higher-risk investments, which generally yield higher returns over the long run. As your risk level increases, so does the expected return of your portfolio, although expected return does not necessarily equal the return you actually achieve. Therefore, your willingness to accept uncertainty in terms of the return you will achieve directly affects how much you will invest in assets such as stocks and commodities.
26) Production costs: essence and types
The Determinants of Cost:
The cost of producing any given amount of output by a firm depends on two main factors:
(a) The Quantities of Resources and Their Combinations:
The cost to the firm of producing any output evidently depends upon the physical quantities of actual resources or services—labour, material, machine hours, and so forth—used in production. Thus, the cost of producing a tons of steel depends upon the quantities of iron ore, limestone, coal, blast-furnace, etc. used in the production.
As the larger output requires the greater amount of resources, the total cost for larger output becomes large. And the smaller output requires the smaller resources; the total cost for smaller output becomes small. Besides, the total cost for producing a given amount of output becomes small when these resources are combined in optimum proportions.
(b) Techniques of Productions:
A firm can produce at low cost when it produces with the new and improved techniques of production. Production with the old and out-dated technique involves higher cost. The profit maximisation requires the use of the particular technique of production which would allow the optimum combination of factors.
In the short period the optimum combination for any given level of output is the least-cost combination possible with the fixed factor units. But this may not be the absolute optimum combination if all the factors could be adjusted. Over the longer period, all factors can be varied, and so the firm is free to select the production technique of factors.
Three Cost Concepts:
Cost of production refers to the expenses incurred by a business firm in producing a commodity. There are different cost concepts. Three important concepts are total cost, average (total) cost and marginal cost.
Total Cost:
It is the total cost of producing a particular output of the commodity in question. It is divided into two parts total fixed cost and total variable cost.
Fixed Costs:
Fixed Costs—also known as ‘overhead cost’ are costs which do not vary with output. These costs will be the same whether output is 1 unit, 10 units, or even 100 units of a commodity. They will be the same even when output is zero. Fixed costs include rent of factory and any office building, insurance charges, interest on bank loans, depreciation of machinery, annual licence fee which is paid to the government and so on.
Variable Costs:
Variable Costs—also known as ‘prime (direct) cost’ are costs which vary with changes in output. The greater the output, the greater will be the variable costs. If output is zero, no variable cost has to be incurred. Variable costs include wages, costs of fuel and power and costs of raw materials.
Total cost is calculated by adding up total fixed cost and total variable cost.
Average (Total) Cost:
Average total cost, or simply average cost, refers to the cost per unit of output and is calculated by dividing the total cost by the level of output. Thus if one total cost of producing 10 units of a commodity is Rs. 90, the average cost is Rs. 9 per unit.
Average cost is divided into two parts average fixed cost (i.e., total fixed cost divided by the level of output) and average variable cost (i.e., total variable cost divided by output).
Marginal Cost:
It is the addition to total cost incurred by increasing output by one unit. In other words, it is the extra cost of producing on extra unit of output.
MC as change in TVC:
Marginal cost for the nth unit may be expressed as:

Since fixed cost remains unchanged at all levels of output up to capacity we can write FC = FCn-1 in which case MC may be expressed as:
MCn = VCn – VCn-1
Thus marginal cost refers to marginal variable cost. In other words, MC has no relation to fixed cost.
27) The ways to minimize the level of production costs
Commit to business management. Specific financial and production goals are measured and monitored.
Make wise purchase decisions to reduce investment in depreciable assets, such as machinery and vehicles.
Avoid industry fads that are not cost effective.
Develop systems for total resource management, including wildlife.
Reduce investment in horses if you expect the cows to pay their expense.
Avoid hay production by buying hay.
Cut feeding losses.
Improve grazing utilization.
Monitor and control purchased feed expenses.
Don't overstock grazing land.
Focus on reproduction (weaning percent based on exposed females). This is the No. 1 production factor for cow-calf producers.
Control breeding seasons for best use of grazing.
Buy replacements and use terminal cross bulls if you are a small producer.
Stay clear of seedstock production. It loses money for most operations.
Use proven health practices to ensure sound herd health. Develop a written preventive health program, have it reviewed by a veterinarian and then follow it.
Evaluate opportunities to participate in cattle marketing alternatives.
Don't spend money to reduce IRS taxes if they aren't sound investments that will increase after-tax equity. It doesn't make sense to spend a dollar to save 30 cents.For IRS compliance, make sure to keep the ranch bank account separate from your personal account.
Consider location when acquiring land for appreciation. Non-cattle uses of land are more important than grazing cattle for land appreciation.
Get a good inventory and manage accounting systems to accurately measure and monitor performance.
28) Wage: essence and types
A wage is monetary compensation (or remuneration, personnel expenses, labor) paid by an employer to an employee in exchange for work done. Payment may be calculated as a fixed amount for each task completed (a task wage or piece rate), or at an hourly or daily rate (wage labour), or based on an easily measured quantity of work done.
Wages are part of the expenses that are involved in running a business.
Payment by wage contrasts with salaried work, in which the employer pays an arranged amount at steady intervals (such as a week or month) regardless of hours worked, with commission which conditions pay on individual performance, and with compensation based on the performance of the company as a whole. Waged employees may also receive tips or gratuity paid directly by clients and employee benefits which are non-monetary forms of compensation. Since wage labour is the predominant form of work, the term "wage" sometimes refers to all forms (or all monetary forms) of employee compensation.
The main types of wages are:
1. Subsistence wage;
2. Minimum wage;
3. Fair Wage; and
4. Living Wage Subsistence Wage:
- The wage that can meet only bare physical needs of a worker and his family is called subsistence wage. Minimum Wage: - Minimum wage is the wage that is able to provide not only for bare physical needs but also for preservation of efficiency of worker plus some measure of education, health and other things. Fair Wage:- Fair wages is an adjustable step that moves up according to the capacity of the industry to pay, and the prevailing rates of wages in the area of industry. Living Wage:- Living wage is that which workers can maintain the health and decency, a measure of comfort and some insurance against the more important misfortune of lie. In any even the minimum wage must be paid irrespective of the extent of profits, the financial condition of the establishment or the availability of workmen at lower wages. The wages must be fair, i.e. sufficiently high to provide standard family with ,food, shelter, clothing, medical care and education of children appropriate to the workmen. A fair wage lies between the minimum wage and the living wage which is the goal. Wages must be paid on an industry wise and region basis having due regard to the financial capacity of the unit.
29)Wage :essence and functions
A wage is monetary compensation (or remuneration, personnel expenses, labor) paid by an employer to an employee in exchange for work done. Payment may be calculated as a fixed amount for each task completed (a task wage or piece rate), or at an hourly or daily rate (wage labour), or based on an easily measured quantity of work done.
Wages are part of the expenses that are involved in running a business.Payment by wage contrasts with salaried work, in which the employer pays an arranged amount at steady intervals (such as a week or month) regardless of hours worked, with commission which conditions pay on individual performance, and with compensation based on the performance of the company as a whole. Waged employees may also receive tips or gratuity paid directly by clients and employee benefits which are non-monetary forms of compensation. Since wage labour is the predominant form of work, the term "wage" sometimes refers to all forms (or all monetary forms) of employee compensation.30)The factors that influence the level of wageMost people work to earn a living, which they do by supplying their labor in return for money. Laborers consist of unskilled workers, blue and white collar workers, professional people, and small business owners.Wages are the price that workers receive for their labor in the form of salaries, bonuses, royalties, commissions, and fringe benefits, such as paid vacations, health insurance, and pensions. The wage rate is the price per unit of labor. Most commonly, workers are paid by the hour. For instance, in 2011, the legal minimum wage rate for most employees in the United States is $7.25 per hour. Earnings equals the wage rate multiplied by the number of hours worked, so an employee earning minimum wage and working the typical 40-hour week earns $7.25 × 40 = $290 per week = $15,080 per year.Nominal wage is the amount earned in terms of dollars or other currency, while the real wage is the amount earned in terms of what it can actually buy. If the nominal wage does not increase as much as the inflation rate, then real wages decline.Wage LevelsWages differ among nations, regions, occupations, and individuals. Generally, wages will be higher where the demand for labor is greater than the supply. Nominal wages vary more than real wages, since the purchasing power of different currenciesvaries considerably. For instance, in countries with low-priced labor, such as China and India, household goods and services have lower prices than in more advanced economies.The main factor that determines the upper limits of wages is the productivity of the business in combining inputs to produce socially desirable outputs. Obviously, more productive workers can be paid more. Productivity largely depends on the availability of real capital, in the form of machinery and automation, and on the availability of natural resources, which are required as inputs in the production of products and services.The amount of education or training also largely determines how much a worker can earn, not only by making the worker more productive but by also making the worker more desirable to employers, who compete for workers through the level of wages that they offer. If the time required for training or education is long, then it must lead to higher paying jobs; otherwise, people would pursue easier work or work that can be attained in less time if there was no difference in pay.The quality of the entrepreneurs who start a business will also determine the efficiency of the business since they lay down the initial organization of how the business will be conducted to produce its output from its various inputs. Afterwards, the quality of the managementwill affect the efficiency of the business, and therefore, the workers, by how effectively they control costs and produce the desired output.31)Interest as an income  of capital ownerCapital and interest, in economics, a stock of resources that may be employed in the production of goods and services and the price paid for the use of credit or money, respectively.Capital in economics is a word of many meanings. They all imply that capital is a “stock” by contrast with income, which is a “flow.” In its broadest possible sense, capital includes the human population; nonmaterial elements such as skills, abilities, and education; land, buildings, machines, equipment of all kinds; and all stocks of goods—finished or unfinished—in the hands of both firms and households.In the business world the word capital usually refers to an item in the balance sheet representing that part of the net worth of an enterprisethat has not been produced through the operations of the enterprise. In economics the word capital is generally confined to “real” as opposed to merely “financial” assets. Different as the two concepts may seem, they are not unrelated. If all balance sheets were consolidated in a closed economic system, all debts would be cancelled out because every debt is an asset in one balance sheet and a liability in another. What is left in the consolidated balance sheet, therefore, is a value of all the real assets of a society on one side and its total net worth on the other. This is the economist’s concept of capital.A distinction may be made between goods in the hands of firms and goods in the hands of households, and attempts have been made to confine the term capital structure to the former. There is also a distinction between goods that have been produced and goods that are gifts of nature; attempts have been made to confine the term capital to the former, though the distinction is hard to maintain in practice. Another important distinction is between the stock of human beings (and their abilities) and the stock of nonhuman elements. In a slave society human beings are counted as capital in the same way as livestock or machines. In a free society each man is his own slave—the value of his body and mind is not, therefore, an article of commerce and does not get into the accounting system. In strict logic persons should continue to be regarded as part of the capital of a society; but in practice the distinction between the part of the total stock that enters into the accounting system, and the part that does not, is so important that it is not surprising that many writers have excluded persons from the capital stock.32)Rental rate:essence and types Rental rates, in essence, are affected by countless elements: the lease term (duration), the size of the property, storage, views, proximity to certain locations, the current market/economy, etc. Market conditions influence rental rates, which oftentimes tend to increase. Once a lease is signed, the rental rate is fixed for the lease term. Because there are a number of factors that comprise rents and several customary ways to quote rents, it can be difficult to understand what people mean when they are discussing leasing rates.Normally, the rate quoted reflects the amount of rent you pay per square foot. Generally square foot prices are quoted on a monthly basis, however, there are markets such as San Francisco that are quoted on an annual basis. By example, a $36.00 per square foot annual rate is equal to $3.00 per square foot when expressed as a monthly rate. While this is simple math, it can come as a bit of a shock when you hear a rate quoted for one space as $3.00 per square foot and another as $36.00. Urban office leasing is generally quoted as an annual rate, while industrial and retail are typically stated as monthly rates.
33. Profit and sources of formation
Profit, in accounting, is an income distributed to the owner in a profitable market production process (business). Profit is a measure of profitability which is the owner’s major interest in income formation process of market production. There are several profit measures in common use.
Income formation in market production is always a balance between income generation and income distribution. The income generated is always distributed to the stakeholders of production as economic value within the review period. The profit is the share of income formation the owner is able to keep to himself/herself in the income distribution process. Profit is one of the major sources of economic well-being because it means incomes and opportunities to develop production. The words income, profit and earnings are substitutes in this context.
34. Macroeconomics: essence and main indicators
Macroeconomics is a branch of the economics field that studies how the aggregate economy behaves. In macroeconomics, a variety of economy-wide phenomena is thoroughly examined such as, inflation, price levels, rate of growth, national income, gross domestic product and changes in unemployment.
It focuses on trends in the economy and how the economy moves as a whole.
Macroeconomics differs from microeconomics, which focuses on smaller factors that affect choices made by individuals and companies. Factors studied in both microeconomics and macroeconomics typically have an influence on one another. For example, the unemployment level in the economy as a whole has an effect on the supply of workers from which a company can hire. Macroeconomics, in its most basic sense, is the branch of economics that deals with the structure, performance, behavior and decision-making of the whole, or aggregate, economy, instead of focusing on individual markets.
The Study of Macroeconomics
Those working in the field of macroeconomics study aggregated indicators such as unemployment rates, GDP and price indices, and then analyze how different sectors of the economy relate to one another to understand how the economy functions. Macroeconomists develop models explaining relationships between a variety of factors such as consumption, inflation, savings, investments, international trade and finance, national income and output. Contrarily, microeconomics analyzes how individual agents act, namely consumers and corporations, and studies how these agents' behavior affects quantities and prices in certain markets. Such macroeconomic models, and what the models forecast, are used by government entities to aid in the construction and evaluation of economic policy.
Macroeconomics is a rather broad field, but two specific areas of research are representative of this discipline. One area involves the process of understanding the causation and consequences of short-term fluctuations in national income, also known as the business cycle. The other area involves the process by which macroeconomics attempts to understand the factors that determine long-term economic growth, or increases in the national income
35. The main issues of macroeconomics
The issues are: 1. Employment and Unemployment 2. Inflation 3. The Trade Cycle 4. Stagflation 5. Economic Growth 6. The Exchange Rate and the Balance of Payments.Issue # 1. Employment and Unemployment:
Unemployment refers to involuntary idleness of resources including manpower. If this problem exists, society’s actual output (or GNP) will be less than its potential output. So one of the objectives of Government policy is to ensure full employment which implies absence of involuntary unemployment of any type.Issue # 2. Inflation:
It refers to a situation of constantly rising prices of commodities and factors of production. The opposite situation is known as deflation. During inflation some people gain and most people lose. So there is a change in the pattern of income distribution. Therefore, one of the objectives of government policy is to ensure price level stability which implies the absence of inflation and deflation.
Issue # 3. The Trade Cycle:
It refers to periodic fluctuations in the levels of economic or business activities, i.e., the tendency for output (GNP) and employment to fluctuate over time in a recurring sequence of ups and downs. The periods of good trade alternate with periods of bad trade, or, boom periods of high output and high employment alternate with slump periods of low output and low employment.In boom periods, employment is low but the rate of inflation is high. In periods of depression (or recession) unemployment is high and the rate of inflation is moderate. In macroeconomics we study the causes of business cycles and suggest remedial measures.
Issue # 4. Stagflation:
Most modern mixed economics suffer from the disease of stagflation which implies the co-existence of inflation and unemployment in a stagnant economy. The trade-off between inflation and unemployment is perhaps the most complex macroeconomic issue of the day. Every country in the world is now struggling hard to fight the disease of stagflation.
Issue # 5. Economic Growth:
In spite of short-term fluctuations of output that are associated with the trade cycle, the long-term trend of total output has been upward in most industrially advanced country. The trend in the nation’s total output over the long period is known as economic growth.
It refers to an expansion of society’s production capacity such as bringing new land under cultivation or setting up new factories. Growth is measured by the annual rate of increase of per capita income and is illustrated by a rightward shift of the production possibility curve.
Issue # 6. The Exchange Rate and the Balance of Payments:
The balance of payments is a systematic record of all economic transactions between the members of the home country and the rest of the world in an accounting year. These transactions are largely, if not entirely, influenced by the exchange rate. It is the rate at which a country’s economy is exchanged for another currency (or gold).
The trend in the value of the rupee in terms of two major currencies of the world, viz., the U.S. dollar and British pound, has been downward in the last two decades. Economists are always eager to discover the cause and consequences of such changes.
36.The main indicators of national account system
National accounts provide a quantitative description of the state of the economy at the macro level. Indicators derived from national accounts are widely used in economic policy analysis. Examples are national income, price and wage deflators as measures of inflation, purchasing power, total employment, imports, exports, current account of the balance of payments, government receipts and expenditure, government deficit, total consumption, investments, stock building, etc.. In almost all countries data of the national accounts are compiled by the National Statistical Offices (NSOs) following uniform international guidelines.
The presentation of national accounts data may vary by country (commonly, aggregate measures are given greatest prominence), however the main national accounts include the following accounts for the economy as a whole and its main economic actors.
Current accounts:
production accounts which record the value of domestic output and the goods and services used up in producing that output. The balancing item of the accounts is value added, which is equal to GDP when expressed for the whole economy at market prices and in gross terms;
income accounts, which show primary and secondary income flows - both the income generated in production (e.g. wages and salaries) and distributive income flows (predominantly the redistributive effects of government taxes and social benefit payments). The balancing item of the accounts is disposable income ("National Income" when measured for the whole economy);
expenditure accounts, which show how disposable income is either consumed or saved. The balancing item of these accounts is saving.
Capital accounts, which record the net accumulation, as the result of transactions, of non-financial assets; and the financing, by way of saving and capital transfers, of the accumulation. Net lending/borrowing is the balancing item for these accounts
Financial accounts, which show the net acquisition of financial assets and the net incurrence of liabilities. The balance on these accounts is the net change in financial position.
Balance sheets, which record the stock of assets, both financial and non-financial, and liabilities at a particular point in time. Net worth is the balance from the balance sheets (United Nations, 1993).
The accounts may be measured as gross or net of consumption of fixed capital (a concept in national accounts similar to depreciation in business accounts).
Notably absent from these components, however, is unpaid work, because its value is not included in any of the aforementioned categories of accounts, just as it is not included in calculating gross domestic product (GDP). An Australian study has shown the value of this uncounted work to be approximately 50% of GDP, making its exclusion rather significant. As GDP is tied closely to the national accounts system, this may lead to a distorted view of national accounts. Because national accounts are widely used by governmental policy-makers in implementing controllable economic agendas,some analysts have advocated for either a change in the makeup of national accounts or adjustments in the formulation of public policy.
37.GNP and ways of its calculation
Main macroeconomic indicators.There are several indicators that measure results of national economy. They are called macroeconomic indicators
How to calculate GNP
GNP=ΣPxQ P-price Q-quantity
The methods of measuring GNP
1- according to the expenses
GNP=C+I+G+Xn C-consumption expenses() I- investment expenses G-government expenses Xn- net export (Export-import)
2. according to the income
GNP=wage+interest+dividend+ profit+rentWhat does GNP per person show?
GNP per person= GNP: population
e.g. 180 000 000 USD: 17 000= 10 500
38.Unemployment: essence and types 39.Unemployment: essence and reasons
Unemployment is surplus of labour supply on demand for labour
Interactions between supply of and demand for labour identify employment level
Unemployment rate(U.r.)=number unemployment people/general population x100%
E.g U.r.= 900 000/16 000 000 x 100 %= 5.6%
Unemployment Rate in Kazakhstan remained unchanged at 5.20 percent in September of 2013 from 5.20 percent in August of 2013. Unemployment Rate in Kazakhstan is reported by the Agency of Statistics of the Republic of Kazakhstan.
Types of unemployment
Frictional unemployment means voluntary giving up the job
Structural unemployment is staying without job because of a new technology, changes in structure of enterprise
Cyclical unemployment is staying without job because of changes in economic cycle (reason of it low demand in economy)
Four Causes of Frictional Unemployment
One reason for unemployment is voluntary. Some of the unemployed have saved enough money so they can quit unfulfilling jobs. They have the luxury to search until they find just the right opportunity.
The second cause is when workers must move for unrelated reasons. They are unemployed until they find a position in the new town.
The third reason is when new workers enter the workforce. That includes students who graduate from high school, college or any higher degree program. They look for a job that fits their new skills and qualifications.
That's a primary reason for youth unemployment.
The fourth reason is when job seekers re-enter the workforce. These are people who went through a period in their lives when they stopped looking for work. They could have stopped working to raise children, get married or care for elderly relatives.
Two Causes of Structural Unemployment
Structural unemployment is neither voluntary nor short-term. These next two causes usually lead to long-term unemployment.
The fifth cause is advances in technology. That's when computers or robots replace workers. Most of these workers need more training before they can get a new job in their field.
The sixth cause is job outsourcing. That's when a company moves its manufacturing or call centers to another country. Labor costs are cheaper in countries with a lower cost of living. That occurred in many states after NAFTA was signed in 1994. Many manufacturing jobs moved to Mexico. It also occurred once workers in China and India gained the skills needed by American companies.
What Causes Cyclical Unemployment?
The seventh reason for unemployment is when are fewer jobs than applicants. The technical term is demand-deficient unemployment. When it happens during the recession phase of the business cycle, it's called cyclical unemployment.
Low consumer demand creates cyclical unemployment. Companies lose too much profit when demand fall. If they don't expect sales to pick up anytime soon, they must lay off workers.
The higher unemployment causes consumer demand to drop even more, which is why it’s cyclical. It results in large-scale unemployment. Examples include the financial crisis of 2008 and the Great Depression of 1929.
40. Social and economic concequences of the unemployment
– Negative consequences • Fall in demand for goods and services • Fall in demand for businesses further down the supply chain • Consider the negative multiplier effects from the closure of a major employer in a town or city – Some positive consequences • Bigger pool of surplus labour is available – but still a problem if there is plenty of structural unemployment • Less pressure to pay higher wages • Less risk of industrial / strike action – fear of job losses – leading to reduced trade union power
Consequences for the Government (Fiscal Policy)
– Increased spending on unemployment benefits and other income –related state welfare payments
– Fall in revenue from income tax and taxes on consumer spending
– Fall in profits – reduction in revenue from corporation tax
– May lead to rise in government borrowing (i.e. a budget deficit)
41. Unemployment: essence and unemployment rate
Unemployment is surplus of labour supply on demand for labour . Interactions between supply of and demand for labour identify employment level.
Unemployment rate. Unemployment rate(U.r.)=number unemployment people/general population x100%
Types of unemployment: Frictional, Structural, Cyclical.
• Frictional unemployment means voluntary giving up the job
• Structural unemployment is staying without job because of a new technology
• Cyclical unemployment is staying without job because of changes in economic cycle (low demand)
Classical, or real-wage unemployment, occurs when real wages for a job are set above the market-clearing level causing the number of job-seekers to exceed the number of vacancies. On the other hand, some economists argue that as wages fall below a livable wage many choose to drop out of the labor market and no longer seek employment. This is especially true in countries where low-income families are supported through public welfare systems. In such cases, wages would have to be high enough to motivate people to choose employment over what they receive through public welfare.
The unemployment rate is a measure of the prevalence of unemployment and it is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labor force. During periods of recession, an economy usually experiences a relatively high unemployment rate.
The "natural" rate of unemployment is defined as the rate of unemployment that exists when the labour market is in equilibrium and there is pressure for neither rising inflation rates nor falling inflation rates.
Hidden, or covered, unemployment is the unemployment of potential workers that is not reflected in official unemployment statistics, due to the way the statistics are collected. In many countries only those who have no work but are actively looking for work (and/or qualifying for social security benefits) are counted as unemployed.
42. Inflation: essence and reasons
Inflation is a process when purchasing ability of money is decreasing because of price increasing. Inflation is commonly understood as a situation of substantial and rapid general increase in the price level and consequent fall the value of money over a period of time. Inflation means persistent rise in the general level of prices. Inflation is a long term operating dynamic process. By and large, inflation is also a monetary phenomenon. It is usually characterized by an overflow of money and credit. In fact, the root cause of inflation is the expansion of money supply beyond the normal absorbing capacity of the economy. The behavior of general prices is measured through price indices. The trend of price indices reveals the course of inflation or deflation in the economy. According to price level changes inflation can be differentiated as: Steady inflation, Galloping inflation.
• Steady inflation is type of inflation when average price level changes till 10% per year.
• Galloping inflation is type of inflation when price level changes between 20% and 200% per year.
Over- Expansion of Money Supply: Many a times a remarkable degree of correlation between the increase in money and rise in the price level may be observed. The Central Bank (India’s RBI) should maintain a balance between money supply and production and supply of goods and services in the economy. Money supply exceeds the availability of goods and services in the economy, it would lead to inflation.
Increase in Population: Increase in population leads to increased demand for goods and services. If supply of commodities are short, increased demand will lead to increase in price and inflation.
Expansion of Bank Credit: Rapid expansion of bank credit is also responsible for the inflationary trend in a country.
Deficit Financing: Deficit financing means spending more than revenue. In this case government of India accepts more amount of money from the Reserve Bank India (RBI) to spend for undertaking public projects and only the government of India can practice deficit financing in India. The high doses of deficit financing which may cause reckless spending, may also contribute to the growth of the inflationary spiral in a country.
High Indirect Taxes: Incidence of high commodity taxation. Prices tend to rise on account of high excise duties imposed by the Government on raw materials and essentials.
Black Money: It is widely condemned that black money in the hands of tax evaders and black marketers as an important source of inflation in a country. Black money encourages lavish spending, which causes excess demand and a rise in prices.
Poor Performance of Farm Sector: If agricultural production especially food grains production is very low, it would lead to shortage of food grains, will lead to inflation.
High Administrative Pricing43. Social and economic consequence of the inflation
It is true that in times of general rise in the price level, if all groups of prices, such as agricultural prices, industrial prices, prices of minerals, wages, rent and profit rise in the same direction and by the same extent, there will be no net effect on any section of people in the community. For example, if the prices of goods and services, which a worker buys rises by 50 per cent and if the wage of the worker also rises by 50 per cent then there is no change in the real income of the worker, i.e., his standard of living will remain constant. However, in practice, all prices do not move in same direction and by same percentage. Hence, some classes of people in the community are affected by inflation more favorably than others.
Producing Classes: All producers, traders and speculators gain during inflation because of the emergence of windfall profits. The prices of goods rise at a far greater rate than costs of production whereas wages, interest rates and insurance premium are all mere or less fixed. Besides, the producers keep such assets, as commodities, real estate, etc., whose prices rise much more than the general level of prices. Thus, the producing and trading classes gain enormously during an inflationary period. However, farmers may gain only if their output is maintained or increased.
Fixed Income Groups: Inflation is very severe on those who arc living on past savings, fixed rents, pensions and other fixed income groups called as the middle classes. Those persons who are working in government and private concerns find their money incomes more or less fixed while the prices of the goods and services, which they buy are rising very rapidly. Those with absolutely fixed incomes derived from interest and rent known as the renter class, realize that their money income is absolutely worthless and their past savings have insignificant value in front of high prices. In fact, the worst sufferers in inflation are the middle classes who are considered as the backbone of any stable society.
Working Classes: During inflation, the working classes also suffer, firstly because wages do not rise as much as the prices of those commodities and services, which the workers buy. Secondly, there is also time lag between rise in the price level and wages. However, these days, many groups of workers are organized in trade unions and their wages rise simultaneously with rise, in the cost of living. Therefore, it can be presumed that organized workers may not suffer much during inflation. However, there are many groups of workers who are not organized for example, the agricultural laborers, who find no way of pushing up their wages in the face of rising prices and cost of living.
Inflation, thus, brings shifts in the distribution of income between different sections of people. The producing classes such as agriculturists, manufacturers and traders gain at the expense of salaried and working classes. The rich become richer and the poor becomes poorer. Thus, there is a transfer of income from poor to rich classes. Inflation, therefore, is unjust. Besides, those who are hard hit by inflation are the young, old, widows and small savers, i.e., all those who are unable to protect themselves. But the most unfortunate thing is that monetary and fiscal authorities which are entrusted with the task of maintaining price stability are often responsible for creating inflationary conditions, for example, a country at war resorts to printing of currency notes as one of the methods of financing war. Similarly, the government of a developing economy may resort to deficit financing as one of the methods of financing development projects. In these cases, inflationary finance, like taxation, brings in additional revenue to the public authorities. However, taxation cannot destroy an economy except in rare cases by eliminating whole groups of people. Inflation, on the other hand, can destroy fixed income group, pauperise the middle classes and destroy the very foundations of an economy. No wonder inflation has been termed as “a species of taxation, cruelest of all” and “open robbery”. Inflation, particularly the hyperinflation type, will therefore endanger the very foundations of the existing social and economic system. It will create a sense of frustration distrust, injustice and discontent and may force people to revolt against the government. It is, therefore, “economically unsound, politically dangerous and morally indefensible”. Therefore, it should be avoided and even if it occurs it should be controlled.
44. Anti-inflation policy of a government
To contain inflation and reduce the negative consequences of its influence on the economy of the state develops and implements Antin-platinu policy. Anti-inflation policy is a set of regulatory measures aimed at fighting inflation and curbing inflationary consequences.
To develop and implement anti-inflationary policy of the state in the face of the government and the national Bank is developing the so-called anti-inflation program, which defines goals, objectives, anti-inflation activities of the state and ways of their implementation. 
First of all, methods of implementation, and therefore, the type of anti-inflation policy (anti-inflation regulation) is selected depending on the type of inflation and identify factors that cause inflation.
So, according to the existing types of inflation are:
anti-inflation policy management demand-side factors;
anti-inflation policy of controlling factors in the cost. 
Anti-inflationary policy of demand management is called where placino policy and is based on the regulation of effective demand for its limitations through the application of measures of monetary, fiscal and structural-investment policy.
To stimulate or prevent decline of production in the context of anti-inflationary regulation in the direction of avoid lower level of marketable security money to use measures of structural-investment policy, in particular: promoting enterprise development; restriction of monopoly and development of competition; conducting of rational protectionism in relation to national producer; attracting foreign investment; prevention of outflow of capital abroad; the formation of the market of loan capital.
Measures of fiscal policy in the context of anti-inflationary regulation of the economy based on the deficit reduction DB as the main factor of demand inflation, which is due to deficit financing of public expenditure and therefore an increase in the money supply in circulation not backed by material resources (goods and services). Deficit reduction is achieved by increasing budget revenues and budget cuts.
A special place among the anti-inflationary policy is the adaptation policies aimed at the adaptation to inflation. This type of policy is implemented through the mechanisms of indexation of income and redemption of inflation expectations.
Indexation of income can be:
disposable while a simultaneous increase in adjustable and fixed prices for consumer goods and services;
periodic - in the context of continuous rising prices.
But indexing does not eliminate inflation, but only mitigates its negative impact. In turn, the indexation in the budget deficit financed by money emission, can act as an inflationary factor.
Repayment of inflationary expectations is to overcome the fears of the subjects N the EU concerning the depreciation of savings and rise in price of goods, to prevent the reduction and termination of the savings and the increase in excessive current demand which causes the increase in prices and a further strengthening of adaptive inflation expectations), etc., which starts a spiral of spontaneous mechanism of inflation.
As you can see, the implementation of an effective inflation policy requires clear and comprehensive approach to solving the problem of rising prices and the depreciation of the national currency, which must consider various factors and ways of elimination of inflation and their relationship.
45The ways of decreasing the level of unemploymnenthere are two main strategies for reducing unemployment –
Demand side policies to reduce demand-deficient unemployment (unemployment caused by recession)
Supply side policies to reduce structural unemployment / (the natural rate of unemployment)
A quick list of policies to reduce unemployment:
Monetary policy – cutting interest rates to boost Aggregate Demand (AD)
Fiscal policy – cutting taxes to boost AD.
Education and training to help reduce structural unemployment.
Geographical subsidies to encourage firms to invest in depressed areas.
Lower minimum wage to reduce real wage unemployment.
More flexible labour markets, to make it easier to hire and fire workers.
Demand side policies
US and UK were more successful in reducing unemployment after 2008/09 recession.
Demand side policies are critical when there is a recession and rise in cyclical unemployment. (e.g. after 1991 recession and after 2008 recession)
1. Fiscal Policy
Fiscal policy can decrease unemployment by helping to increase aggregate demand and the rate of economic growth. The government will need to pursue expansionary fiscal policy; this involves cutting taxes and increasing government spending. Lower taxes increase disposable income (e.g. VAT cut to 15% in 2008) and therefore help to increase consumption, leading to higher aggregate demand (AD).
With an increase in AD, there will be an increase in Real GDP (as long as there is spare capacity in the economy.) If firms produce more, there will be an increase in demand for workers and therefore lower demand-deficient unemployment. Also, with higher aggregate demand and strong economic growth, fewer firms will go bankrupt meaning fewer job losses.
Keynes was an active advocate of expansionary fiscal policy during a prolonged recession. He argues that in a recession, resources (both capital and labour) are idle. Therefore the government should intervene and create additional demand to reduce unemployment.
Impact of Higher AD on Economy
However,
It depends on other components of AD. e.g. if confidence is low, cutting taxes may not increase consumer spending because people prefer to save. Also, people may not spend tax cuts, if they will soon be reversed.
Fiscal policy may have time lags. E.g., a decision to increase government spending may take a long time to affect aggregated demand (AD).
If the economy is close to full capacity, an increase in AD will only cause inflation. Expansionary fiscal policy will only reduce unemployment if there is an output gap.
Expansionary fiscal policy will require higher government borrowing – this may not be possible for countries with high levels of debt, and rising bond yields.
In the long run, expansionary fiscal policy may cause crowding out, i.e. the government increase spending but because they borrow from the private sector, they have less to spend, and therefore AD doesn’t increase. However, Keynesians argue crowding out will not occur in a liquidity trap.
2. Monetary policy
Monetary policy would involve cutting interest rates. Lower rates decrease the cost of borrowing and encourage people to spend and invest. This increases AD and should also help to increase GDP and reduce demand deficient unemployment.
Also, lower interest rates will reduce exchange rate and make exports more competitive.
In some cases, lower interest rates may be ineffective in boosting demand. In this case, Central Banks may resort to Quantitative easing. This is an attempt to increase the money supply and boost aggregate demand. See:  HYPERLINK "https://www.economicshelp.org/blog/1428/economics/how-quantitative-easing-works/"Quantitative easing.
EvaluationSimilar problems to fiscal policy. e.g. it depends on other components of AD.
Lower interest rates may not help boost spending if banks are still reluctant to lend.
Demand side policies can contribute to reducing demand deficient unemployment e.g. in a recession. However, they cannot reduce supply side unemployment. Therefore, their effectiveness depends on the type of unemployment that occurs.
Supply side policies for reducing unemployment
Supply side policies deal with more micro-economic issues. They don’t aim to boost overall aggregate demand but seek to overcome imperfections in the labour market and reduce unemployment caused by supply side factors. Supply side unemployment includes:
FrictionalStructuralClassical (real wage)
Policies to reduce supply side unemployment
1. Education and training. The aim is to give the long-term unemployed new skills which enable them to find jobs in developing industries, e.g. retrain unemployed steel workers to have basic I.T. skills which help them find work in the service sector. – However, despite providing education and training schemes, the unemployed may be unable or unwilling to learn new skills. At best it will take several years to reduce unemployment.
2. Reduce the power of trades unions. If unions can bargain for wages above the market clearing level, they will cause real wage unemployment. In this case reducing the influence of trades unions (or reducing Minimum wages) will help solve this real wage unemployment.
3. Employment subsidies. Firms could be given tax breaks or subsidies for taking on long-term unemployed. This helps give them new confidence and on the job training. However, it will be quite expensive, and it may encourage firms to just replace current workers with the long-term unemployment to benefit from the tax breaks.
4. Improve labour market flexibility. It is argued that higher structural rates of unemployment in Europe is due to restrictive labour markets which discourage firms from employing workers in the first place. For example, abolishing maximum working weeks and making it easier to hire and fire workers may encourage more job creation. However, increased labour market flexibility could cause a rise in temporary employment and greater job insecurity.
5. Stricter benefit requirements. Governments could take a more pro-active role in making the unemployed accept a job or risk losing benefits. After a certain period, the government could guarantee a public sector job (e.g. cleaning streets). This could significantly reduce unemployment. However, it may mean the government end up employing thousands of people in unproductive tasks which is very expensive. Also, if you make it difficult to claim benefits, you may reduce the claimant count, but not the International Labour force survey. See: measures of unemployment6. Improved geographical mobility. Often unemployed is more concentrated in certain regions. To overcome this geographical unemployment, the government could give tax breaks to firms who set up in depressed areas. Alternatively, they can provide financial assistance to unemployed workers who move to areas with high employment. (e.g. help with renting in London)
46Aims and instruments of government regulation of the economy
Regulatory economics is the economics of regulation. It is the application of law by government or independent administrative agencies for various purposes, including remedying market failure, protecting the environment, centrally-planning an economy, enriching well-connected firms, or benefiting politicians.
Regulation is generally defined as legislation imposed by a government on individuals and private sector firms in order to regulate and modify economic behaviors.[1] Conflict can occur between public services and commercial procedures (e.g. maximizing profit), the interests of the people using these services (see market failure), and also the interests of those not directly involved in transactions (externalities). Most governments, therefore, have some form of control or regulation to manage these possible conflicts. The ideal goal of economic regulation is to ensure the delivery of a safe and appropriate service, while not discouraging the effective functioning and development of businesses.
For example, in most countries, regulation controls the sale and consumption of alcohol and prescription drugs, as well as the food business, provision of personal or residential care, public transport, construction, film and TV, etc. Monopolies, especially those that are difficult to abolish (natural monopoly), are often regulated. The financial sector is also highly regulated.
Regulation can have several elements:
Public statutes, standards, or statements of expectations.
A registration or licensing process to approve and permit the operation of a service, usually by a named organization or person.
An inspection process or other form of ensuring standard compliance, including reporting and management of non-compliance with these standards: where there is continued non-compliance, then
A de-licensing process through which an organization or person, if judged to be operating unsafely, is ordered to stop or suffer a penalty.
Not all types of regulation are government-mandated, so some professional industries and corporations choose to adopt self-regulating models.[1] There can be internal regulation measures within a company, which work towards the mutual benefit of all members. Often, voluntary self-regulation is imposed in order to maintain professionalism, ethics, and industry standards.
For example, when a broker purchases a seat on the New York Stock Exchange, there are explicit rules of conduct, or contractual and agreed-upon conditions, to which the broker must conform. The coercive regulations of the U.S. Securities and Exchange Commission are imposed without regard for any individual's consent or dissent regarding that particular trade. However, in a democracy, there is still collective agreement on the constraint—the body politic as a whole agrees, through its representatives, and imposes the agreement on those participating in the regulated activity.
Other examples of voluntary compliance in structured settings include the activities of Major League Baseball, FIFA, and the Royal Yachting Association (the UK's recognized national association for sailing). Regulation in this sense approaches the ideal of an accepted standard of ethics for a given activity to promote the best interests of those participating as well as the continuation of the activity itself within specified limits.
In America, throughout the 18th and 19th centuries, the government engaged in substantial regulation of the economy. In the 18th century, the production and distribution of goods were regulated by British government ministries over the American Colonies (see mercantilism). Subsidies were granted to agriculture, and tariffs were imposed, sparking the American Revolution. The United States government maintained a high tariff throughout the 19th century and into the 20th century until the Reciprocal Tariff Act was passed in 1934 under the Franklin D. Roosevelt administration. However, regulation and deregulation came in waves, with the deregulation of big business in the Gilded Age leading to President Theodore Roosevelt's trust busting from 1901 to 1909, deregulation and Laissez-Faire economics once again in the roaring 1920s leading to the Great Depression, and intense governmental regulation and Keynesian economics under Franklin Roosevelt's New Deal plan. President Ronald Reagan deregulated business in the 1980s with his Reaganomics plan.
In 1946, the U.S. Congress enacted the Administrative Procedure Act (APA), which formalized means of ensuring the regularity of government administrative activity and its conformance with authorizing legislation. The APA established uniform procedures for a federal agency's promulgation of regulations and adjudication of claims. The APA also sets forth the process for judicial review of agency action.
47The components of the monetary system
A monetary system is the set of institutions by which a government provides money in a country's economy. Modern monetary systems usually consist of the national treasury, the mint, the central banks and commercial banks.[1]A commodity money system is a monetary system in which a commodity such as gold is made the unit of value and physically used as money. The money retains its value because of its physical properties. In some cases, a government may stamp a metal coin with a face, value or mark that indicates its weight or asserts its purity, but the value remains the same even if the coin is melted down.
Commodity-backed money
One step away from commodity money is "commodity-backed money", also known as "representative money". Many currencies have consisted of bank-issued notes which have no inherent physical value, but which may be exchanged for a precious metal, such as gold. (This is known as the gold standard.) The silver standard was widespread after the fall of the Byzantine Empire, and lasted until 1935, when it was abandoned by China and Hong Kong.
Another alternative which was tried in the twentieth Century was bimetallism, also called the "double standard", under which both gold and silver were legal tender.[2]Fiat money[ HYPERLINK "https://en.wikipedia.org/w/index.php?title=Monetary_system&action=edit&section=3"edit]
The alternative to a commodity money system is fiat money which is defined by a central bank and government law as legal tender even if it has no intrinsic value. Originally fiat money was paper currency or base metal coinage, but in modern economies it mainly exists as data such as bank balances and records of credit or debit card purchases, HYPERLINK "https://en.wikipedia.org/wiki/Monetary_system#cite_note-3"[3] and the fraction that exists as notes and coins is relatively small.[4] Money is mostly created, contrary to what is written in most textbooks, by banks when they loan to customers. Put simply, banks lending currency to customers creates more deposits and deficit spending.
In normal times, the central bank does not fix the amount of money in circulation, nor is central bank money ‘multiplied up’ into more loans and deposits. Although commercial banks create money through lending, they cannot do so freely without limit. Banks are limited in how much they can lend if they are to remain profitable in a competitive banking system. Prudential regulation also acts as a constraint on banks’ activities in order to maintain the resilience of the financial system. And the households and companies who receive the money created by new lending may take actions that affect the stock of money – they could quickly ‘destroy’ the money or currency by using it to repay their existing debt, for instance.[5]Central banks control the creation of money by commercial banks, by setting interest rates on reserves. This limits the amount of money the commercial banks are willing to lend, and thus create, as it affects the profitability of lending in a competitive market.[5] This is the opposite of what many people believe about the creation of fiat money. The most common misconception was that central banks print all the money, this is not reflective of what actually happens.
Today's global monetary system is essentially a fiat system because people can use paper bills or bank balances to buy goods.[48Money: essence, functions and aggregates
What is money?
24 November 2015 (updated 20 June 2017)
Euro banknotes and coins are money but so is the balance on a bank account. What actually is money? How is it created and what is the ECB’s role?
The changing essence of money
The nature of money has evolved over time. Early money was usually commodity money – an object made of something that had a market value, such as a gold coin. Later on, representative money consisted of banknotes that could be swapped against a certain amount of gold or silver. Modern economies, including the euro area, are based on fiat money. This is money that is declared legal tender and issued by a central bank but, unlike representative money, cannot be converted into, for example, a fixed weight of gold. It has no intrinsic value – the paper used for banknotes is in principle worthless – yet is still accepted in exchange for goods and services because people trust the central bank to keep the value of money stable over time. If central banks were to fail in this endeavour, fiat money would lose its general acceptability as a medium of exchange and its attractiveness as a store of value.
The nature of money over time
Commodity money
Representative money
Fiat money
Present-day currency can also exist independently of a physical representation. Money can exist in a bank account in the form of a computer entry or stored in the form of a savings account. Digital cash, or e-money, is monetary value stored in a pre-paid card or smartphone, for example. And direct debits, internet payments and card transfers are all forms of payment that do not involve cash. (There are even newer decentralised digital currencies or virtual currency schemes like Bitcoin that exist without a central point of control like a central bank. These are not regarded as money from a legal perspective.)
Despite the rapid rise in electronic payments, cash is still very popular. In the euro area, cash is used for a high proportion of all payments under €20. The value of euro cash is guaranteed by the ECB and the national central banks of the euro area countries, which together form the Eurosystem.
The uses of money and how the ECB keeps track of it
Money, whatever its form, has three different functions. It is a medium of exchange – a means of payment with a value that everyone trusts. Money is also a unit of account allowing goods and services to be priced. And it is a store of value. Only a portion of euro cash in circulation actually circulates, i.e. is used for processing payments. For example, many of the circulating €50 notes are hoarded.
The functions of money
Medium of exchangefor buying things
Unit of accountfor pricing
Store of valuefor saving
Central banks usually define and monitor several monetary aggregates. Developments in these aggregates can reveal useful information about money and prices. Several aggregates are needed because many different financial assets are substitutable and the nature and characteristics of financial assets, transactions and means of payment change over time. The Eurosystem has defined a narrow (M1), an “intermediate” (M2) and a broad monetary aggregate (M3) for use in the ECB’s monetary analysis. The ECB looks at developments in these aggregates, together with a lot of other information and analyses, as part of its monetary policy strategy.
How is money created?
The ECB acts as a bank for the commercial banks and this is also how it influences the flow of money and credit in the economy to achieve stable prices. Commercial banks, in turn, can borrow money, i.e. central bank reserves, from the ECB, usually to cover very short-term liquidity needs. The ECB’s main tool for controlling the quantity of “outside” money, and hence the demand for central bank reserves by commercial banks, is setting very short-term interest rates – the “cost of money”.
Money creation in the euro area
European Central Bank
Commercial banks
People & businesses
Commercial banks can also create so-called “inside” money, i.e. bank deposits – this happens every time they issue a new loan. The difference between outside and inside money is that the former is an asset for the economy as a whole, but it is nobody’s liability. Inside money, on the other hand, is named this way because it is backed by private credit: if all the claims held by banks on private debtors were to be settled, the inside money created would be reversed to zero. So, it is one form of currency that is created – and can be reversed – within the private economy.
What about the ECB’s “money-printing” scheme I keep reading about?
In practice, only the national central banks physically issue euro banknotes. “Money-printing” is the colloquial term for the ECB’s asset purchase programme, a form of “quantitative easing”. By purchasing assets in the financial market, the ECB creates additional central bank reserves that can help reduce – through a variety of channels – the interest rates faced by households and firms with a view to supporting the economy and, ultimately, to keep the value of money stable when the room to cut those interest rates directly controlled by the ECB is limited. In this process, the ECB does not actually print banknotes to pay for the assets but creates money electronically, which is credited to the seller or intermediary, e.g. a commercial bank. The seller can then use the additional liquidity to buy other assets or, in case of a commercial bank, extend credit to the real economy. The purchases contribute to improving monetary and financial conditions, making it cheaper for businesses and households to borrow so they can invest and spend more. The ultimate aim is that inflation rates return to levels close to but below 2% in line with the ECB’s price stability mandate.
49. Credit: essence and types
Essence is the property or set of properties that make an entity or substance what it fundamentally is, and which it has by necessity, and without which it loses its identity. Essence is contrasted with accident: a property that the entity or substance has contingently, without which the substance can still retain its identity. The concept originates with Aristotle, who used the Greek expression to ti ên einai, literally meaning "the what it was to be" and corresponding to the scholastic term quiddity or sometimes the shorter phrase to ti esti, literally meaning "the what it is" and corresponding to the scholastic term  HYPERLINK "https://en.wikipedia.org/wiki/Haecceity"haecceity for the same idea. This phrase presented such difficulties for its Latin translators that they coined the word essential (English "essence") to represent the whole expression. For Aristotle and his scholastic followers, the notion of essence is closely linked to that of definition.
50. Bank system and its role in the economy development
Banks accept deposits and make loans and derive a profit from the difference in the interest rates paid and charged to depositors and borrowers respectively. The process performed by banks of taking in funds from a depositor and then lending them out to a borrower is known as financial intermediation.
Through the process of financial intermediation, certain assets are transformed into different assets or liabilities. As such, financial intermediaries channel funds from people who have extra money or surplus savings (savers) to those who do not have enough money to carry out a desired activity (borrowers).
Banking thrive on the financial intermediation abilities of financial institutions that allow them to lend out money and receiving money on deposit. The bank is the most important financial intermediary in the economy as it connects surplus and deficit economic agents.
When you deposit your money in the bank, your money goes into a big pool along with everyone else’s, and your account is credited with the amount of your deposit. The role of the bank is to provide a safe place to keep your money and sometimes the opportunity to earn interest on your deposits.
Services like current and savings accounts provide convenient ways for you to pay your bills without the hustle of using cash. At the same time, when you run short of liquidity, the bank is able to give you some advance to cover up for your shortfall through other depositors funds.
51. The functions of Central bank
The main function of a central bank is to act as governor of the machinery of credit in order to secure stability of prices. It regulates the volume of credit and currency, pumping in more money when market is dry of cash, and pumping out money when there is excess of credit. In India RBI have two departments, namely. Issue department and Banking department.Main functions:
1. Issue of Currency:
The central bank is given the sole monopoly of issuing currency in order to secure control over volume of currency and credit. These notes circulate throughout the country as legal tender money.
2. Banker to Government:
Central bank functions as a banker to the government—both central and state governments. It carries out all banking business of the government.
3. Banker’s Bank and Supervisor:
There are usually hundreds of banks in a country. There should be some agency to regulate and supervise their proper functioning. This duty is discharged by the central bank.
4. Controller of Credit and Money Supply:
Central bank controls credit and money supply through its monetary policy which consists of two parts—currency and credit.
5. Exchange Control:
Another duty of a central bank is to see that the external value of currency is maintained.
6. Lender of Last Resort:
When commercial banks have exhausted all resources to supplement their funds at times of liquidity crisis, they approach central bank as a last resort.
7. Custodian of Foreign Exchange or Balances:
It has been mentioned above that a central bank is the custodian of foreign exchange reserves and nation’s gold.
8. Clearing House Function:
Banks receive cheques drawn on the other banks from their customers which they have to realise from drawee banks.
9. Collection and Publication of Data:
It has also been entrusted with the task of collection and compilation of statistical information relating to banking and other financial sectors of the economy.
52. The functions of Commercial bank
The main functions of commercial banks are accepting deposits from the public and advancing them loans. However, besides these functions there are many other functions which these banks perform. All these functions can be divided under the following heads:
1. Accepting deposits. The most important function of commercial banks is to accept deposits from the public. Various sections of society, according to their needs and economic condition, deposit their savings with the banks.
2. Giving loans. The second important function of commercial banks is to advance loans to its customers. Banks charge interest from the borrowers and this is the main source of their income.
3. Overdraft. Banks advance loans to its customer’s upto a certain amount through over-drafts, if there are no deposits in the current account. For this banks demand a security from the customers and charge very high rate of interest.
4. Discounting of Bills of Exchange. This is the most prevalent and important method of advancing loans to the traders for short-term purposes. Under this system, banks advance loans to the traders and business firms by discounting their bills. In this way, businessmen get loans on the basis of their bills of exchange before the time of their maturity.
5. Investment of Funds. The banks invest their surplus funds in three types of securities—Government securities, other approved securities and other securities. Government securities include both, central and state governments, such as treasury bills, national savings certificate etc.
6. Agency Functions. Banks function in the form of agents and representatives of their customers. Customers give their consent for performing such functions. 
7. Miscellaneous Functions. Besides the functions mentioned above, banks perform many other functions of general utility
53. Fiscal policy: essence and main instruments
Fiscal policy is a policy concerning the receipts and expenditures of the government. It refers to the policy related to the budget of the government. It operates through changes in the government expenditures, taxation, and public borrowings.Fiscal policy is used as a balancing device in the development of an economy. The modern fiscal policy is a technique to achieve and regulate full employment by manipulating public expenditure and revenue in such a way as to maintain equilibrium between effective demand and supply services at a particular time.There are mainly four instruments or constituents of the fiscal policy:
Budget, government expenditure, taxation, public debt and deficit financing.
1. Budget
A budget is an estimate of government expenditures and revenues for a fiscal year, usually presented to the parliament by the finance minister. In other words , the estimated statements of the government revenues and expenditures are called budget.
2. Government Expenditure. It includes:
government spending on the purchase of goods and services
Payment of wages and salaries of government servants
Public investment
Transfer payments
3. Taxation
Direct taxes are those taxes which have to be paid by the person on whom they are levied. Its burden can not be shifted to some one else. E.g. Income tax, property tax, corporation tax, estate duty, etc. are direct taxes. There is no direct benefit to the tax payer.
Indirect taxes are those taxes which are levied on commodities and services and affect the income of a person through their consumption expenditure. E.g. Custom duties, sales tax, services tax, excise duties, etc. are indirect taxes.
4. Public DebtPublic debt is the debt which the government owes to its subject or to the nationals of other countries. The government can borrow from individuals, business enterprises and banks. It can borrow from within the country and from outside the country. The main objectives of government borrowings are to meet the budgetary deficit, to finance a war, to finance development plans and to fight depression.
54. Government budget: essence and structure
Government budget is an annual statement, showing item wise estimates of receipts and expenditure during fiscal year i.e. financial year. The receipts and expenditure, shown in the budget, are not the actual figure, but the estimated values for the coming fiscal year.

1. Revenue Budget
This financial statement includes the revenue receipts of the government i.e. revenue collected by way of taxes & other receipts. It also contains the items of expenditure met from such revenue.
(a) Revenue Receipts : These are the incomes which are received by the government from all sources in its ordinary course of governance. These receipts do not create a liability or lead to a reduction in assets.
Revenue receipts are further classified as tax revenue and non-tax revenue.
 Tax Revenue :-
Tax revenue consists of the income received from different taxes and other duties levied by the government. It is a major source of public revenue. Every citizen, by law is bound to pay them and non-payment is punishable.
Taxes are of two types:  Direct Taxes and Indirect Taxes.
Direct taxes are those taxes which have to be paid by the person on whom they are levied. Its burden can not be shifted to some one else. E.g. Income tax, property tax, corporation tax, estate duty, etc. are direct taxes. There is no direct benefit to the tax payer.
Indirect taxes are those taxes which are levied on commodities and services and affect the income of a person through their consumption expenditure. Here the burden can be shifted to some other person. E.g. Custom duties, sales tax, services tax, excise duties, etc. are indirect taxes.
 Non-Tax Revenue :-
Apart from taxes, governments also receive revenue from other non-tax sources.
The non-tax sources of public revenue are as follows :-
Fees : The government provides variety of services for which fees have to be paid. E.g. fees paid for registration of property, births, deaths, etc.
Fines and penalties : Fines and penalties are imposed by the government for not following (violating) the rules and regulations.
Profits from public sector enterprises : Many enterprises are owned and managed by the government. The profits receives from them is an important source of non-tax revenue. For example in India, the Indian Railways, Oil and Natural Gas Commission, Air India, Indian Airlines, etc. are owned by the Government of India. The profit generated by them is a source of revenue to the government.
Gifts and grants : Gifts and grants are received by the government when there are natural calamities like earthquake, floods, famines, etc. Citizens of the country, foreign governments and international organisations like the UNICEF, UNESCO, etc. donate during times of natural calamities.
Special assessment duty : It is a type of levy imposed by the government on the people for getting some special benefit. For example, in a particular locality, if roads are improved, property prices will rise. The Property owners in that locality will benefit due to the appreciation in the value of property. Therefore the government imposes a levy on them which is known as special assessment duties.
 What is Revenue Expenditure ?Revenue expenditure is the expenditure incurred for the routine, usual and normal day to day running of government departments and provision of various services to citizens. It includes both development and non-development expenditure of the Central government. Usually expenditures that do not result in the creations of assets are considered revenue expenditure.
Capital Budget
This part of the budget includes receipts & expenditure on capital account projected for the next financial year. Capital budget consists of capital receipts & Capital expenditure.
Capital Receipts
Receipts which create a liability or result in a reduction in assets are called capital receipts. They are obtained by the government by raising funds through borrowings, recovery of loans and disposing of assets.
 What is Capital Expenditure ? :-
Any projected expenditure which is incurred for creating asset with a long life is capital expenditure. Thus, expenditure on land, machines, equipment, irrigation projects, oil exploration and expenditure by way of investment in long term physical or financial assets are capital expenditure.
55. Classification of a government expenditure
Government expenditure can be broadly classified into four categories: (i) Functional Classification or Budget Classification (ii) Economic Classification (iii) Cross Classification and (iv) Accounting Classification. As already mentioned, each classification of expenditure in government serves one objective or other i.e. financial control, economic growth, price stability etc.Functional or Budget Classification:
The classification indicated the nature of expenditure but not its purpose. It did not enable identification of expenditure with functions, programmes, activities and projects. It lacked management approach in accounting in as much as it did not provide the facility for monitoring and analysis of expenditure on functions, programmes, activities and projects. Classilkation of Government Expenditure Functional classification has provided the necessary facility for monitoring and analysis of expenditure on functions, programmes and activities to aid the management function.
Economic Classification: Economic classification refers to the resources allocated by government to various economic activities. It involves arranging the public expenditures and receipts by significant economic categories, distinguishing current expenditure from capital outlays, spending for goods and services from transfers to individuals and institutions, tax receipts by kind from other receipts and from borrowing and inter-governmental loans, grants etc.
Cross Classification or Economic-cum-Functional Classification: Cross classification provides the breakup of government expenditure not only-by economic categories but also by functional heads. For instance, expenditure on medical facilities (a functional head) is split between economic categories such as current expenditure, . capital expenditure, and various types of transfers and loans.
Accounting Classification: Accounting classification of government expenditure can be analysed under (i) Revenue and Capital (ii) Developmental and Non- Developmental and (iii) Plan and Non-Plan. Each classification of expenditure serves one objective or other of the government. For instance, Revenue and Capital expenditure classification indicates how much government expenditure results in creation of assets in the economy and how much expenditure is unproductive. Again, developmental and non-developmental classification indicates how much government expenditure is spent on social and community services and economic services as against general services.
56. Tax: essence and types
The leading role in ensuring the implementation of state functions on regulation of economic processes belongs to taxes. A tax is a mandatory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund various public expenditures. Taxes is a very complex and highly influential financial category. This is a compulsory element of the economic system of any state regardless of which model of economic development it chooses which political forces are in power. No taxes paralyze the financial system of the state as a whole, making it dysfunctional and, ultimately, is devoid of any sense.
Types of taxes:
Federal Income Tax: A tax levied by a national government on annual income.
State and/or Local Income Tax: A tax levied by a state or local government on annual income. Not all states have implemented state level income taxes.
Payroll Tax: A tax an employer withholds and/or pays on behalf of their employees based on the wage or salary of the employee. In most countries, including the United States, both state and federal authorities collect some form of payroll tax. In the United States, Medicare and Social Security, also called FICA, make up the payroll tax.
Unemployment Tax: A federal tax that is allocated to state unemployment agencies to fund unemployment assistance for laid-off workers.
Sales Tax: A tax imposed by the government at the point of sale on retail goods and services. It is collected by the retailer and passed on to the state. Sales tax is based on a percentage of the selling prices of the goods and services and is set by the state. Technically, consumers pay sales taxes, but effectively, business pay them since the tax increases consumers costs and causes them to buy less.
Foreign Tax: Income taxes paid to a foreign government on income earned in that country.
Value-Added Tax: A national sales tax collected at each stage of production or consumption of a good. Depending on the political climate, the taxing authority often exempts certain necessary living items, such as food and medicine from the tax.
57.Reasons of the government budget deficit
For many countries a rising budget deficit is the inevitable result of experiencing a recession or a sustained period of slow growth.
In a downturn, revenue flows fall from direct and indirect taxes whilst at the same time, the government is required to pay more out in welfare benefits such as the means-tested income support, unemployment benefits and other welfare handouts.
So part of a fiscal deficit may be the consequence of the automatic stabilisers at work. These are the tax and government spending changes that happen automatically at different stages of the business cycle. The governments of most developed countries are prepared to allow the automatic stabilisers to work through because, when their economy recovers, the cyclical component of a fiscal deficit will diminish, indeed in an economic boom, the government may run a budget surplus. Structural reasons, For some countries, fiscal deficits seem an almost permanent feature, rarely is the government able to find enough tax revenue to cover the annual spending budgets
58.Tax: essence,base,and the types of tax rate
A tax is a compulsory payment levied on the persons or companies to meet the expenditure incurred on conferring common benefits upon the people of a country.
The tax structure of an economy depends on its tax base, tax rate, and how the tax rate varies. The tax base is the amount to which a tax rate is applied. The tax rate is the percentage of the tax base that must be paid in taxes. To calculate most taxes, it is necessary to know the tax base and the tax rate.
A regressive tax is one that is inversely proportional to income — the lower the income, the higher the tax in relation to income. Most regressive taxes are assessed on products and services in which the tax is a percentage of the cost of the product or service.
A progressive tax applies a higher tax rate to higher incomes. So if the tax rate on $50,000 is 10% and 20% for $100,000, then, continuing the above example, Bill still owes $5,000 in taxes while Jane will have to pay $20,000 in taxes. However, almost all progressive taxes are structured as a marginal tax, which means that the progressive tax rate is only applied to that part of the income which is greater than a certain amount. The portion of the tax base that is subject to a particular tax rate, known as a tax bracket, always has lower and upper limits, except for the top tax bracket, which has no upper limit.
59.Direct and portfolio investment
Foreign investors can have myriad motivations for seeking to earn profits in another country. But they have fundamentally two core choices when deciding how to deploy their capital.
They can make a portfolio investment, buying stocks or bonds, say, often with the idea of making a short-term speculative financial gain without becoming actively engaged in the day-to-day running of the enterprise in which they invest.
Or they can choose the long-haul, hands-on approach—investing in an enterprise in another economy with the objective of gaining control or exerting significant influence over management of the firm (which usually involves a stake of at least 10 percent of a company’s stock). In the most extreme case, investors may build new facilities from scratch, maintaining full control over operations.
It is the intent of lasting interest that is the crucial component of direct investment. A portfolio investor can sell a stock or bond quickly—whether to cement a gain or avoid a loss. Most corporations entering a foreign market through direct investment expect to substantially influence or control the management of the enterprise over the long haul.
61-62. Economic growth: essence, factors and types
The term economic growth is associated with economic progress and advancement.
Economic growth is the increase in the amount of the goods and services produced by an economy over time.
Factors that affect the economic growth of a country:
1. Human Resource:
Refers to one of the most important determinant of economic growth of a country. The quality and quantity of available human resource can directly affect the growth of an economy.
The quality of human resource is dependent on its skills, creative abilities, training, and education. If the human resource of a country is well skilled and trained then the output would also be of high quality.
2. Natural Resources:
Affect the economic growth of a country to a large extent. Natural resources involve resources that are produced by nature either on the land or beneath the land. The resources on land include plants, water resources and landscape.
The resources beneath the land or underground resources include oil, natural gas, metals, non-metals, and minerals. The natural resources of a country depend on the climatic and environmental conditions. Countries having plenty of natural resources enjoy good growth than countries with small amount of natural resources.
The best examples of such economies are developed countries, such as United States, United Kingdom, Germany, and France. However, there are countries that have few natural resources, but high per capita income, such as Saudi Arabia, therefore, their economic growth is very high. Similarly, Japan has a small geographical area and few natural resources, but achieves high growth rate due to its efficient human resource and advanced technology.
3. Capital Formation:
Involves land, building, machinery, power, transportation, and medium of communication. Producing and acquiring all these manmade products is termed as capital formation. Capital formation increases the availability of capital per worker, which further increases capital/labor ratio. Consequently, the productivity of labor increases, which ultimately results in the increase in output and growth of the economy.
4. Technological Development:
Refers to one of the important factors that affect the growth of an economy. Technology involves application of scientific methods and production techniques. In other words, technology can be defined as nature and type of technical instruments used by a certain amount of labor.
Technological development helps in increasing productivity with the limited amount of resources. Countries that have worked in the field of technological development grow rapidly as compared to countries that have less focus on technological development. The selection of right technology also plays an role for the growth of an economy. On the contrary, an inappropriate technology- results in high cost of production.
5. Social and Political Factors:
Play a crucial role in economic growth of a country. Social factors involve customs, traditions, values and beliefs, which contribute to the growth of an economy to a considerable extent.
There are 4 types of economic growth:
1. Balanced Economic Growth 2. Un-balanced Economic Growth
3. Extensive
4. Intensive
1. Balanced Economic Growth: All the economic sectors are growing at same ratio or percentage, this growth is known as balanced economic growth. 2. Un-balanced Economic Growth: When some sectors of the economy are growing faster than others, and their rate of growth is different to each other, this growth is known as un-balanced economic growth.
3. Extensive Economic Growth: Economic growth is achieved by increasing number of production factors
4. Intensive Economic Growth: Economic growth is achieved by increasing quality of production factors, i.e. using of new quality raw materials, new technology and others
63. GNP and ways of its calculation according to the income
GNP stands for Gross National Product. In general terms, GNP means the total of all business production and service sector industry in a country plus its gain on overseas investment. In some cases GNP will also be calculated by subtracting the capital gains of foreign nationals or companies earned domestically.
Calculation according to the income:
 This method of calculating GNP involves measuring the income generated by selling output. By selling outputs, firms earn revenue. This revenue is utilized for the payment of rent, interest, wage, indirect tax payments as well as for buying inputs and enjoys what is left-over as profits.
Revenue = rent + interest + wage + costs of intermediate inputs + indirect taxes + profit
If costs of intermediate goods are deducted from revenue we obtain value added. Thus, value added = rent + interest + wage + indirect taxes + profit
Since the value of GNP is equal to the sum of the value added of all firms operating, GNP must also equal the sum of all payments, i.e.,GNP = rent + interest + wage + indirect taxes + profit
This means that GNP is the sum of all payments to the input owners plus government revenue from indirect taxes.
Or national income is the sum of the values earned by each factor of production— land, labour, capital and entrepreneurship. The measures derived are comparable to those obtained from the product side of the accounts. Since GNP is the sum of all values added, it must also be the aggregate of all incomes subdivided into rent, wages, interest, and profit, plus indirect taxes.
64. GNP and ways of its calculation according to the expenditure
GNP stands for Gross National Product. In general terms, GNP means the total of all business production and service sector industry in a country plus its gain on overseas investment. In some cases GNP will also be calculated by subtracting the capital gains of foreign nationals or companies earned domestically.
Calculation according to the expenditure:
This approach is to add up all expenditures on final goods and services. In fact, this approach is another way of calculating the value of final goods of the economy. This approach considers where those goods go. There are four possibilities— some final goods are consumed by individuals, some are used by firms, some are purchased by the government, and some of them go abroad.
In a two-sector economy consisting of consuming sector and producing sector, total expenditure is divided into consumption spending (symbolized by C) and investment spending (symbolized by I). ‘C’ includes expenditure on all types of goods (both durable and non-durable) and services produced and sold.
‘I’ is defined as the expenditure on newly produced capital goods acquired for the purpose of providing services in the future. It includes investment in fixed capital formation, stock building and residential housing.
Again, investment may be gross or net. Net investment is obtained by subtracting depreciation expenditure or capital consumption allowance from gross investments.
Thus,
GNP = C + I
If we now consider a three-sector economy (i.e., a closed economy) that includes governmental sector, then GNP from the national expenditure side becomes
GNP = C + I + G
G’ consists of expenditures on goods and services provided by the government. However, not all government expenditures are included in the GNP accounts. Expenditure on government transfer payments (e.g., unemployment benefit, welfare grants, interest on national debt, etc.) are excluded.
The fourth category of expenditure in a four-sector economy, i.e., an open economy, arises from international trade.
Here we will now include export (symbolized by X) and exclude imports (symbolized by M). Market value of all exportable goods should be included in national income. But market value of all imported final goods and services are to be subtracted from the GNP figure. This is because national income figures of any country must not reflect the contribution of foreign nationals.
Thus, in an open economy,
GNP = C + I + G + (X-M)
This equation is called an identity. By definition, thus, GNP equals consumption plus investment, plus government expenditures, plus net exports.
65.GNP and ways of its calculation according to the expenditure.
Gross national product (GNP) is a broad measure of a nation's total economic activity. GNP is the value of all finished goods and services produced in a country in one year by its nationals.
"Expenditures" is a reference to spending; Keynesian theory places extreme macroeconomic importance on the willingness for businesses, individuals and governments to spend money. Another word for spending is "demand."
The total spending, or demand, in the economy is known as aggregate demand. This is why the GDP formula is exactly the same as the formula for calculating aggregate demand: Y = C + I + G + NX
According to this approach, all output must go toward one of four sources. These sources are private individual consumers (C), business (I), governments (G) and foreigners (net exports, or NX).
The expenditure approach is different than the income approach, which instead focuses on the income received by the factors of production: labor, capital, land and entrepreneurs.
66. Government budget: essence and its revenue part.
Government budgeting is one of the major processes by which the use of public resources are planned and controlled to attain certain objectives . Budgetary actions of the government affect production, size, and distribution of income and utilization of human and material resources of the country. So the government should prepare a different budget of the various situations is the economy. Public expenditure should be varied according to the requirement and urgencies of the business situations. Governments, however, also have recourse to raising funds through the sale of their goods and services, and, because government budgets seldom balance, through borrowing.
The two basic elements of any budget are the revenues and expenses. In the case of the government, revenues are derived primarily from taxes.
In deciding how to raise enough money to finance its expenditure program, a government faces a large number of different considerations. First, the tax system is complex, containing many different taxes, each often having a complex structure. Perhaps the major consideration is the effects on behaviour that particular tax rates will cause.
Income tax has a graduated structure whereby no tax is paid on the first segment of income and then each subsequent segment is taxed at a higher rate than the previous one. In the United Kingdom most taxpayers pay tax at a uniform marginal rate, while other countries have more steeply rising rate schedules. Higher marginal tax rates make work less rewarding, which tends to reduce work effort. High marginal rates, however, may have less impact in some areas than others, a factor that needs to be considered when deciding who should bear the tax burden. Such considerations presumably have influenced the trend in many countries to tax the wealthiest groups.
67. Government budget: essence and its expenses part.
A government budget is an annual financial statement presenting the government's proposed revenues and spending for a financial year that is often passed by the legislature, approved by the chief executive or president and presented by the Finance Minister to the nation. The budget is also known as the Annual Financial Statement of the country. This document estimates the anticipated government revenues and government expenditures for the ensuing (current) financial year.
The two basic elements of any budget are the revenues and expenses. Government expenses include spending on current goods and services, which economists call government consumption; government investment expenditures such as infrastructure investment or research expenditure; and transfer payments like unemployment or retirement benefits.
Expenditures authorized under a national budget are divided into two main categories. The first is the government purchase of goods and services in order to provide services such as education, health care, or defense. The second is the payment of social security and other transfers to individuals and the payment of subsidies to industrial and commercial companies. Both types are usually labeled “public expenditure,” and in many countries attention usually focuses on the aggregate of the two. This obscures important differences in the economic significance of the two items, however. The first represents the public sector’s claim on total national resources; the second the scale of its redistribution within the private sector.
68. Subject and functions of economic theory.
"Economic theory is the science of what a rare productive resources, people and society over time, with money or without their participation, elect for the production of various goods and distribute them for consumption in the present and the future, between different people and groups in society" .
"The subject of economics - finding an effective use of scarce resources in the production of goods and services for the satisfaction of material needs."
Thus, the subject of economic theory is the work of people using limited resources to produce goods and services to meet their needs.
Economic theory performs methodological, practical, cognitive, predictive, educational and ideological functions.
Methodological function allows you to define economics as the basis for the development of a number of other economic disciplines (marketing, statistics, management, pricing).
Expression of the practical function of economic theory is the development of economic policy. In general, the practical function is the scientific foundation of economic policy, to identify principles and practices of good housekeeping.
Cognitive function is to comprehensively examine the forms of economic phenomena and their inner self, allowing you to discover the laws by which develops the national economy. This study begins by examining the facts of mass economic data, the behavior of economic agents that Western economic literature by the term "descriptive science."
The predictive function of economic theory is to determine the prospects for socio-economic development in the future. This function is related to the development of promising criteria and indicators. It has a special significance in the development of plans and forecasts for the national economy.
Educational function is manifested in the formation of economic thinking.
69) Types of costs: fixed cost and variable cost.
Costs are the money and other material expenditures incurred (привлеченные) in producing and selling goods during the period.
Fixed cost- costs that do not change with the amount of produced.
Fixed costs are costs that are independent of output. These remain constant throughout the relevant range and are usually considered sunk for the relevant range (not relevant to output decisions). Fixed costs often include rent, buildings, machinery, etc.
Variable costs are costs that vary with output. Generally variable costs increase at a constant rate relative to labor and capital. E.g. expenses for labour force wage, raw materials, packing expenses, stationary expenses, storage expenses, transportation expenses and others.
70) Pricing of the goods and average cost.
Price may be defined as the exchange of goods or services in terms of money. Without price there is no marketing in the society. If money is not there, exchange of goods can be undertaken, but without price; i.e., there is no exchange value of a product or service agreed upon in a market transaction, is the key factor which affects the sales operations. The market price of a product influences wages, rent, interest and profits. In other words, the price .of a product influences the price paid for the factors of production-labour, land, capital and entrepreneurship. The price is a matter of vital importance to the buyer and the seller. Exchange of the goods or services takes place only when the prices are agreed upon by the seller and the buyer. Price can decide the success or failure of a firm. Prices are important economic regulators. By transferring to money economy from barter economy, the importance of price has been increased. Price is a primary source of revenue which, all firms try to maximize by expanding markets.
Average cost- AC- is amount of money that is used in producing one unit of product.
Why is AC important for a businessman?
AC is foundation of price formation
AC helps to define price of a product.
P= AC+ addition (үстеме)
P= 20 tenge+5 tenge=25 tengeAdditions are profit sources. A profit maximizing firm must produce its output at minimum cost.
71)Government budget deficit reasons and ways of its solving
Government budget is centralized fund of money resources. A budget deficit increases likewise on account of the natural cycle of business. The business cycle comes full circle from the stages of "trough", to "expansion", to "peak" and to its "downturn" before it rotates again on the same wheel. Trough is the bottompoint before the start of the economic upturn, expansion is the continued rise in economic activities that culminates at the peak before economic events slackens into the period of downturn.
72) Perfect competition and its features.
Competitiveness pertains to the ability and performance of a firm, sub-sector or country to sell and supply goods and services in a given market, in relation to the ability and performance of other firms, sub-sectors or countries in the same market. In recent years, the concept of competitiveness has emerged as a new paradigm in economic development. Competitiveness captures the awareness of both the limitations and challenges posed by global competition, at a time when effective government action is constrained by budgetary constraints and the private sector faces significant barriers to competing in domestic and international markets. “Competitiveness is defined as the ability to produce goods and services which meet the test of international markets, while at the same time maintaining high and sustainable levels of income or, more generally, the ability of (regions) to generate, while being exposed to external competition, relatively high income and employment levels’.”
73. Imperfect competition and its features
1. Existence of large number of firms:The first important feature of monopolistic competition is that there are a large number of firms satisfying the market demand for the product. As there are a large number of firms under monopolistic competition, there exists stiff competition between them. (2) Product differentiations:· The various firms under monopolistic competition bring out differentiated products which are relatively close substitutes for each other. So their prices cannot be very much different from each other. Various firms under monopolistic competitors compete with each other as the products are similar and close substitutes of each other
(3) Some influence over the price:· As the products are close substitutes of others any reduction of price of a commodity by a seller will attract some customers of other products. Thus with a fall in price quantity demanded increases. It therefore, implies that the demand curve of a firm under monopolistic competition slopes downward and marginal revenue curve lies below it.(4) Absence of firm's interdependence:· Under oligopoly, the firms are dependent upon each other and can't fix up price independently. But under monopolistic competition the case is not so. Under monopolistic competition each firm acts more or less independently. Each firm formulates its own price-output policy upon its own demand cost.(5) Non-price competition:· Firms under monopolistic competition incur a considerable expenditure on advertisement and selling costs so as to win over customers. In order to promote sale firms follow definite -methods of competing rivals other than price. Advertisement is a prominent example of non-price competition.(6) Freedom of entry and exit:· In a monopolistic competition it is easy for new firms to enter into an existing firm or to leave the industry. Lured by the profit of the existing firms new firms enter the industry which leads to the expansion of output. But there exists a difference.
74. Government regulation of the economy: aims and instruments
Government regulation of the economy — a purposeful and active impact of the state and supranational authorities on the functioning and development of integral economic system (and thus on its expanded reproduction) by the use of economic laws and the resolution of economic contradictions using certain combination of forms and methods. The essence of state regulation of the economy comprehensively reveal its basic functions, which are, on the one hand, a logical extension of state functions, their specificity, and on the other due to the inability of the market mechanism of self-regulation and monopoly regularity to ensure the stable development of the economic system.
main government instruments in this case are the financial and monetary policies and a variety of government programs with which the state is able to smooth out economic fluctuations and to create a more modern, competitive operating environment.This is most clearly the action of indirect methods is shown during a recession or overheating of the economy, when stabilize the situation can only state holding a certain fiscal and monetary policy.
75. Type of interest rate: nominal and real
The nominal interest rate is the stated interest rate. If a bank pays 5% annually on a savings account, then 5% is the nominal interest rate. So if you deposit $100 for 1 year, you will receive $5 in interest. However, that $5 will probably be worth less at the end of the year than it would have been at the beginning. This is because inflation lowers the value of money. As goods, services, and assets, such as real estate, rise in price, it takes more money to buy them.
Irving Fisher looked at interest rate equilibrium as the desire for a specific real rate of return plus the expected inflation rate:
Nominal Interest Rate = Real Interest Rate + Expected Inflation Rate.
If the expected inflation rate was high, then people would demand a higher nominal rate for their investments; for why would anyone invest if they did not expect a real return? Although no one can really know what future interest rates will be, the nominal interest rate can be somewhat indicative of the expected interest rates.
The real interest rate is the nominal rate of interest minus inflation, which can be expressed approximately by the following formula:
Real Interest Rate = Nominal Interest Rate – Inflation Rate = Growth of Purchasing Power.
Real Interest Rate Formula
R =N - I
1 + IR = Real Interest Rate
N = Nominal Interest Rate
I = Inflation Rate
Because people invest to earn more purchasing power, they will only invest or lend money that pays more than the expected inflation rate. In this case, the nominal rate equals the real interest rate plus the expected inflation.
76. Types of costs: total cost and average cost
Average Cost is also known as cost per unit. If total cost of production is divided by the total number of units produced, we get the average cost.
In other-words, Average Cost at any output = Total Cost/ Units of Output
Average cost is the sum of average variable cost and average fixed cost. It is also called average total cost. If the total cost of producing 120 units of a commodity is 2400 rupees then average cost will be 2400/ 120 = Rs. 20. On the other-hand, Average Cost helps in fixing or determining the total quantity for sale. The difference between average revenue and average cost shows the profit per unit. If the profit is multiplied with the total production (Units of production) we get the total or gross profit.
Average product (AP) is the total product divided by the number of units of input, which is usually labor.
Average Product=Total Product
1410616-4127 Input Quantity
So if 10 workers can produce 50 widgets, then the average product = 5 widgets per worker.
Total cost (TC) is the cost to produce a firm's entire output. Therefore:
Total Cost = Fixed Costs + Variable Costs
The average total cost (ATC) equals the total cost divided by the quantity of product produced.
Average Total Cost= Total Cost
Total ProductThe average fixed cost (AFC) equals total fixed costs divided by total product:
77.Production and natural economy (натуральное хозяйство)
Production -The processes and methods used to transform tangible inputs (raw materials, semi-finished goods, subassemblies) and intangible inputs (ideas, information, knowledge) into goods or services. Resources are used in this process to create an output that is suitable for use or has exchange value.
Natural economy-refers to a type of economy in which money is not used in the transfer of resources among people. It is a system of allocating resources through direct bartering, entitlement by law, or sharing out according to traditional custom. In the more complex forms of natural economy, some goods may act as a referent for fair bartering, but generally currency plays only a small role in allocating resources. As a corollary, the majority of goods produced in a system of natural economy are not produced for the purpose of exchanging them, but for direct consumption by the producers (subsistence).
78.Market economy and its types
system where decisions regarding investment, production, and distributionare based on the interplay of supply and demand,which determines the prices of goods and services The major defining characteristic of a market economy is that investment decisions, or the allocation of producer good, are primarily made through capital and financial markets.This is contrasted with a planned economy, where investment and production decisions are embodied in an integrated plan of production established by a state or other organizational body that controls the factors of production.
1. Traditional Economic System
A traditional economic system is the best place to start because it is, quite literally, the most traditional and ancient type of economy in the world. There are certain elements of a traditional economy that those in more advanced economies, such as Mixed, would like to see return to prominence.
2. Command Economic System
In terms of economic advancement, the command economic system is the next step up from a traditional economy. This by no means indicates that it is fairer or an exact improvement; there are many things fundamentally wrong with a command economy.
3. Market Economic System
A market economy is very similar to a free market. The government does not control vital resources, valuable goods or any other major segment of the economy. In this way, organizations run by the people determine how the economy runs, how supply is generated, what demands are necessary, etc.
4. Mixed Economic System
A mixed economic system (also known as a Dual Economy) is just like it sounds (a combination of economic systems), but it primarily refers to a mixture of a market and command economy (for obvious reasons, a traditional economy does not typically mix well). As you can imagine, many variations exist, with some mixed economies being primarily free markets and others being strongly controlled by the government.
79.The economic cycle and its phases
An economy in full recession has seen its gross domestic product retract over two consecutive quarters. Interest rates fall and consumer expectations bottom out, while the yield curve remains normal. Economic sectors that usually profit most during a recession include cyclical and transport industries near the beginning of the stage, plus technology and industrials near its end.
In the early recovery stage, the economy begins to pick up. Consumer expectations rise and industrial production increases. Interest rates bottom out and the yield curve starts to get steeper, as well. Sectors that are successful in this portion of the cycle include industrials during the beginning, basic materials, and energy near the end.
In the late recovery stage, interest rates rise and the yield curve flattens. Consumer expectations drop and industrial production is flat. Sectors that succeed typically include energy near the beginning, staples and services near the end.
And in the early recession stage, consumer expectations are at their lowest, industrial production falls, interest rates reach their highest and the yield curve flattens or inverts. Sectors that do well in the early recession stage are usually services near the beginning; utilities, cyclicals and transports near the end.
80.Credit: essence and consumer credit
Credit is a contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some date in the future, generally with interest. Credit also refers to an accounting entry that either decreases assets or increases liabilities and equity on the company's balance sheet. Additionally, on the company's income statement, a debit reduces net income, while a credit increases net income.
incurs when purchasing a good or service. Consumer credit includes purchases obtained with credit cards, lines of credit and some loans. Consumer credit is also known as consumer debt. Consumer credit is divided into two classifications: revolving credit and installment credit. The most common form of consumer credit is a credit card.
81Credit: essence and mortgage
Credit is a sum of money that has to be returned, be payed according to the agreement. There are forms of the credit such as commercial credit, consumer credit, mortgage (ипотека), international credit, leasing, factoring, and etcConsumer credit is a credit that is taken by person to buy long term goods.
Mortgage is a form credit when person can get money but should give mortgage to the bank (house, land)
Factoring means the bank covers all debts of the enterprise, then requires the money from the enterprise.
Commercial credit is form of credit when it is used to let pay enterprise for the goods after buying them. This form is used only between enterprises
82Market economy and its functions
A market is a set of arrangements by which buyers and sellers are in contact to exchange goods and services.
The market functions:
Self regulating function. The prices guide society in choosing what, how and for whom to purchase.
Stimulating function. Businessmen use an innovation equipments, effective ways of producing goods to get high level of profit on the market.
Informating function. The market closes unhealthy, non efficiency production, but it gives possibility to run perspective, new business.
The structure of a market is a description of the behavior of buyers and sellers in that market.
83Advantages and disadvantages of market economy
The market advantages:
It has an ability to satisfy enough level of demand with high level of goods
The sellers and buyers are an independent
It has ability to adopt quickly to any changes on the economy
Disadvantages of the market:
It only satisfies the needs of person who has money
It is not interested in producing social goods such as roads, education system, health system, public transportation and others.
It does not give warranty(protection) for full employment and stable income
It doesn’t care about ecology, pollution of the environment and others
84.Monetary policy: essence and instruments
“Monetary policy is essentially a programme of action undertaken by the monetary authorities, generally the central bank, to control and regulate the supply of money with the public and the flow of credit with a view to achieving predetermined macroeconomic goals”
The objectives of monetary policy are the same as of macroeconomic policy – price stability, currency stability, financial stability, growth in employment and income
Monetary system of the country is stated in the law and it has:
the following components, such as:
National currency
Cash system (coins, credit cards and money)
System of money emission
Government Regulation of money supply (Central bank)
ТИПТІК
1. Decribe the conditions of goods production formation.
There are two types of social economy. They are a natural production and a goods production.
The second type of the social economy is goods production. In the goods production the goods are made to be sold. The economic relations between people are take place throw market, that’s аhв this sвstem has the following stages of goods movement: production-exchange-use.
The conditions of the goods production development:
1. Public division of labour ( producers specialised on making one type of
goods )2. Private property (the results of the production are owned by holders)
The goods production was the basis of the market development. There are several types of market economy. They are:
1. Non developed market economy (the half of the production results are consumed by the producers and the others are sold on the market).
2. Developed market economy (free market economy). Such kind of market economy has peculiarities as working force is a good, the producer engage( ) hired worker, and the most production results are sold.
3. Regulated market economy (mixed economy). Here is combined the private sector and government sector. There are several forms of the government regulations. They are issue a law, conduct a tax and finance systems of the country. Several forms of regulated market economy used in the world such as social oriented (Germany), to support a business (the USA), to protect a big business interests (Japan, Sweden)
4. Deformation market economy (administered-command economy)
2. Give definitions of the economic category. Write 5 economic category according to the alphabet
Economics: the study of choice under conditions of scarcity. This definition requires some
unpacking, to be more precise about the notions of choice and scarcity.
In economics a resource is defined as a commodity, service or other asset used to produce goods and services that meet human needs and wants. The aim of the economic system development is satisfaction the needs of a society. It defines by 5 categories:
Needs
Opportunity Cost
Resources
Scarcity
Wants
4. What are the difference between microeconomics and macroeconomics?
Macroeconomics and microeconomics, and their wide array of underlying concepts, have been the subject of a great deal of writings. The field of study is vast; so here is a brief summary of what each covers. Microeconomics is generally the study of individuals and business decisions, while  macroeconomics looks at higher up country and government decisions.
Microeconomics
Microeconomics is the study of decisions that people and businesses make regarding the allocation of resources and prices of goods and services. This means also taking into account taxes and regulations created by governments. Microeconomics focuses on supply and demand and other forces that determine the price levels seen in the economy. For example, microeconomics would look at how a specific company could maximize its production and capacity, so that it could lower prices and better compete in its industry. Microeconomics' rules flow from a set of compatible laws and theorems, rather than beginning with empirical study.
Macroeconomics
Macroeconomics, on the other hand, is the field of economics that studies the behavior of the economy as a whole, not just of specific companies, but entire industries and economies. It looks at economy-wide phenomena, such as Gross Domestic Product (GDP) and how it is affected by changes in unemployment, national income, rate of growth, and price levels. For example, macroeconomics would look at how an increase/decrease in net exports would affect a nation's capital account or how GDP would be affected by the unemployment rate.John Maynard Keynes is often credited with founding macroeconomics, when he initiated the use of monetary aggregates to study broad phenomena. Some economists reject his theory and many of those who use it disagree on how to interpret it.
Micro and Macro
While these two studies of economics appear to be different, they are actually interdependent and complement one another since there are many overlapping issues between the two fields. For example, increased inflation (macro effect) would cause the price of raw materials to increase for companies and in turn affect the end product's price charged to the public.
5. What are the difference between positive and normative economies?
The distinction between positive economics and normative economics may seem simple, but it is not always easy to differentiate between the two. Positive economics is objective and fact based, while normative economics is subjective and value based. Positive economic statements must be able to be tested and proved or disproved. Normative economic statements are opinion based, so they cannot be proved or disproved. In fact,  many widely-accepted statements that people hold as fact are actually value based.
For example, the statement, "government should provide basic healthcare to all citizens" is a normative economic statement. There is no way to prove whether government "should" provide healthcare; this statement is based on opinions about the role of government in individuals' lives, the importance of healthcare, and who should pay for it.
The statement, "government-provided healthcare increases public expenditures" is a positive economic statement, as it can be proved or disproved by examining healthcare spending data in countries like Canada and Britain, where the government provides healthcare.
Disagreements over public policies typically revolve around normative economic statements, and the disagreements persist because neither side can prove that it is correct or that its opponent is incorrect. A clear understanding of the difference between positive and normative economics should lead to better policy making if policies are made based on facts (positive economics), not opinions (normative economics). Nonetheless, numerous policies on issues ranging from international trade to welfare are at least partially based on normative economics.
6. Decribe the link between value and labouWhat is the 'Labor Theory Of Value 'The labor theory of value was an early attempt by economists to explain why goods were exchanged for certain prices on the market. It suggested the value of a commodity could be measured objectively by the average number of labor hours necessary to produce it. The best-known advocates of the labor theory were Adam Smith, David Ricardo and Karl Marx.
BREAKING DOWN 'Labor Theory Of Value 'Exchange values were a serious puzzle for early economic thinkers. If a horse cart traded for 20 ounces of gold but a pair of shoes only traded for 2 ounces, what made the horse cart 10 times as valuable as the shoes? The answer, according to the labor theory, is the horse cart took 10 times as much average labor to produce as the shoes.
Advocates of the labor theory believed that if two goods are exchanged for the same price, they must therefore have the same value. Value was determined by inputs, chiefly labor. The theory could not explain, among other things, profits, losses and land values.

7. Describe the disadvantages of market economy
Distorted investment priorities, as wealth gets directed into what will earn the largest profit and not into what most people really need (so public health, public education, and even dikes for periodically swollen rivers receive little attention);
Worsening exploitation of workers, since the harder, faster, and longer people work—just as the less they get paid—the more profit is earned by their employer (with this incentive and driven by the competition, employers are forever finding new ways to intensify exploitation);
Overproduction of goods, since workers as a class are never paid enough to buy back, in their role as consumers, the ever growing amount of goods that they produce (in the era of automation, computerization and robotization, the gap between what workers produce—and can produce—and what their low wage allows them to consume has increased enormously);
Unused industrial capacity (the mountain of unsold goods has resulted in a large percentage of machinery of all kinds lying idle, while many pressing needs—but needs that the people who have them can't pay for—go unmet);
Growing unemployment (machines and raw materials are available, but using them to satisfy the needs of the people who don't have the money to pay for what could be made would not make profits for those who own the machines and raw materials—and in a market economy profits are what matters);
Growing social and economic inequality (the rich get richer and everyone else gets poorer, many absolutely and the rest in relation to the rapidly growing wealth of the rich);
With such a gap between the rich and the poor, egalitarian social relations become impossible (people with a lot of money begin to think of themselves as a better kind of human being and to view the poor with contempt, while the poor feel a mixture of hatred, envy and queasy respect for the rich);
Those with the most money also begin to exercise a disproportional political influence, which they use to help themselves make still more money;
Increase in corruption in all sectors of society, which further increases the power of those with a lot of money and puts those without the money to bribe officials at a severe disadvantage;
Increase in all kinds of economic crimes, with people trying to acquire money illegally when legal means are not available (and sometimes even when they are);
Reduced social benefits and welfare (since such benefits are financed at least in part by taxes, extended benefits generally means reduced profits for the rich; furthermore, any social safety net makes workers less fearful of losing their jobs and consequently less willing to do anything to keep them);
8) Describe the advantages of market economy
Whether the society is developed or underdeveloped, a market economy has several important advantages and several major disadvantages: Among the advantages, we find the following:Competition between different firms leads to increased efficiency, as firms do whatever is necessary—including laying off workers—to lower their costs;Most people work harder (the threat of losing one's job is a great motivator); There is more innovation as firms look for new products to sell and cheaper ways to do their work; Foreign investment is attracted as word gets out about the new opportunities for earning profit;The size, power, and cost of the state bureaucracy is correspondingly reduced as various activities that are usually associated with the public sector are taken over by private enterprises;The forces of production, or at least those involved in making those things people with money at home or abroad want to buy, undergo rapid development;
Many people quickly acquire the technical and social skills and knowledge needed to function in this new economy; A great variety of consumer goods become available for those who have the money to buy them; and Large parts of the society take on a bright, merry and colorful air as everyone busies himself trying to sell something to someone else.
9) Explain the functions of market economy
In a free market economy the price of different products gives information about the demand and supply of the products. The price of products increases when the demand rises as there are more buyers willing to pay a larger amount for the same product. Price also goes up when the number of producers supply a smaller amount of the product as they are in a position to demand a larger amount for the same product.
The demand and supply in a free market is also a function of the price. As the price increases the demand goes down and the supply increases. In a free market economy the price of different products gives information about the demand and supply of the products. The price of products increases when the demand rises as there are more buyers willing to pay a larger amount for the same product. Price also goes up when the number of producers supply a smaller amount of the product as they are in a position to demand a larger amount for the same product. The demand and supply in a free market is also a function of the price. As the price increases the demand goes down and the supply increases. In a free market economy the price of different products gives information about the demand and supply of the products. The price of products increases when the demand rises as there are more buyers willing to pay a larger amount for the same product. Price also goes up when the number of producers supply a smaller amount of the product as they are in a position to demand a larger amount for the same product. The demand and supply in a free market is also a function of the price. As the price increases the demand goes down and the supply increases.
10) Explain stimulating function of market economy and your example
The objective of this article is the disclosure of the essential and functional characteristics of economic systems development stimulation as a function of regulation in the market mechanism of interaction. The importance of theoretical principles of the meaning of regulation as a component of the factors providing economic management is described. The structural elements of formation the organizational and economic stimulation mechanism of economic agent interaction under market conditions are determined. The role characteristics of stimulation from the perspective of institutional concepts and in particular, neo-institutionalism are positioned, with the definition of roles in the process of transaction cost regulation. The author’s opinion concerning the tasks of stimulation under the transience of changes in the market mechanism as the institutional dynamic system of economic exchange, which is both the object of regulation and the subject of the regulation process.
11. What are the main problems of economy and explain each of them?
The economic problem – sometimes called the basic or central economic problem – asserts that an economy's finite resources are insufficient to satisfy all human wants and needs. It assumes that human wants are unlimited, but the means to satisfy human wants are scarce.
Three questions arise from this:
What to produce?
'What and how much will you produce?' This question lies with selecting the type of supply and the quantity of the supply, focusing on efficiency.
e.g. "What should I produce more; laptops or tablets?"
How to produce? Capital goods or consumer goods
'How do you produce this?' This question deals with the assets and procedures used while making the product, also focusing on efficiency.
e.g. "Should I hire more workers, or do I invest in more machinery?"For whom to produce?'To whom and how will you distribute the goods?' and 'For whom will you produce this for?' arises from this question. This question deals with distributing goods that have been produced, focusing on efficiency and equity.
e.g. "Do I give more dividends to stock holders, or do I increase worker wages?"
Economics revolve around these fundamental economic problems.
The problem of allocation of resources arises due to the scarcity of resources, and refers to the question of which wants should be satisfied and which should be left unsatisfied. In other words, what to produce and how much to produce. More production of a good implies more resources required for the production of that good, and resources are scarce. These two facts together mean that, if a society decides to increase production of some good, it has to withdraw some resources from the production of other goods. In other words, more production of a desired commodity can be made possible only by reducing the quantity of resources used in the production of other goods.
Resources are scarce and it is important to use them as efficiently as possible. Thus, it is essential to know if the production and distribution of national product made by an economy is maximally efficient. The production becomes efficient only if the productive resources are utilized in such a way that any reallocation does not produce more of one good without reducing the output of any other good. In other words, efficient distribution means that redistributing goods cannot make anyone better off without making someone else worse off.
12. What are the difference between nature and goods productions?
Natural economy refers to a type of economy in which money is not used in the transfer of resources among people. It is a system of allocating resources through direct bartering, entitlement by law, or sharing out according to traditional custom. In the more complex forms of natural economy, some goods may act as a referent for fair bartering, but generally currency plays only a small role in allocating resources. As a corollary, the majority of goods produced in a system of natural economy are not produced for the purpose of exchanging them, but for direct consumption by the producers
Goods production: reasons and conditions of its formation, main features.
Essence of the goods and its features.The second type of the social economy is goods production. In the goods
production the goods are made to be sold. The economic relations between people
are take place throw market, that’s аhв this sвstem has the following stages of
goods movement: production-exchange-use.
The conditions of the goods production development:
1. Public division of labour ( producers specialised on making one type of
goods )2. Private property (the results of the production are owned by holders)
The goods production was the basis of the market development. There are several
types of market economy. They are:
1. Non developed market economy (the half of the production results are
consumed by the producers and the others are sold on the market).
2. Developed market economy (free market economy). Such kind of market
economy has peculiarities as working force is a good, the producer
engage(ɧɚɧɢɦɚɬɶ) hired worker, and the most production results are sold.
3. Regulated market economy (mixed economy). Here is combined the
private sector and government sector. There are several forms of the
government regulations. They are issue a law, conduct a tax and finance
systems of the country. Several forms of regulated market economy used in
the world such as social oriented (Germany), to support a business (the
USA), to protect a big business interests (Japan, Sweden)
4. Deformation market economy (administered-command economy)
What kind of things are called as goods? There are three answers for this
question: 1. Thing should be the result of labour, 2. It should satisfy the
needs, 3. It should be exchanged on the market.
Goods are the results of production and they are produced to be sold on the
market.
Goods have two features, such as exchange value and consumption value.
The exchange value means the interchange of goods to the other goods (later
for money).
The goods value is defined by the labour, which is used in the production
process. There are two types labour, such as real labour and abstract labour.
The real labour helps to create a product, abstract labour calculate how much
money, forces (physical and mental works) are used in the production of the
goods so it is foundation of defining goods value.
The goods value is defined by social necessary working time(ɨɛщɟɫɬɜɟɧɧɨɟɧɟɨɛɯɨɞɢɦɨɟ ɪɚɛɨчɟɟ ɜɪɟɦя). The social necessary working time is the
time when the most number of goods are produced by using widespread
equipments and with average rate of intensity of labour.
13.Explain exchange value and use value of a product
In political economy and especially Marxian economics, exchange value (German: Tauschwert) refers to one of four major attributes of a commodity, i.e., an item or service produced for, and sold on the market. The other three aspects are use value, economic value, and price.Thus, a commodity has: a value (note the link is to a non-Marxian definition of value)
a use value (or utility)
an exchange value
a price (it could be an actual selling price or an imputed ideal price)
These four concepts have a very long history in human thought, from Aristotle to David Ricardo,[2] becoming ever more clearly distinguished as the development of commercial trade progressed but have largely disappeared as four distinct concepts in modern economics. This entry focuses on Marx's summation of the results of economic thought about exchange-value.
Use value (German: Gebrauchswert) or value in use is the utility of consuming a good—the want-satisfying power of a good or service in classical political economy.[1] In Marx's critique of political economy, any product has a labor-value and a use-value, and if it is traded as a commodity in markets, it additionally has an exchange value, most often expressed as a money-price.[2] Marx acknowledges that commodities being traded also have a general utility, implied by the fact that people want them, but he argues that this by itself tells us nothing about the specific character of the economy in which they are produced and sold.
14)What are the main problem of economy? Explain one of them
The first central problem of an economy is to decide what goods and services are to be produced and in what quantities. This involves allocation of scarce resources in relation to the composition of total output in the economy. Since resources are scarce, the society has to decide about the goods to be produced: wheat, cloth, roads, television, power, buildings, and so on. Once the nature of goods to be produced is decided, then their quantities are to be decided. How many tonnes of wheat, how many televisions, how many million kws of power, how many buildings, etc. Since the resources of the economy are scarce, the problem of the nature of goods and their quantities has to be decided on the basis of priorities or preferences of the society. If the society gives priority to the production of more consumer goods now, it will have less in the future. A higher priority on capital goods implies less consumer goods now and more in the future. But since resources are scarce, if some goods are produced in larger quantities, some other goods will have to be produced in smaller quantities.
Suppose the economy produces capital goods and consumer goods. In deciding the total output of the economy, the society has to choose that combination of capital goods and consumer goods which is in keeping with its resources.
15)Describe the difference between material and non material production?
Material Production, Sphere of
the economic sphere that embraces all the branches of material production in which material goods are created for the satisfaction of certain human needs, both personal and social. The differences between the sphere of material production and the nonproduction sphere are fundamental. A clear distinction between the various branches of the sphere of material production and all other types of activity is essential, for otherwise the volume of the total social product and national income cannot be correctly determined.
National income is generated in the various branches of material production. In the socialist countries, it is calculated on the basis of production data for the various branches of the sphere of material production. Expenditures for the upkeep of the nonproduction sphere are made at the cost of the surplus product created by the labor of workers in the sphere of material production—first, through the state budget (for example, for such activities as education, public health, and administration) and, second, at the cost of the personal incomes of the working people, who in exchange for part of their income receive a special use value—services.
The labor of workers employed in the sphere of material production is productive labor.
Soviet statistics include, within the sphere of material production, industry, agriculture, forestry, construction, transportation and communications (that part that provides services to material production), trade and public catering, material and technical supply and marketing, procurement, and other branches of material production, such as publishing, motion pictures, sound recording, designing, the procurement of scrap metal and other usable waste, hunting, and the harvesting and primary processing of wild plants, fruits, mushrooms, seeds, and grasses.
The makeup of the various branches in the national economy is by no means static. As a result of the development of material production, technical progress, and the social division of labor, new branches of the national economy come into being, and the relationship between the sphere of material production and the nonproduction sphere change.
16) Describe the peculiarities of monopoly
The word monopoly has been derived from the combination of two words i.e., ‘Mono’ and ‘Poly’. Mono refers to a single and poly to control.In this way, monopoly refers to a market situation in which there is only one seller of a commodity. “Monopoly is a market situation in which there is a single seller. There are no close substitutes of the commodity it produces, there are barriers to entry”. –KoutsoyiannisWe may state the features of monopoly as:
1. One Seller and Large Number of Buyers:
The monopolist’s firm is the only firm; it is an industry. But the number of buyers is assumed to be large.
2. No Close Substitutes:
There shall not be any close substitutes for the product sold by the monopolist. The cross elasticity of demand between the product of the monopolist and others must be negligible or zero.
3. Difficulty of Entry of New Firms:
There are either natural or artificial restrictions on the entry of firms into the industry, even when the firm is making abnormal profits.
4. Monopoly is also an Industry:
Under monopoly there is only one firm which constitutes the industry. Difference between firm and industry comes to an end.
5. Price Maker:
Under monopoly, monopolist has full control over the supply of the commodity. But due to large number of buyers, demand of any one buyer constitutes an infinitely small part of the total demand. Therefore, buyers have to pay the price fixed by the monopolist.
17. Describe the peculiarities of oligopoly
1. High ProfitsSince there is such little competition, the companies that are involved in the market have the potential to bring a large amount of profits. The services and goods that are controlled through oligopolies are generally highly needed or wanted by the large majority of the population.
2. Simple ChoicesHaving only a few companies that offer the goods or service that you are looking for makes it easy to compare between them and choose the best option for you. In other markets it can be difficult to thoroughly look at all of the competitors to compare pricing and services offered.
3. Competitive PricesBeing able to easily compare prices forces these companies to keep their prices in competition with the other companies involved in the market. This is a great benefit for the consumers because prices continually go lower as other companies lower there prices.
4. Better Information and GoodsRight along with price competition, product competition plays a huge part in a the oligopoly market structure. Each company scrambles to come out with latest and greatest thing in order to sway consumers to go with their company over a different one. This also goes with the advertising and amount of information and support that they provide their customers.
18. Describe the peculiarities of monopolistic competition
In case of monopolistic competition buyers get plenty of options due to differentiated products as every product has some additional feature which is not the case with perfect competition where sellers sell homogeneous products or in monopoly where sellers do not bother to add new features to product as there is no competition.
Another advantage of monopolistic competition is that since different companies are selling differentiated products they tend to advertise about it through various channels of communication which make customers more aware about the various products and their features which in turn helps the customers in making informed decision by comparing the features of various products.
It helps in innovation because the only thing which will help the company in surviving in case of monopolistic competition is to constantly add new features to product and hence in a way one can say that monopolistic competition forces the companies to invest in research and development so that the company can produce better quality product at cheaper rates than their competitor.
19. What is labour productivity?
Labour productivity is concerned with the amount (volume) of output that is obtained from each employee.  It is a key measure of business efficiency, particularly for firms in which the production process is labour-intensive.
Why does labour productivity matter?
• Labour costs are usually a significant part of total costs• Business efficiency and profitability closely linked to productive use of labour• In order to remain competitive, a business needs to keep its unit costs down
Achieving high (or higher) labour productivity is not a simple task.  Several factors influence how productive the workforce is: e.g.
• Extent and quality of fixed assets (e.g. equipment, IT systems)• Skills, ability and motivation of the workforce• Methods of production organisation• External factors (e.g. reliability of suppliers)
20) What are the ways of achieving the economic efficiency of the production?
Productive efficiency is concerned with producing goods and services with the optimal combination of inputs to produce maximum output for the minimum cost.
To be productively efficient means the economy must be producing on its production possibility frontier. (i.e. it is impossible to produce more of one good without producing less of another).

Points A and B are productively efficient.
Point D is inefficient because you could produce more goods or services with no opportunity cost
Point C is currently impossible.
Economic efficiency is, roughly speaking, a situation in which nothing can be improved without something else being hurt. Depending on the context, it is usually one of the following two related concepts:
Allocative or Pareto efficiency: any changes made to assist one person would harm another.
Productive efficiency: no additional output can be obtained without increasing the amount of inputs, and production proceeds at the lowest possible average total cost.
21) Describe the difference between goods and services. Give your example.
Goods are items that are tangible, such as pens, salt, shoes, hats and folders
Services are activities provided by other people, such as doctors, lawn care workers, dentists, barbers, waiters, or online servers. According to economic theory, consumption of goods and services is assumed to provide utility (satisfaction) to the consumer or end-user, although businesses also consume goods and services in the course of producing other goods and services.
HISTORY
Physiocratic economists categorized production into productive labour and unproductive labour. Adam Smith expanded this thought by arguing that any economic activities directly related on material products (goods) were productive, and those activities which involved non-material production (services) were unproductive. This emphasis on material production was adapted by David Ricardo, Thomas Robert Malthus and John Stuart Mill, and influenced later Marxian economics. Other, mainly Italian, 18th century economists maintained that all desired goods and services were productive.[1]22) There are 5 workers on an enterprise. Each of them produces 300 goods. How many goods are produced on the enterprise?
5 x 300 = 1500 is maximum of the enterprise
23)Explain the difference between main and variable capital
Constant capital (c), is a concept created by Karl Marx and used in Marxian political economy. It refers to one of the forms of capital invested in production, which contrasts with variable capital (v). The distinction between constant and variable refers to an aspect of the economic role of factors of production in creating a new value.Constant capital includes the outlay of money on (1) fixed assets, i.e. plant, machinery, landand buildings, (2) raw materials and ancillary operating expenses (including external services purchased), and (3) certain faux frais of production (incidental expenses). Variable capital by contrast refers to the capital outlay on labour costs insofar as they represent workers' earnings.The concept of constant vs. variable capital contrasts with that of fixed vs. circulating capital (used not only by Marx but by David Ricardo and other classical economists). The latter distinction corresponds to the very common distinction in economics, between fixed inputs (and costs) and variable inputs (and costs). It distinguishes inputs from the point of view of their user (the capitalist), in terms of the degree of flexibility that the user has in using them.On the other hand, constant capital refers to the non-human inputs into production, while variable capital refers to the human input (the hiring of labor power to do labor).24)Explain the formula of capital circulationCirculation of Capital
the movement of automatically growing value in production and distribution, during which the capital assumes three functional forms (monetary, productive, and commodity) and passes through three stages. At the end of the process, the capital returns to its initial form.The first stage of the movement of industrial capital is the conversion of monetary capital (M) into productive capital, that is, the purchase of commodities (C); these commodities are composed of the means of production (MP) and labor (L). This stage is expressed by the formulaCapital passes through the first stage in the sphere of circulation: the purchase of a specific commodity, labor, converts money into capital that is returned to its owner in an amount exceeding the initial capital value by the magnitude of the surplus value. Thus, monetary capital expresses the relations between two classes in bourgeois society: the workers, who are deprived of the means of production and forced to sell their labor, and the capitalists, the owners of the means of production.The condition for the conversion of money into capital is the existence of a specific commodity, labor, in the market. In the first stage of the circulation of capital, no growth in value occurs. The second stage of the circulation of capital, the conversion of productive capital into commodity capital, takes place in the production sphere and is expressed by the formula … P …, where P stands for the process of production. This stage is characterized by growth in capital value. The function of capital in this form is to produce value and surplus value. The means of production become the material carrier of constant capital, whereas labor is the carrier of variable capital. The value of the commodity newly created in the production process already includes surplus value. The third stage is the conversion of commodity capital into monetary capital. It is expressed by the formula C’ — M’ and takes place in the distribution sphere. The function of commodity capital is the process of selling, that is, conversion of the produced value and surplus value from the commodity form into the monetary form. With the conversion of commodity capital into the monetary form, the circulation of capital is completed; capital begins a new circulation in its initial form, monetary capital.25)Explain the meaning of investment from economic and finance point of viewIn a broad sense, all investments are alike: You spend money or commit resources now in the hope of earning a return later. Go just a bit deeper, however, and you see significant differences in the way investments are expected to pay off. Economists draw a key distinction between economic investments, which generate wealth through economic activity, and financial investments, which generate wealth primarily through finance -- the manipulation of money.Economic InvestmentsManagement professors Krishnamurthy Nagarajan and G. Jayabal define economic investment as investment that increases the "capital stock" of society -- in other words, it increases production capacity. Economic investment allows companies to provide more or better products and services. New buildings, equipment and vehicles obviously represent economic investment, but so can spending on education and health care. Those things improve "human capital," making workers more productive.Financial InvestmentsA share of stock is a quintessential example of a financial investment. If you're like most investors, when you buy a share of stock, you're not planning to "do something" with it. You're not going to use it to increase production of anything or improve the quality of any products. You buy it with the hope that it will increase in value so when you sell it, you'll make money. In the meantime, you'd like to collect dividends -- regular payments from the company that issued the stock. Nothing new is directly created from a financial investment; rather, as Michael Douglas Gilbert writes in "America in the Economic World," a financial investment simply represents an asset changing hands. Other examples can include bonds; gold and other precious metals, when purchased as a store of value rather than for industrial use; money earning interest in a savings account; and real estate that you don't develop or improve.
26.Explain the difference between direct investment and portfolio investment.
One of the most important distinctions between portfolio and direct investment to have emerged from this young era of globalization is that portfolio investment can be much more volatile. Changes in the investment conditions in a country or region can lead to dramatic swings in portfolio investment. For a country on the rise, FPI can bring about rapid development, helping an emerging economy move quickly to take advantage of economic opportunity, creating many new jobs and significant wealth. However, when a country’s economic situation takes a downturn¯sometimes just by failing to meet the expectations of international investors¯the large flow of money into a country can turn into a stampede away from it.
By contrast, because FDI implies a controlling stake in a business, and often connotes ownership of physical assets such as equipment, buildings and real estate, FDI is more difficult to pull out or sell off. Consequently, direct investors may be more committed to managing their international investments, and less likely to pull out at the first sign of trouble.
This volatility has effects beyond the specific industries in which foreign investments have been made. Because capital flows can also affect the exchange rate of a nation’s currency, a quick withdrawal of investment can lead to rapid decline in the purchasing power of a currency. Such quick withdrawals can produce widespread economic crises.
This was partly the case in the Asian economic crisis that began in 1997. Although the economic turmoil began as a result of some broader shifts in international economic policy and some serious problems within the banking and financial sectors of the affected East Asian nations, the capital flight that ensued—some compared it to the great financial panics which took place in the United States during the 19th century— significantly exacerbated the crisis. 
27.Analyse the factors that influence the investment levels
There are no hard and fast rules that determine patterns and levels of investment made by either institutional investors or individuals. However, there are a few common factors and boundaries that will at least influence investors’ decisions on how much to invest. Decisions on how these factors affect investment strategies vary from investor to investor, but in general they must be considered at some level.
Available Resources
The first and most important factor has to do with the available assets of the person or institution making the investment. Obviously, investment will be bound by how much money is available, but these considerations are a bit more nuanced. For example, a company with a good deal of liquid assets wouldn't necessarily invest even a sizable chunk of them if they had a lot of other commitments to meet, such as payroll and debt. By the same token, individual investors would be ill-advised to invest money that they normally spend on bills. It all depends on the priority that the investment takes, how it interacts with other monetary priorities and what the expected result of the investment will be.
Market Prediction
The next factor that will help to determine the level of investment is predictions on results of the investment based on the available information. Of course, no investment is foolproof enough to put all of your money into, and by the same token, even the riskiest investment might be worth throwing a little bit of extra cash at. Even though there is no guaranteed way to predict the market, awareness about possible outcomes will determine what a reasonable level of investment is. For example, it would be much more tolerable to put a large sum of money into high-rated government bonds than into some unknown start-up company. Different levels of investment are appropriate to each situation.
Type of Assets
The type of asset being invested in is another important factor depending on the individual or organization making the investment. For example, some types of assets, such as financial derivatives, can be highly risky and don't really have any value unless they are cashed in at the right time. On the other hand, certain investments can be much more tangible and can go beyond the simple goal of earning a profit. A good example is real estate. Real estate is clearly not a foolproof investment. However, as a tangible asset in a growing marketplace, real estate is inherently valuable, and can be particularly so if it can help investors expand their operations or accomplish goals.
Tolerable Risk
The bottom line for any investment, to determine whether it is acceptable or not, is assessing the level of tolerable risk. Common sense dictates that no individual or institution should ever invest more than they are willing to lose, since, unlikely as it may be, losing the whole investment is always a possibility. Risk should be taken very seriously and assessed painstakingly. In some situations, there is a risk factor that goes beyond the loss of the initial investment. For example, certain investments might require the investor to spend money on maintenance and upkeep, or might potentially embroil the investor in legal trouble. These factors should always be considered.
28.Explain the difference between fixed and variable costs?
In economics, variable cost and fixed cost are the two main costs a company has when producing goods and services. A company's total cost is composed of its total fixed costs and its total variable costs. Variable costs vary with the amount produced. Fixed costs remain the same, no matter how much output a company produces.
A variable cost is a company's cost that is associated with the amount of goods or services it produces. A company's variable cost increases and decreases with the production volume. For example, suppose company ABC produces ceramic mugs for a cost of $2 a mug. If the company produces 500 units, its variable cost will be $1,000. However, if the company does not produce any units, it will not have any variable cost for producing the mugs.
On the other hand, a fixed cost does not vary with the volume of production. A fixed cost does not change with the amount of goods or services a company produces. It remains the same even if no goods or services are produced. Using the same example above, suppose company ABC has a fixed cost of $10,000 per month for the machine it uses to produce mugs. If the company does not produce any mugs for the month, it would still have to pay $10,000 for the cost of renting the machine. On the other hand, if it produces 1 million mugs, its fixed cost remains the same. The variable costs change from zero to $2 million in this example.
29.Explain the formula of good's pricing 30.Explain the link between average cost and goods price.
TC is whole sum of money that is used in producing goods/services. Fixed costs (FC) are the costs that do not vary with output levels. Variable costs (VC) are costs that change as output changes.
TC=FC+VC
AC- is amount of money that is used in producing one unit of product
AC=TC: Q e.g. TC=100 000 tenge, number of produced goods (Q)=5 000.
AC=100 000: 5000=20
AC is foundation of price formation
AC helps to define price of a product.
P= AC+ addition (үстеме)
P= 20 tenge+5 tenge=25 tengeAdditions are profit sources. A profit maximizing firm must produce its output at minimum cost.
31.Explain the difference between nominal and real wages.
Wage is price of labour . Labour is a special commodity.
Wage types:
nominal wage
real wage.
Nominal wage is the whole money which you get during certain period of time according to the contract or agreement.
Real wage is nominal wage after paying taxes.
Real wage=nominal wage-taxes
Changes in demand for and supply of labour
Labour hours
Trade unions activities
Inflation rate
32. Explain the difference between wage by time and wage by job.
Time Wage System:
This is the oldest method of wage payment. “Time” is made a basis for determining wages of worker. Under this system, the wages are paid according to the time spent by workers irrespective of his output of work done. The wage rates are fixed for an hour, a day, week, a month or even a year (seldom used). There are no hard and fast rules for fixing rates of wages. These may be decided according to the level of the past higher positions may be paid higher rates and vice- versa.
Advantages:
1. Simplicity:
The method of wage payments is very simple. The workers will not find any difficulty in calculating the wages. The time spent by a person multiplied by the rate will determine his wages.
2. Security:
Workers are guaranteed minimum wages for the time spent by them. There is no link between wages and output, wages are paid irrespective of output. They are not supposed to complete particular task for getting their wages. They are sure to set certain wages at the end of a specified period of time spent in working.
3. Batter Quality of Products:
When workers are assured of wages on time basis, they will improve the quality of products. If wages are related to output, then workers may think of increasing production without bothering about quality of goods.
In this method, workers will concentrate on producing better quality of goods. In certain situations, only time wage system will be suitable. If some artistic nature products are produced, then this method will be most suitable.
4. Support of Unions:
This method is acceptable to trade unions because it does not distinguish between workers on the basis of their performance. Any method which gives different wage rates or wages based on output is generally opposed by trade unions.
So as we can understand wage by job is opposite for wage by time. Basically you get your wage on pointed date. Your output mostly doesn’t depend on how long you work. It matters on which career ladder you are. The main difference is this. Also your working hour is pointed out too. It might be from 8 a.m. to 6 p.m and etc. you can be promoted and with this way you can get more output. But it takes you time. You will sign a contract that obligates you with some responsibilities. The thing is company that is providing you with job have obligations towards you too. So you have also pluses of this kind of job.
33. How to calculate real wage? What are the factors that influence the level of real wage?
Your real wage, on the other hand, takes inflation into account. An increase in real wages occurs when wages rise more quickly than inflation. On the other hand, if real wages rise more slowly than inflation, then your real wages - your purchasing power - has declined. It's important for you to know your real wage to determine if an increase in your wage is actually increasing your wealth, simply keeping pace with rising costs, or worse, falling behind rising prices.
Real wage=nominal-taxes
1. Ability to Pay:
The ability of an industry to pay will influence wage rate to be paid, if the concern is running into losses, then it may not be able to pay higher wage rates. A profitable enterprise may pay more to attract good workers. During the period of prosperity, workers are paid higher wages because management wants to share the profits with labour.
2. Demand and Supply:
The labour market conditions or demand and supply forces to operate at the national and local levels and determine the wage rates. When the demand for a particular type of skilled labour is more and supply is less than the wages will be more. One the other hand, if supply is more demand on the other hand, is less then persons will be available at lower wage rates also.
According to Mescon,” the supply and demand compensation criterion is very closely related to the prevailing pay comparable wage and on-going wage concepts since, in essence to all these remuneration standards are determined by immediate market forces and factors.
3. Prevailing Market Rates:
No enterprise can ignore prevailing wage rates. The wage rates paid in the industry or other concerns at the same place will form a base for fixing wage rates. If a unit or concern pays low rates then workers leave their jobs whenever they get a job somewhere else. It will not be possible to retain good workers for long periods.
4. Cost of Living:
In many industries wages are linked to enterprise cost of living which ensures a fair wages to workers. The wage rates are directly influenced by cost of living of a place. The workers will accept a wage which may ensure them a minimum standard of living.
Wages will also be adjusted according to price index number. The increase in price index will erode the purchasing power of workers and they will demand higher wages. When the prices are stable, then frequent wage increases may not be required
5. Bargaining of Trade Unions:
The wage rates are also influenced by the bargaining power of trade unions. Stronger the trade union, higher will be the wage rates. The strength of a trade union is judged by its membership, financial position and type of leadership.
6. Productivity:
Productivity is the contribution of the workers in order to increase output. It also measures the contribution of other factors of production like machines, materials, and management .Wage increase is sometimes associated with increase in productivity. Workers may also be offered additional bonus, etc., if productivity increases beyond a certain level. It is common practice to issue productivity bonus in industrial units.
7. Government Regulations:
To improve the working conditions of workers, government may pass a legislation for fixing minimum wages of workers. This may ensure them, a minimum level of living. In under developed countries bargaining power of labour is weak and employers try to exploit workers by paying them low wages. In India, Minimum Wages Act, 1948 was passed empower government to fix minimum wages of workers. Similarly, many other important legislation passed by government help to improve the wage structure.
8. Cost of Training:
In determining, the wages of the workers, in different occupations, allowances must be made for all the exercises incurred on training and time devoted for it.
34. List the factors that influence the level of wage.
1. Ability to Pay:
The ability of an industry to pay will influence wage rate to be paid, if the concern is running into losses, then it may not be able to pay higher wage rates. A profitable enterprise may pay more to attract good workers. During the period of prosperity, workers are paid higher wages because management wants to share the profits with labour.
2. Demand and Supply:
The labour market conditions or demand and supply forces to operate at the national and local levels and determine the wage rates. When the demand for a particular type of skilled labour is more and supply is less than the wages will be more. One the other hand, if supply is more demand on the other hand, is less then persons will be available at lower wage rates also.
According to Mescon,” the supply and demand compensation criterion is very closely related to the prevailing pay comparable wage and on-going wage concepts since, in essence to all these remuneration standards are determined by immediate market forces and factors.
3. Prevailing Market Rates:
No enterprise can ignore prevailing wage rates. The wage rates paid in the industry or other concerns at the same place will form a base for fixing wage rates. If a unit or concern pays low rates then workers leave their jobs whenever they get a job somewhere else. It will not be possible to retain good workers for long periods.
4. Cost of Living:
In many industries wages are linked to enterprise cost of living which ensures a fair wages to workers. The wage rates are directly influenced by cost of living of a place. The workers will accept a wage which may ensure them a minimum standard of living.
Wages will also be adjusted according to price index number. The increase in price index will erode the purchasing power of workers and they will demand higher wages. When the prices are stable, then frequent wage increases may not be required
5. Bargaining of Trade Unions:
The wage rates are also influenced by the bargaining power of trade unions. Stronger the trade union, higher will be the wage rates. The strength of a trade union is judged by its membership, financial position and type of leadership.
6. Productivity:
Productivity is the contribution of the workers in order to increase output. It also measures the contribution of other factors of production like machines, materials, and management .Wage increase is sometimes associated with increase in productivity. Workers may also be offered additional bonus, etc., if productivity increases beyond a certain level. It is common practice to issue productivity bonus in industrial units.
7. Government Regulations:
To improve the working conditions of workers, government may pass a legislation for fixing minimum wages of workers. This may ensure them, a minimum level of living. In under developed countries bargaining power of labour is weak and employers try to exploit workers by paying them low wages. In India, Minimum Wages Act, 1948 was passed empower government to fix minimum wages of workers. Similarly, many other important legislation passed by government help to improve the wage structure.
8. Cost of Training:
In determining, the wages of the workers, in different occupations, allowances must be made for all the exercises incurred on training and time devoted for it.
35Explian the difference between nominal and real interest rates.
A nominal interest rate is the interest rate that does not take inflation into account. It is the interest rate that is quoted on bonds and loans. The nominal interest rate is a simple concept to understand; for example, if you borrow $100 at a 6% interest rate, you can expect to pay $6 in interest without taking inflation into account. The disadvantage of using the nominal interest rate is that it does not adjust for the inflation rate.
A real interest rate is the interest rate that does take inflation into account. As opposed to the nominal interest rate, the real interest rate adjusts for the inflation and gives the real rate of a bond or a loan. To calculate the real interest rate, you first need the nominal interest rate. The calculation used to find the real interest rate is the nominal interest rate minus the expected or actual inflation rate. This rate gives the real rate that lenders or investors are receiving after inflation is factored in; it gives them a better idea of the rate at which their purchasing power is increasing or decreasing.
For example, suppose a bank loans a person $200,000 to purchase a house at a 3% rate. The 3% rate is the nominal interest rate, not taking factoring for inflation. Assume the inflation rate is 2%. The real interest rate the borrower is paying is 1%; the real interest rate the bank is receiving is 1%. The purchasing power of the bank only increases by 1%.
36How to calculate real interest rate? What is the economic meaning of the real inerest rate?
What is a 'Real Interest Rate'
A real interest rate is an interest rate that has been adjusted to remove the effects of inflation to reflect the real cost of funds to the borrower and the real yield to the lender or to an investor. The real interest rate of an investment is calculated as the amount by which the nominal interest rate is higher than the inflation rate:
Real Interest Rate = Nominal Interest Rate - Inflation (Expected or Actual)
BREAKING DOWN 'Real Interest Rate'
While the nominal interest rate is the interest rate officially assigned to the product or investment, the real interest rate is a reflection of the change in purchasing power derived from an investment based on shifts in the rate of inflation. The nominal interest rate is generally the one advertised by the institution backing the loan or investment. By adjusting the nominal interest rate to compensate for inflation, you are identifying the shift in purchasing power of a given level of capital constant over time.
Expected Rate of Inflation
The anticipated rate of inflation is reported by the U.S. Federal Reserve to Congress regularly and includes estimates for a minimum three-year period. Most anticipatory interest rates are reported as ranges instead of single point estimates. As the true rate of inflation may not be known until the time period corresponding with the holding time of the investment has passed, the associated real interest rates must be considered predictive, or anticipatory, in nature when the rates apply to time periods that have yet to pass.
Effect of Inflation Rates on the Purchasing Power of Investment Gains
In cases where inflation is positive, the real interest rate is lower than the advertised nominal interest rate. For example, if funds used to purchase a certificate of deposit (CD) are set to earn 4% in interest per year and the rate of inflation for the same time period is 3% per year, the real interest rate received on the investment is 4% - 3% = 1%. The real value of the funds deposited in the CD will only increase by 1% per year, when purchasing power is taken into consideration.
If those funds were instead placed in a savings account with an interest rate of 1%, and the rate of inflation remained at 3%, the real value, or purchasing power, of the funds in savings will have actually decreased, as the real interest rate would be -2%, after accounting for inflation. 
Nominal means very small or far below the real value or cost, and in finance, this adjective modifies words such as fee, interest rate and gross domestic product (GDP). A nominal fee simply refers to a fee that is below the cost of the service provided or presumably easy for a consumer to afford. When describing concepts such as interest rate or GDP, nominal refers to their unadjusted rate, value or current pricewithout taking elements such as inflation, seasonality, loan fees, interest compounding or other factors into account.
BREAKING DOWN 'Nominal'
In contrast to nominal, real expresses the value of something after making adjustments for various factors to create a more accurate measure. For example, the difference between nominal and real GDP is that nominal GDP measures the economic output of a country using current market prices, and real GDP takes inflation into account to create a more accurate measure.
Nominal vs. Real Rate of Return
The rate of return is the amount an investor earns on an investment. While the nominal rate of return reflects the investor's earnings as a percentage of his initial investment, the real rate takes inflation into account. As a result, the real rate gives a more accurate assessment of the actual buying power of the investor's earnings.
37What is rental rate? What is the difference between differential rate I anad II?
The upcoming discussion will help you to differentiate between differential rent and scarcity rent.
1. Rent as stated by Ricardo is a differential surplus in the sense that a more fertile or super marginal land earns a surplus of revenue over its costs.
It is a surplus over the earnings of marginal land, since marginal land earns a revenue just to cover its costs. So, it earns no rent, because rent is a surplus over the cost. But modern economists are of this opinion that rent is a differential surplus in the sense of a difference between the actual earnings and transfer earnings of a factor of production.
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2. Next, it has been said that any factor which earns such a differential surplus i.e., rent, so long as its supply is less than perfectly elastic. But Ricardo has said that a more fertile land earned a differential rent because of its greater productivity. The concept of scarcity rent, however implies that rent of land arises on account of scarcity. But Ricardo did not consider the thought of scarcity.
3. Modern economists, considers that since the supply of land is fixed, irrespective of its fertility, there is a scarcity of land. Therefore, rent tends to rise with the increase in demand.In short, it can be said that scarcity rent is demand determined.
Ricardo, on the other-hand, attributes rent only to land as a factor of production. Modern economists, however, take a broader view and regard that rent can be earned by any factor of production (and not confined to land alone), so long as its supply is less than perfectly elastic i.e., scarcity of the factor remains.
4. Land earns differential rent, or scarcity rent for ever, as the differences in the fertility or scarcity are permanent, while the other factors can only be temporary as their scarcity is only temporary.
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Distinction between the Ricardian Theory of Rent and the Modern Theory of Rent:
Important difference between the Ricardian Theory of Rent and the Modern Theory of Rent are as follows:
1. Ricardian theory of rent is the return for the original and indestructible powers of the soil. But the modern theory of rent is surplus earned by any factor of production not necessarily land, over and above the minimum earnings necessary to induce it to do its work.
2. In Ricardian theory, rent is due to differences in fertility and situation. While in modern theory it is due to scarcity or specificity.
3. In Ricardian theory, Rent is a surplus above the marginal or no rent-land. While in modern theory it is the difference of actual earnings and transfer earnings.
4. Ricardo says—”Rent does not enter into Price” while modern economists are of this opinion that rent enter into price.”
5. In Ricardian theory, production of land is the important basis of determination of rent while in modern theory power of demand and supply plays an important role.
6. Ricardo theory is based on various assumptions while modern theory is not based on any assumptions.
38. Explain difference between income and profit.
Some people intend for the terms income and profit to have the same meaning. For example, the income statement was commonly referred to as the profit and loss (P&L) statement. When a company is profitable, we mean that the company has a positive net income.
 Income can be described as the total inflow of revenue during a period of time. It generally includes the wages, interests, rent and profits.
Profit can be defined as the surplus that is remained after the deduction of total costs from the total revenues.
Income and profit are very important terms for the economic activities and also find important status in the dictionary of business.
Income and profit seems to be connected to each other. However, some confusion may occur regarding the difference between the two as they both are related to each other in many senses. Thus, it is important to understand both these terms and then find the differences between the two.
39. List the factors that influence the level of profit.
1. Degree of competition
The degree of competition a firm faces is important. If a firm has monopoly power then it has little competition, therefore demand will be more inelastic. This enables the firm to increase profits by increasing the price. However, government regulation may prevent monopolies abusing their power.
2. Market competition
If the market is very competitive then profit will be low. This is because consumers would only buy from the cheapest firms.
3. Market contestability
Market contestability is how easy it is for new firms to enter the market. If entry is easy then other firms will always face threat of competition, even if it is just “hit and run competition”. This will reduce profits.
4. Strength of Demand
Demand will be high if the product is fashionable. E.g. mobile phone companies. 5. State of the Economy
If there is economic growth then there will be increased demand for most products especially luxury products.
6. Successful Advertising
A successful advertising campaign can increase demand and make the product inelastic.
7. Substitutes
If there are many substitutes or substitutes are expensive then demand for the product will be higher. Similarly complementary goods will be important for the profits of a company.
8. Degree of Costs
An increase in costs will decrease profits, this could include labour costs, raw material costs and cost of rent.
40. Explain the difference between microeconomics and macroeconomics. List the main indicators of macroeconomics.
Macroeconomics and microeconomics, and their wide array of underlying concepts, have been the subject of a great deal of writings. The field of study is vast; so here is a brief summary of what each covers. Microeconomics is generally the study of individuals and business decisions, while  macroeconomics looks at higher up country and government decisions.
Microeconomics. Microeconomics is the study of decisions that people and businesses make regarding the allocation of resources and prices of goods and services. This means also taking into account taxes and regulations created by governments. Microeconomics focuses on supply and demand and other forces that determine the price levels seen in the economy. For example, microeconomics would look at how a specific company could maximize its production and capacity, so that it could lower prices and better compete in its industry. Microeconomics' rules flow from a set of compatible laws and theorems, rather than beginning with empirical study.
Macroeconomics. Macroeconomics, on the other hand, is the field of economics that studies the behavior of the economy as a whole, not just of specific companies, but entire industries and economies. It looks at economy-wide phenomena, such as Gross Domestic Product (GDP) and how it is affected by changes in unemployment, national income, rate of growth, and price levels. For example, macroeconomics would look at how an increase/decrease in net exports would affect a nation's capital account or how GDP would be affected by the unemployment rate.
41. List the main indicators of the national account system.
The System of National Accounts (SNA) is the internationally agreed standard set of recommendations on how to compile measures of economic activity. The SNA describes a coherent, consistent and integrated set of macroeconomic accounts in the context of a set of internationally agreed concepts, definitions, classifications and accounting rules.
42. Explain the difference between microeceonomics and macroeconomics. List the main problems of macroeconomics.
Microeconomics concerns itself with the small details that make a difference when evaluating individual companies. This includes production costs and market prices for goods and services. A lot of microeconomic information can be gleaned from the financial statements.
Macroeconomics focuses on aggregates and econometric correlations. Investors of mutual funds or interest rate-sensitive securities should keep an eye toward monetary and fiscal policy. Outside of a few meaningful and measurable impacts, macroeconomics doesn't offer much for specific investments.
Micro economics is concerned with:
Supply and demand in individual markets
Individual consumer behaviour. e.g. Consumer choice theoryIndividual labour markets – e.g. demand for labour, wage determinationExternalities arising from production and consumption. e.g. ExternalitiesMacro economics is concerned withMonetary / fiscal policy. e.g. what effect does interest rates have on the whole economy?
Reasons for inflation and unemployment.
Economic growthInternational trade and globalisationReasons for differences in living standards and economic growth between countries.
Government borrowingMain problems of macroeconomics: Unemployment, Inflation, The Business Cycle, Interest Rates, Economic Growth, Stagflation.
43. What are the problems that study macroeconomics?
Unemployment : Unemployment is a problem because the factors that are engaged in production is not using the employment potential to the maximum. Unemployment means the economy is not attaining the macroeconomic goal of full employment. Due to lower production and problem of scarcity in the economy, unemployed recieved less income, resulting in gradual reduction in standard of living. Unemployment rate tells us the number bof persons who b could not be employed. If the GDP is higher, output will be higher. Hence more labour is required. Unemployment will be lower. General better the economy unemployment will be lower and vice versa.
Inflation : General raise in prices of goods and services over a vtime, is inflation. The inflation can be from month to month or b year to year. With the consistent and persistent increase in nprices, economy do not attain stability. Inflation leads vto average increase. Some goods or services increase more than average, some below average or some average. This will turn out to be a problem because the inflation reduces the purchasing power of money, which in turn reduces financial wealth lowering the standard of living. Also greater uncertainty surrounds long term planning and haphazard distribution of wealth
Business Cycle : Unemployment and inflation tend to raise at different phases of business cycle. Some time unemployment is more of a problem and inflation less of a problem and vice versa. To understand this we shall study it in two different primary phases of business cycle. Contraction phase : IN this phase there is general decline in production because there is decline in demand. Because of this there is contractual of employment, since less goods are produced. In this phase employment is a problem. Since demand is less inflation will not be a problem. Expansion Phase: During this phase production increase. More employment created. Because demand is more than supply, prices tend to increase, leading vto inflation. In this phase inflation is the problem. The robust production demands higher employment and employment will not be a problem.
Interest rates : Interest rates affect businesses. Interest are the charges levied by banks on the loan. If the interest rate increase, it directly affect the business. Higher interest will result in higher expenses and businessmen will not be enthused to invest. Indirectly consumers are also affected. As a result individuals have to pay higher for borrowing money resulting in blower demand for large products.
Stagnant growth : Stagnant growth is a situation where in supply of products is not increasing or it is decreasing below the bench mark. For a fair growth in economy increase in production is needed. The production should keep pace with the aspirations of the people to raise the standard of living. But in stagnant economy production do not meet the demand of population and the economy stagnate or decelerates. Macroeconomic goals are not attained. The factors affecting stagnant growth are quantity and quality. This is affected by the quantities of production which are labour, capital, land and entrepreneurs. If few are lazy and do not work, the quantity of labour is affected. Government regulations and high tax dissuade businessman from investment resulting in lower creation of jobs and lower production, because of lower quantity of capital.
44.Explain the essence and reasons of unemployment
People can be unemployed for many reasons:
One reason for unemployment is voluntary. Some of the unemployed have saved enough money so they can quit unfulfilling jobs. They have the luxury to search until they find just the right opportunity.
The second cause is when workers must move for unrelated reasons. They are unemployed until they find a position in the new town.
The third reason is when new workers enter the workforce. That includes students who graduate from high school, college or any higher degree program. They look for a job that fits their new skills and qualifications.
That's a primary reason for youth unemployment.
The fourth reason is when job seekers re-enter the workforce. These are people who went through a period in their lives when they stopped looking for work. They could have stopped working to raise children, get married or care for elderly relatives.
These four situations are an unavoidable part of the job search process.
The good news is that frictional unemployment is usually voluntary and short-term.
45.Nominal intrest rate is 10 % , real intrest rate is 6 %. What is inflation rate?
10%-6% = 4%
46. Nominal intrest rate is 10 % , inflation rate 4% What is real intrest rate?
10%-4%=6%
47. Explain social and economic concequences of unemployment
Unemployment - one of the most urgent problems of any society based on free market principles.
But mostly, this phenomenon affects the economy in transition, which are characterized by the formation of labor markets and labor.
The State, which formally guarantees its citizens the right to work, to overcome the serious economic and social consequences of unemployment.Social and economic consequences of unemployment are on a par with the problems of poverty and instability in society.For the majority of both developed and developing countries, this phenomenon becomes a problem, which poses a potential danger of the growth of social tension.Once the unemployment rate reaches a critical value, the company is in an unstable state, which threatens social upheavals.
 Unemployment and its social consequences
1. Negative:
aggravated criminogenic situation;
society intensified social tensions;
growing number of mentally and physically ill;
growing social stratification of society, increasing the gap between rich and poor;
labor activity at times less than the years of social and economic stability.
2. Positive:
people start more than usual to keep his job, the social value of jobs increases significantly;
with decreasing employment released more free time, which people often spend on the acquisition of new specialty, improving their intellectual level;
appears legitimate opportunity to find a new job;
social significance and value of the work itself is greatly increased.
II.Unemployment and its economic consequences
1. Negative:
learning process, learning in the school curriculum and higher loses its former significance (why to study if there is no place to work anyway!);
production cuts may take a very three-dimensional form;
increase in costs for the victims of unemployment;
experts lose their skills, knowledge remains unclaimed;
standard of living has been steadily going downhill;
the state treasury tax revenue significantly reduced;
underperforms the national income.
2. Positive:
not involved in the production process are the citizens of some sort of reserve labor force in the changing economy;
competition between workers an incentive to develop their own talents, skills, growth of the level of skill;
retraining;
stimulate productivity, its intensity.
48. If Labour force is 10 000 000 people. Unemployment rate is 10 %. What is number of unemployed people?
At first you should find out 1%
1% is 1/100 (жүзден бір деген сөз)
10 000 000 * 1/100 ( 10 миллион көбейту жүзден бір)= 100 000
Then you can find out 10%
100 000 * 10= 1 000 000
The answer is 1 000 000 unemployed people
49. If Labour force is 700 000 people. Unemployment rate is 10 %. What is number of unemployed people?
At first you should find out 1%
1% is 1/100 (жүзден бір деген сөз)
700 000 * 1/100 ( 700 мың көбейту жүзден бір) = 7 000
Then you can find out 10%
7 000 * 10=70 000
The answer is 70 000 unemployed people
50. Labour force is 700 000 people. Unemployed people is 70 000 person. What is unemployment rate?
Formula:
Unemployment rate
= totalnumberofunemploymentpersonstotalnumberofpersonsinthelaborforcex100% (UR=ULF x 100%) 70,000700,000x100%=0,1
51. Explain social and economic consequences of inflation.
Socio-economic effects of inflation are very deep.Around the world, perhaps, can not find a country that would not "ill" this serious disease.
Thus, the socio-economic effects of inflation are as follows.
1. It destroys the usual economic ties.The economy intensified confusion and imbalances. Undermines investment process, since the uncontrollable price increase profit, is the goal of production, can be obtained without its extension.
2. Socio-economic effects of inflation and the impact on the functioning of the monetary system. Banknotes impaired, people lose the incentive to their accumulation. And entrepreneurs, and ordinary citizens prefer to invest in real estate and the acquisition of various goods. Credit also has to break the contract, as in the new conditions of their unprofitable to give a little interest in the long term. In this case, the debt will be refunded the money that already have time to depreciate.
3. Also, inflation does not contribute to the development of foreign economic relations of the country. Domestic products are losing competitiveness, they are difficult to export. But the import of goods, on the contrary, increased, as in the domestic market, they have higher rates. Inflation hinders flow of foreign capital into the country. The depreciation of the national currency leads to a decrease in its market and the official exchange rate.
4. Inflation leads to a drop in the living standards of the population. This is especially true of those who had previously had a stable income, since its growth rate did not keep pace with rising prices for goods and services.
5. Inflation devalues ​​those monetary savings that people had once invested in banks, insurance policies. The same happens with other paper assets, which have a fixed cost.
All the above economic and social impact of inflation and the impact of how to behave market actors. Most likely, they will lose confidence and to each other and to the state. This, in turn, will increase and economic instability in society.
52. Why does the government regulate the economy?
In today’s world governments get involved in the economy in certain ways and leaders must often make economic decisions.
A government must make sure that there is enough competition to keep prices low the quality products high. If only a few companies produce products they may agree to keep prices high. In a monopoly, only one company produces goods and services that everybody needs, so it can set the price.
In the second half of the 19th century companies started to get bigger and bigger by taking over smaller ones. Soon these so-called trusts had a lot of power and controlled the market and the prices. At the beginning of the 20th century the United States passed a law which helped smaller companies survive.
Business leaders often do not care about what their decisions may do to our society. For example, a factory may pollute a river by pouring dirty water into it. It is the job of government organizations to make sure that this does not happen.
The state of economy is not the same all the time. Normally, there are always ups and downs. Sometimes the economy of a country is in good condition, everybody has enough money and lots of goods are produced. On the other side there may be years in which there are a lot of unemployed people and factories cannot sell their products. The business cycle shows the economy in four phases.
53) What are the money aggregates and explain each aggregate?
Money supply aggregates-Money supply is the sum of cash, clearing money that is used in the national economy to provide the circulation of goods and services. Product quantity=amount of supplied money. Money supply aggregates consists of the following elements:
M0- money in cash of people and enterprises
M1- M0+ short term deposits of the people and the enterprises
M2- M1+ long term deposits of the people
M3-M2+ government bonds
54) what is credit? Explain the types of credits.
Credit is a sum of money that has to be returned, be payed according to the agreement. There are forms of the credit such as commercial credit, consumer credit, mortgage (ипотека), international credit, leasing, factoring, and etc. Commercial credit is form of credit when it is used to let pay enterprise for the goods after buying them. This form is used only between enterprises. Consumer credit is a credit that is taken by person to buy long term goods.
Mortgage is a form credit when person can get money but should give mortgage to the bank (house, land)
Factoring means the bank covers all debts of the enterprise, then requires the money from the enterprise.
55) Your nominal wage is 200000 tenge. Income tax is 10% and payment for pension fund is 10%. What is real wage?
Real wage=nominal wage-income tax
Real wage=160000 tg56. Explain the difference between commercial and bank credits
The banking segment is divided into two main divisions that are investment banking and commercial banking. Investment bank is the bank having all setup with the end goal of closing commercial transactions but commercial bank is the bank having all setup to give services to the investors. These two banks are not same but there exists a difference between these banks. In this article the contrasts between these banks are explained, which help the individuals to understand the main differences between these banks.
The commercial bank alludes to a foundation which is busy with giving financial and banking related services to the general population. In prior times, there was no that kind of organization where individuals can deposit their cash securely or take advances. Later on, banks are developed that fills in as a financier to every one of the nationals of the nation. Commercial banks are possessed privately or publicly or by the blend of the two. The banks provide assist in the mobilizations of funds over the economy. The banks acknowledge deposits from the natives of the nation at nominal interest rate and utilize that cash in stretching out credit to different clients, charging more rate of interest from them
For example Merchant banking often focuses on investing a depositor’s assets in a finance portfolio and managing these investments. In the US, banks that offer these services are typically called investment banks. Apart from investing and managing the assets of wealthy clients, they also offer counsel and advice to large corporations. This advice is particularly useful when a company is considering merging with or acquiring another business.
Both commercial banking and merchant banking have roots that go back hundreds of years, if not more. Merchant banks were actually the original banks, and they were invented in the Middle Ages by Italian grain merchants. These merchants, as well as Jewish traders fleeing persecution in Spain, used merchant banking to finance long trading journeys as well as the production of grain
57. Explain the functions of Central Bank
The central bank generally performs the following functions:
1. Bank of Note Issue:
The central bank has the sole monopoly of note issue in almost every country. The currency notes printed and issued by the central bank become unlimited legal tender throughout the country.
In the words of De Kock, "The privilege of note-issue was almost everywhere associated with the origin and development of central banks."
The main advantages of giving the monopoly right of note issue to the central bank are given below:
(i) It brings uniformity in the monetary system of note issue and note circulation.
(ii) The central bank can exercise better control over the money supply in the country. It increases public confidence in the monetary system of the country.
(iii) Monetary management of the paper currency becomes easier. Being the supreme bank of the country, the central bank has full information about the monetary requirements of the economy and, therefore, can change the quantity of currency accordingly.
(iv) It enables the central bank to exercise control over the creation of credit by the commercial banks.
(v) The central bank also earns profit from the issue of paper currency.
(vi) Granting of monopoly right of note issue to the central bank avoids the political interference in the matter of note issue.
2. Banker, Agent and Adviser to the Government:
The central bank functions as a banker, agent and financial adviser to the government,
(a) As a banker to government, the central bank performs the same functions for the government as a commercial bank performs for its customers. It maintains the accounts of the central as well as state government; it receives deposits from government; it makes short-term advances to the government; it collects cheques and drafts deposited in the government account; it provides foreign exchange resources to the government for repaying external debt or purchasing foreign goods or making other payments,
(b) As an Agent to the government, the central bank collects taxes and other payments on behalf of the government. It raises loans from the public and thus manages public debt. It also represents the government in the international financial institutions and conferences,
(c) As a financial adviser to the lent, the central bank gives advise to the government on economic, monetary, financial and fiscal ^natters such as deficit financing, devaluation, trade policy, foreign exchange policy, etc.
3. Bankers' Bank:
The central bank acts as the bankers' bank in three capacities:
(a) custodian of the cash preserves of the commercial banks;
(b) as the lender of the last resort; and (c) as clearing agent. In this way,the central bank acts as a friend, philosopher and guide to the commercial banks
As a custodian of the cash reserves of the commercial banks the central bank maintains the cash reserves of the commercial banks. Every commercial bank has to keep a certain percentage of its cash balances as deposits with the central banks. These cash reserves can be utilised by the commercial banks in times of emergency.
4. Lender of Last Resort:
As the supreme bank of the country and the bankers' bank, the central bank acts as the lender of the last resort. In other words, in case the commercial banks are not able to meet their financial requirements from other sources, they can, as a last resort, approach the central bank for financial accommodation. The central bank provides financial accommodation to the commercial banks by rediscounting their eligible securities and exchange bills.
5. Clearing Agent:
As the custodian of the cash reserves of the commercial banks, the central bank acts as the clearing house for these banks. Since all banks have their accounts with the central bank, the central bank can easily settle the claims of various banks against each other with least use of cash. The clearing house function of the central bank has the following advantages:
(i) It economies the use of cash by banks while settling their claims and counter-claims.
(i) It reduces the withdrawals of cash and these enable the commercial banks to create credit on a large scale.
(ii) It keeps the central bank fully informed about the liquidity position of the commercial banks.
58. Explain the functions of Commercial Banks
A commercial bank refers to a normal bank that provides the basic banking services to the residents of a country. Some of the different services available from commercial banks to its customers are:
Checking/Current accountSavings accountsInternet/Mobile BankingATM CardsCheck BooksDeposit AccountsLoansCredit Cards etcThe Functions of a Commercial Bank can be classified as follows:1. Primary Functionsa) Accepting of Deposits.b) Lending2. Secondary Functions.a) Agency Services.b) General Utility Services3. Services through their Subsidiariesa) Merchant Banking Servicesb) Leasing.c) Housing Finance.d) Factoring Services.e) Insurance Services.Under general utility services we can include modern facilities provided by banks like, for example,a) Locker Facilities and Safe Deposit Functions.b) Autoamted Teller Machines (ATM)c) Credit Cards and Debit Cards.d) Tele-banking.e) Internet Bankingf) Online Ticket Bookings.g) Electronic Funds transfer.h) Real Time Gross Settlement (RTGS) Servicei) Online tax payment services
59. Explain the difference between bank of the first level and the second level
In the age of online transactions, banks are working hard to provide their clients with the best security protocol available. This extends beyond the simple username/password and security questions you see on your bank's homepage. Banks also employ firewall software as a first line of defense against unauthorized entry, and they are continually updating this software to stay ahead of viruses and identity thieves. In addition to these security measures, banks also implement a certain level of encryption over all of your digital files and online transactions. This essentially encodes all of your information in a way that prevents hackers from easily accessing or deciphering your data. The standard level of encryption for banks has been identified as 256-bit AES or Advanced Encryption Standard. When it comes to choosing a company to help you keep track of your expenses, should the 128-bit encryption be a dealbreaker? Definitely not! But if it's really that important to you, you can rest assured that more and more companies are now adopting the 256-bit key to drive their encryption processes. And most of the businesses still running 128-bit run regular security scans over their software. Remember, when it comes to AES encryption, it's not a matter "good versus bad," but more a matter of "excellence versus excellence (plus added peace of mind)."
60.What is government budget and its structure?
A government budget is an annual financial statement presenting the government's proposed revenues and spending for a financial year that is often passed by the legislature, approved by the chief executive or president and presented by the Finance Minister to the nation. The budget is also known as the Annual Financial Statement of the country. This document estimates the anticipated government revenues and government expenditures for the ensuing (current) financial year.For example, only certain types of revenue may be imposed and collected. Property tax is frequently the basis for municipal and county revenues, while sales tax and/or income tax are the basis for state revenues, and income tax and corporate tax are the basis for national revenues.
61.What is government budget and list the government expenditures ?
Government spending or expenditureincludes all government consumption, investment, and transfer payments.In national income accounting the acquisition by governments of goods and services for current use, to directly satisfy the individual or collective needs of the community, is classed as government final consumption expenditure. Government acquisition of goods and services intended to create future benefits, such as infrastructure investment or research spending, is classed as government investment (government gross capital formation). These two types of government spending, on final consumption and on gross capital formation, together constitute one of the major components of gross domestic product.
Government spending can be financed by government borrowing, seigniorage, or taxes. Changes in government spending is a major component of fiscal policy used to stabilize the macroeconomic business cycle.
62List the indirect taxes and why are they called indirect taxes?
Indirect taxes are the charges that are levied on goods and services. Some of the significant indirect taxes include Value Added Tax, Central Sales Tax, Central Excise Duty, Customs Duty, stamp duties and expenditure tax. Unlike Direct Taxes, Indirect Taxes are not levied on individuals, but on goods and services. Customers indirectly pay this tax in the form of higher prices.
For example, it can be said that while purchasing goods from a retail shop, the retail sales tax is actually paid by the customers. The retailer eventually passes this tax to the respective authority. The indirect tax, actually raises the price of a good and the customers purchase by paying more for that product.
The term indirect tax can be defined from different views. In the colloquial sense, an indirect tax is the charge that is collected by intermediary (like retail store) from the individual who holds the actual economic burden of the tax (like customer). The intermediary files a tax return and eventually passes to the government. The indirect tax can be alternatively defined as the charge that is paid by one individual at the beginning, but the burden of which will be passed over to some other individual, who eventually holds the burden. In a colloquial sense, one example of indirect tax includes VAT (Value Added Tax).
63List the direct taxes and why are they called direct taxes? Any person on whom the tax is imposed, if he himself pays the tax, it is called direct tax 
Merits of Direct TaxDirect taxes are based on the principle of ability to pay and so they help to distribute tax burden equally.
As the tax is imposed on each individual, for example, based on his income, he is certain about the amount of tax payable by him. Hence, the direct tax satisfies the canon of certainty.
Direct taxes are also highly flexible. The revenue from them can be increased or decreased depending upon the need of the government. For example, the government can simply raise the rate of tax to get more revenue and bring down the tax rate to reduce the revenue.
The tax paying people are more interested in the ways in which the tax revenue is spent by the government. They feel proud of participating in the public projects by paying tax.

64Explain the difference between progressive tax rate and regressive tax rate
A progressive tax is a type of tax that takes a larger percentage of income from taxpayers as their income rises. An example is the federal income tax, where there are six marginal tax brackets ranging from 10% (lowest-income taxpayers) to 39.6% (highest-income taxpayers). Most state income taxes have a similar progressive structure.
A regressive tax is the exact opposite. Higher-income taxpayers pay a smaller percentage of their income than lower-income taxpayers because the tax is not based on ability to pay. An example is state sales tax, where everyone pays the same tax rate regardless of their income.
65)What does show the difference between export and import?
International trade is a steady sea of import and export which involves countries all over the world, and people sometimes confuse the difference between exports and imports. Put simply, an import is something which is brought into a country over an international boundary, while an export is something which is shipped out of a country over an international boundary. If an American grocery store chain buys bananas from Mexico, it is said to be importing the bananas, while the Mexican produce company which grows the bananas is exporting them.
Most countries attempt to achieve a trade balance, in which the flow of imports and exports is relatively equal. If a country exports too much, it may not be able to support its domestic needs, while a country which imports excessive amounts of products may not have enough money to support the high volume of imports. In a country with a trade balance, import and export rates are about equal, with nations exporting excess items for sale, and importing the goods that it needs.
The confusion between the two terms can be alleviated by looking at the prefixes and comparing them to other known words. The prefix “ex-” means “out” or “away,” as in “exit.” Exporting can be thought of as shipping goods away from a domestic producer to a foreign buyer. “Im-” comes from the Latin “in-” which means “into,” so an import is literally taken “into” a domestic “port.” The important thing to remember about the difference between import and export is that it has to do with the direction in which the goods are traveling.
Many companies perform both import and export services. They handle goods for domestic producers who want to sell abroad without having to deal with the details of exporting, which can include passing inspections, paying fees and tariffs, and organizing transport, as well as finding buyers. Import-export companies also liaise with foreign companies which would like to export their products, providing support to ensure that shipments go smoothly.
In some regions, there is controversy over importing and exporting. Some domestic producers argue that imports of inexpensive products manufactured overseas can cut into their bottom line, with foreign producers providing goods at lower cost because they have cheaper raw materials, less stringent labor laws, or favorable trade agreements. Domestic consumers sometimes actively seek out goods which are produced domestically to support their national economy, and they may protest the widespread export of domestic goods, arguing that it makes it challenging to find domestically-produced products in various areas.
66) What is nominal exchange rate and revaluation?
The nominal exchange rate E is defined as the number of units of the domestic currency that can purchase a unit of a given foreign currency. A decrease in this variable is termed nominal appreciation of the currency. (Under the fixed exchange rate regime, a downward adjustment of the rate E is termed revaluation.) An increase in this variable is termed nominal depreciation of the currency. (Under the fixed exchange rate regime, an upward adjustment of the rate E is called devaluation.)
Revaluation is a change in a price of a good or product, or especially of a currency, in which case it is specifically an official rise of the value of the currency in relation to a foreign currency in a fixed exchange rate system. Under floating exchange rates, by contrast, a rise in a currency's value is an appreciation. Altering the face value of a currency without changing its purchasing power is a redenomination, not a revaluation (this is typically accomplished by issuing a new currency with a different, usually lower, face value and a different, usually higher, exchange rate while leaving the old currency unchanged; then the new replaces the old).
In a fixed exchange rate system, the central bank maintains an officially announced exchange rate by standing ready to buy or sell foreign currency at that rate. In general terms, revaluation of a currency is a calculated adjustment to a country's official exchange rate relative to a chosen baseline. The baseline could in principle be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country's government (specifically, its central bank) can alter the official value of the currency. In contrast, a devaluation is an official reduction in the value of the currency.
For example, suppose a government has set 10 units of its currency equal to one US dollar. To revalue, the government might change the rate to 9.9 units per dollar. This would result in that currency being slightly more expensive to people buying that currency with U.S. dollars than previously and the US dollar costing slightly less to those buying it with foreign currency.
67)Explain the difference between intensive and extensive economic growth?
Extensive growth, in economics, is based on the expansion of the quantity of inputs in order to increase the quantity of outputs, opposite to that of intensive growth. For example, GDP growth caused only by increases in population or territory would be extensive growth. Thus, extensive growth is likely to be subject to diminishing returns. It is therefore often viewed as having no effect on per-capita magnitudes in the long-run.
Reliance on extensive growth can be undesirable in the long-run because it exhausts resources. To maintain economic growth in the long-run, especially on a per-capita basis, it is good for an economy to grow intensively; for example, by improvements in technology or organisation, thereby increasing the production possibilities frontier of the economy.
Intensive growth- Increases in aggregate economic activity, or growth, may be generated by adding more labor and capital or by improving skills and technology. Development economists call the latter "intensive growth" because labor and capital work harder. Growth is driven by enhanced productivity (higher output per unit of input) rather than augmented factor supplies. Theory predicts that all growth in a steady-state, long-run equilibrium will be attributable to technological progress (intensive growth). Developing nations may initially grow faster than this "golden mean" rate, benefiting both from rapid capital accumulation (capital deepening) and technological catch-up, but must converge to the golden mean thereafter. During the 1970s many Marxist economists hypothesized that socialist economies were not bound by these neoclassical principles. They forecasted that extensive growth (increased factor supply) would be replaced by socialist–intensive methods ensuring superior performance, but they were mistaken: Growth fell below zero in 1989, heralding the collapse of the Soviet Union two years later.
68)Explain the phases of the economic(business)cycle?
The business cycle is the periodic but irregular up-and-down movements in economic activity, measured by fluctuations in real GDP and other macroeconomic variables.
THE PHASES OF THE BUSINESS CYCLE:
While no two business cycles are exactly the same, they can be identified as a sequence of four phases that were classified and studied in their most modern sense by American economists Arthur Burns and Wesley Mitchell in their text Measuring Business Cycles. The four primary phases of the business cycle include:
Expansion: A speedup in the pace of economic activity defined by high growth, low unemployment, and increasing prices. The period marked from trough to peak.
Peak: The upper turning point of a business cycle and the point at which expansion turns into contraction.
Contraction: A slowdown in the pace of economic activity defined by low or stagnant growth, high unemployment, and declining prices. It is the period from peak to trough.
Trough: The lowest turning point of a business cycle in which a contraction turns into an expansion. This turning point is also called Recovery.
These four phases also make up what is known as the "boom-and-bust" cycles, which are characterized as business cycles in which the periods of expansion are swift and the subsequent contraction is steep and severe.
69) Explain the difference between money and finance?
Money is the stuff you carry around in your pockets. The stuff you use, handle and spend - everyday. It is personal and practical. For example when you buy cup of coffee or a newspaper you usually pay with money (cash) out of your pocket.
Finance is numbers. Usually large numbers. Numbers which you move around by signing pieces of paper. For example when you buy a house, you sign contracts, mortgages and checks. You don't usually pay in cash out of your pocket.
70) What is the difference between GDP and GNP?
GDP stands for Gross Domestic Product. The term gross domestic product means the total worth of all the goods and services produced in the various sectors of a country. This worth is always estimated in the internationally accepted currency value. GDP is calculated for a period of one whole year, at the end of a country’s financial year. However, for regular assessments and analysis of various short term and long term trends, nations calculate their GDP in the middle of a financial year as well. The GDP can also be called as the sum of all economic activity in a nation. GDP involves an important facility of being calculated on a per capita or per person basis, in order to present a precise picture of the economic development in a country.
GNP is the abbreviation for the Gross National Product. In a simple manner, GNP can be understood as the addition of a country’s profit on overseas investment to its GDP. GNP actually paints a more accurate picture of a country’s economic growth over a period of one year, as it is derived by subtracting the capital gains of foreign nationals and the gains of foreign companies earned domestically, from the annual worth of all the goods and services produced in a country. Along with presenting the figure for the total worth of all business production and service sector industries of a nation, GNP also demonstrates the per capita income of a country. Important factors influencing an economy such as the buying power of an individual from a particular country, an estimate of average wealth, estimation of average wages, ownership distribution in a society, etc. are revealed precisely by GNP.
71) What is the difference between direct tax and indirect tax?
1. The tax, which is paid by the person on whom it is levied is known as the Direct tax while the tax, which is paid by the taxpayer indirectly is known as the Indirect tax. The direct tax is levied on person’s income and wealth whereas the indirect tax is levied on a person who consumes the goods and services.
2. The burden of the direct tax is transferable while that of indirect tax is non-transferable.
3. the incidence and impact of direct tax falls on the same person, but in the case of indirect tax, the incidence and impact falls on different [persons.
4. The evasion of tax is possible in case of a direct tax if the proper administration of the collection is not done, but in the case of indirect tax, the evasion of tax is not possible since the amount of tax is charged on the goods and services.
5. The direct tax is levied on Persons, i.e. Individual, HUF (Hindu Undivided Family), Company, Firm, etc. On the other hand, the indirect tax is levied on the consumer of goods and services.
6. The nature of a direct tax is progressive, but the nature of the indirect tax is regressive.
7. Direct tax helps in reducing the inflation, but the indirect tax sometimes helps in promoting the inflation.
8. Direct tax is collected when the income for the financial year is earned or the assets are valued at the date of valuation. As against this, the indirect taxes are collected, when the purchase or sale of goods or services are rendered.
9. Direct tax is imposed on and collected from the assessee. Unlike indirect tax is imposed on and collected from consumer but deposited to the exchequer by the dealer of goods or provider of services.
Similarities
• Payable to the government.
• Penalty for the non-payment.
• Interest on Delayed Payment.
• Improper administration can lead to tax avoidance or tax evasion.
Conclusion
Both the direct and indirect tax has its own merits and demerits. If we talk about the direct taxes they are equitable because they are charged on person, according to their paying ability. The direct tax is economical because its cost of collection is less but however, it doesn’t cover every section of the society.
On the other hand, if we talk about the indirect tax, they are easy to realize as they are included in the price of the product and services, and along with that, it has an excellent coverage of every section of the society. One of the best advantages of the indirect tax is, the rate of tax is high for harmful products as compared to the other goods which are necessary for life.
72.What is the difference between progressive and regressive tax rate?
A progressive tax is a type of tax that takes a larger percentage of income from taxpayers as their income rises. An example is the federal income tax, where there are six marginal tax brackets ranging from 10% (lowest-income taxpayers) to 39.6% (highest-income taxpayers). Most state income taxes have a similar progressive structure.
A regressive tax is the exact opposite. Higher-income taxpayers pay a smaller percentage of their income than lower-income taxpayers because the tax is not based on ability to pay. An example is state sales tax, where everyone pays the same tax rate regardless of their income.
73. When and why does government use progressive tax rate?
A progressive tax is a tax in which the tax rate increases as the taxable amount increases. The term "progressive" refers to the way the tax rate progresses from low to high, with the result that a taxpayer's average tax rate is less than the person's marginal tax rate. The term can be applied to individual taxes or to a tax system as a whole; a year, multi-year, or lifetime. Progressive taxes are imposed in an attempt to reduce the tax incidence of people with a lower ability to pay, as such taxes shift the incidence increasingly to those with a higher ability-to-pay. The opposite of a progressive tax is a regressive tax, where the relative tax rate or burden decreases as an individual's ability to pay increases.[5]
The term is frequently applied in reference to personal income taxes, in which people with lower income pay a lower percentage of that income in tax than do those with higher income. It can also apply to adjustments of the tax base by using tax exemptions, tax credits, or selective taxation that creates progressive distribution effects. For example, a wealth or property tax,[8] a sales tax on luxury goods, or the exemption of sales taxes on basic necessities, may be described as having progressive effects as it increases the tax burden of higher income families and reduces it on lower income families.[9][10][11]
Progressive taxation is often suggested as a way to mitigate the societal ills associated with higher income inequality,[12] as the tax structure reduces inequality,[13] but economists disagree on the tax policy's economic and long-term effects.[14][15][16] Progressive taxation has also been positively associated with happiness, the subjective well-being of nations and citizen satisfaction with public goods, such as education and transportation.
74. Explain the meaning of the labour productivity in the economy
Labor productivity is a measure of economic growth within a country. Labor productivity measures the amount of goods and services produced by one hour of labor; specifically, labor productivity measures the amount of real gross domestic product (GDP) produced by an hour of labor. Growth in labor productivity depends on three main factors: investment and saving in physical capital, new technology, and human capital.
Labor productivity is defined as real economic output per labor hour. Growth in labor productivity is measured by the change in economic output per labor hour over a defined period of time. Labor productivity is directly linked to improved standards of living in the form of higher consumption. As an economy's labor productivity grows, it produces more goods and services for the same amount of relative work. This increase in output makes it possible to consume more of the goods and services for an increasingly reasonable price.
75) Describe the factors that influence the level of demand for the foods
These other factors determine the position or level of demand curve of a commodity.
It may be noted that when there is a change in these non-price factors, the whole curve shifts rightward or leftward as the case may be. The following factors determine market demand for a commodity.
1. Tastes and Preferences of the Consumers:
An important factor which determines the demand for a good is the tastes and preferences of the consumers for it. A good for which consumers’ tastes and preferences are greater, its demand would be large and its demand curve will therefore lie at a higher level. People’s tastes and preferences for various goods often change and as a result there is change in demand for them.
The changes in demand for various goods occur due to the changes in fashion and also due to the pressure of advertisements by the manufacturers and sellers of different products. On the contrary, when certain goods go out of fashion or people’s tastes and preferences no longer remain favourable to them, the demand for them decreases.
2. Income of the People:
The demand for goods also depends upon the incomes of the people. The greater the incomes of the people, the greater will be their demand for goods. In drawing the demand schedule or the demand curve for a good we take income of the people as given and constant. When as a result of the rise in the income of the people, the demand increases, the whole of the demand curve shifts upward and vice versa.
The greater income means the greater purchasing power. Therefore, when incomes of the people increase, they can afford to buy more. It is because of this reason that increase in income has a positive effect on the demand for a good.
When the incomes of the people fall, they would demand less of a good and as a result the demand curve will shift downward. For instance, as a result of economic growth in India the incomes of the people have greatly increased owing to the large investment expenditure on the development schemes by the Government and the private sector.
As a result of this increase in incomes, the demand for good grains and other consumer goods has greatly increased. Likewise, when because of drought in a year the agriculture production greatly falls, the incomes of the farmers decline. As a result of the decline in incomes of the farmers, they will demand less of the cotton cloth and other manufactured products.
3. Changes in Prices of the Related Goods:
The demand for a good is also affected by the prices of other goods, especially those which are related to it as substitutes or complements. When we draw the demand schedule or the demand curve for a good we take the prices of the related goods as remaining constant.
Therefore, when the prices of the related goods, substitutes or complements, change, the whole demand curve would change its position; it will shift upward or downward as the case may be. When the price of a substitute for a good falls, the demand for that good will decline and when the price of the substitute rises, the demand for that good will increase.
For example, when price of tea and incomes of the people remain the same but the price of coffee falls, the consumers would demand less of tea than before. Tea and coffee are very close substitutes. Therefore, when coffee becomes cheaper, the consumers substitute coffee for tea and as a result the demand for tea declines. The goods which are complementary with each other, the fall in the price of any of them would favorably affect the demand for the other.
For instance, if price of milk falls, the demand for sugar would also be favorably affected. When people would take more milk, the demand for sugar will also increase. Likewise, when the price of cars falls, the quantity demanded of them would increase which in turn will increase the demand for petrol.
4. Advertisement Expenditure:
Advertisement expenditure made by a firm to promote the sales of its product is an important factor determining demand for a product, especially of the product of the firm which gives advertisements. The purpose of advertisement is to influence the consumers in favour of a product. Advertisements are given in various media such as newspapers, radio, and television. Advertisements for goods are repeated several times so that consumers are convinced about their superior quality. When advertisements prove successful they cause an increase in the demand for the product.
5. The Number of Consumers in the Market:
The market demand for a good is obtained by adding up the individual demands of the present as well as prospective consumers of a good at various possible prices. The greater the number of consumers of a good, the greater the market demand for it.
Now, the question arises on what factors the number of consumers for a good depends. If the consumers substitute one good for another, then the number of consumers for the good which has been substituted by the other will decline and for the good which has been used in place of the others, the number of consumers will increase.
Besides, when the seller of a good succeeds in finding out new markets for his good and as a result the market for his good expands the number of consumers for that good will increase. Another important cause for the increase in the number of consumers is the growth in population. For instance, in India the demand for many essential goods, especially food grains, has increased because of the increase in the population of the country and the resultant increase in the number of consumers for them.
6. Consumers’ Expectations with Regard to Future Prices:
Another factor which influences the demand for goods is consumers’ expectations with regard to future prices of the goods. If due to some reason, consumers expect that in the near future prices of the goods would rise, then in the present they would demand greater quantities of the goods so that in the future they should not have to pay higher prices. Similarly, when the consumers expect that in the future the prices of goods will fall, then in the present they will postpone a part of the consumption of goods with the result that their present demand for goods will decrease.
76) Describe the factors that influence the level of supply of the foodsIn economics, supply refers to the quantity of a product available in the market for sale at a specified price at a given point of time.Unlike demand, supply refers to the willingness of a seller to sell the specified amount of a product within a particular price and time.Supply is always defined in relation to price and time. For example, if a seller agrees to sell 500 kgs of wheat, it cannot be considered as supply of wheat as the price and time factors are missing.i. Price:Refers to the main factor that influences the supply of a product to a greater extent. Unlike demand, there is a direct relationship between the price of a product and its supply. If the price of a product increases, then the supply of the product also increases and vice versa. Change in supply with respect to the change in price is termed as the variation in supply of a product.Speculation about future price can also affect the supply of a product. If the price of a product is about to rise in future, the supply of the product would decrease in the present market because of the profit expected by a seller in future. However, the fall in the price of a product in future would increase the supply of product in the present market.ii. Cost of Production:Implies that the supply of a product would decrease with increase in the cost of production and vice versa. The supply of a product and cost of production are inversely related to each other. For example, a seller would supply less quantity of a product in the market, when the cost of production exceeds the market price of the product.In such a case the seller would wait for the rise in price in future. The cost of production rises due to several factors, such as loss of fertility of land, high wage rates of labor, and increase in the prices of raw material, transport cost, and tax rate.iii. Natural Conditions:Implies that climatic conditions directly affect the supply of certain products. For example, the supply of agricultural products increases when monsoon comes on time. However, the supply of these products decreases at the time of drought. Some of the crops are climate specific and their growth purely depends on climatic conditions. For example Kharif crops are well grown at the time of summer, while Rabi crops are produce well in winter season.iv. Technology:Refers to one of the important determinant of supply. A better and advanced technology increases the production of a product, which results in the increase in the supply of the product. For example, the production of fertilizers and good quality seeds increases the production of crops. This further increase the supply of food grains in the market.v. Transport Conditions:Refer to the fact that better transport facilities increase the supply of products. Transport is always a constraint to the supply of products, as the products are not available on time due to poor transport facilities. Therefore even if the price of a product increases, the supply would not increase.
77. Production and natural economy (натуральное хозяйство)
Production is a process of combining various material inputs and immaterial inputs (plans, know-how) in order to make something for consumption (the output). It is the act of creating output, a good or service which has value and contributes to the utility of individuals.
Economic well-being is created in a production process, meaning all economic activities that aim directly or indirectly to satisfy human wants and needs. The degree to which the needs are satisfied is often accepted as a measure of economic well-being. In production there are two features which explain increasing economic well-being. They are improving quality-price-ratio of goods and services and increasing incomes from growing and more efficient market production.
The most important forms of production are
market production
public production
household production
In order to understand the origin of the economic well-being we must understand these three production processes. All of them produce commodities which have value and contribute to well-being of individuals.
The satisfaction of needs originates from the use of the commodities which are produced. The need satisfaction increases when the quality-price-ratio of the commodities improves and more satisfaction is achieved at less cost. Improving the quality-price-ratio of commodities is to a producer an essential way to improve the competitiveness of products but this kind of gains distributed to customers cannot be measured with production data. Improving the competitiveness of products means often to the producer lower product prices and therefore losses in incomes which are to compensated with the growth of sales volume.
Economic well-being also increases due to the growth of incomes that are gained from the growing and more efficient market production. Market production is the only production form which creates and distributes incomes to stakeholders. Public production and household production are financed by the incomes generated in market production. Thus market production has a double role in creating well-being, i.e. the role of producing goods and services and the role of creating income. Because of this double role market production is the “primus motor” of economic well-being and therefore here under review.
Natural economy refers to a type of economy in which money is not used in the transfer of resources among people. It is a system of allocating resources through direct bartering, entitlement by law, or sharing out according to traditional custom. In the more complex forms of natural economy, some goods may act as a referent for fair bartering, but generally currency plays only a small role in allocating resources. As a corollary, the majority of goods produced in a system of natural economy are not produced for the purpose of exchanging them, but for direct consumption by the producers
78. What is the difference between frictional and structural types of unemployment?
Unemployment is surplus of labour supply on demand for labour
Interactions between supply of and demand for labour identify employment level
Types of unemployment
Frictional unemployment means voluntary giving up the job
Structural unemployment is staying without job because of a new technology, changes in structure of enterprise
Cyclical unemployment is staying without job because of changes in economic cycle (reason of it low demand in economy)

79Explain the ways of solving economic problems if economy is in the ression phase of the economic cycle?
Economic Recession Definition
Economic recession is a period of general economic decline and is typically accompanied by a drop in the stock market, an increase in unemployment, and a decline in the housing market. Generally, a recession is less severe than a depression. The blame for a recession generally falls on the federal leadership, often either the president himself, the head of the Federal Reserve, or the entire administration.
Factors that Cause Recessions
High interest rates are a cause of recession because they limit liquidity, or the amount of money available to invest.
Another factor is increased inflation. Inflation refers to a general rise in the prices of goods and services over a period of time. As inflation increases, the percentage of goods and services that can be purchased with the same amount of money decreases.
Reduced consumer confidence is another factor that can cause a recession. If consumers believe the economy is bad, they are less likely to spend money. Consumer confidence is psychological but can have a real impact on any economy.
Reduced real wages, another factor, refers to wages that have been adjusted for inflation. Falling real wages means that a worker's paycheck is not keeping up with inflation. The worker might be making the same amount of money, but his purchasing power has been reduced.
Recessions and Gross Domestic Product
An economic recession is typically defined as a decline in gross domestic product (GDP) for two or more consecutive quarters. GDP is the market value of all goods and services produced within a country in a given period of time. An example of one type of GDP would be the value of all the automobiles produced within the United States for one year. GDP only takes into account new products that have been manufactured. Therefore, if a pre-owned car lot were selling pre-owned cars, they would not be included in the GDP calculation.
80) List the types of banks and describe the services that are offered by the second level bank
Some of the most common banks are listed below, but the dividing lines are not always clean cut. Some banks work in multiple areas (for example, a bank might offer personal accounts, business accounts, and even help large enterprises raise money in the financial markets).
Retail banks are probably the banks you’re most familiar with: Your checking and savings accounts are held at a retail bank, which focuses on consumers as customers. These banks give you credit cards, offer loans, and they’re the ones with numerous branch locations in populated areas.
Commercial banks focus on business customers. Businesses need checking and savings accounts just like individuals do. But they also need more complex services, and the dollar amounts can be much larger. They might need to accept payments from customers, rely heavily on lines of credit to manage cash flow, and they might use letters of credit to do business overseas.
Investment banks help businesses work in financial markets. If a business wants to go public or sell debt to investors, they’ll often use an investment bank.
Central banks manage the monetary system for a government. For example, the Federal Reserve Bank is the US central bank responsible for managing economic activity and supervising banks.
Credit unions are similar to banks, but they are not-for-profit organizations owned by their customers (most banks are owned by investors). Credit unions offer products and services more or less identical to most retail and commercial banks. The main difference is that credit union members share some characteristic in common.
Online banks operate entirely online – there are no physical branch locations available to visit with a teller or personal banker. Many brick-and-mortar banks also offer online services, such as the ability to view accounts and pay bills online, but internet-only banks are different: they often offer competitive rates on savings accounts and they’re especially likely to offer free checking.
Mutual banks are similar to credit unions because they are owned by members (or customers) instead of outside investors.
Savings and loans are less prevalent than they used to be, but they are still important. This type of bank was important in making home ownership mainstream, using deposits from customers to fund home loans. The name savings and loan refers to the core activity they perform: take savings from one customer and make loans to another.
81. What is commercial credit and why does enterprise use it?
Commercial credit is a credit granted by a bank to a business concern to finance commercial transaction. Commercial credit is often used by companies to help fund new business opportunities or to pay for unexpected charges. For example, imagine that XYZ Manufacturing Inc. has the chance to buy a piece of much needed machinery at a deep discount. Let's assume that the piece of equipment normally costs $250,000, but is being sold for $100,000 on a first-come, first-serve basis. In this example, XYZ Manufacturing could access its commercial credit agreement to get the required funds immediately. The firm would then pay the borrowed amount back at a later date.
82. What is more popular form of credit in Kazakhstan? Why?
One of the main functions of banks is lending to the economy. Bank credit is the most common form of credit relations in the economy. Currently, the main risk factors for banks associated with lending to the population are general economic shocks that could lead to a decrease in the solvency of the population, a decline in property prices and the instability of exchange rates. As for the corporate sector, the risks here are primarily due to the high proportion of loans directed to the economy, whose businesses, in the event of a decline in business activity, are more mobile, which could lead to increased bankruptcies and a deterioration in the quality of the loan portfolio. Because a slowdown in the growth of the economy may lead to a decrease in the ability of borrowers to repay loans, it is necessary for banks to reorient lending from the branches of trade and real estate in the manufacturing, transport, and agricultural industries. The market rate of loan interest is determined by the interaction of supply and demand in the credit market. With a high interest rate, the capital productivity of the enterprise is relatively low, the demand decreases accordingly, and the loan offer increases. When the interest rate decreases, the profitability for the enterprise grows, it makes sense to borrow money. And the population makes a choice in favor of using a loan in order to meet their needs at the expense of borrowed funds. A decrease in interest rates on loans leads to an increase in demand for credit. In this connection, the process of changing interest rates on loans will be constantly on the move.
83. Explain the influence of income the demand for goods and services
The demand for a good or service represents the willingness and ability of buyers or consumers to purchase goods and services. The total demand for a product will depend on a number of factors with the most obvious factor being the price of the product. A rational consumer will seek to purchase products at the lowest price possible because it maximizes the value or satisfaction he or she gets from purchasing and consuming the product
Almost without exception, when the price of a product falls, the total demand for the product will rise in response.
Existing consumers may increase the amount they purchase given that their income “will go further” and be able to afford a greater volume of that particular product. In economics we sometimes refer to this as the income effect
84. Why is government interested in motivating producers of real goods?
Profit motive. That`s just my opinion. If you are efficient and people want and are interested in buying your stuff, you can make a profit and be well off. If people don't like your stuff or other people can do it better, you will go out of business and fail. You need to do it in a way that people are willing to pay you for it.
Of course economics is more complex than that with things like monopolies, oligopolies, monopolistic competition, perfect competition, etc but all of which will affect your profit motive, strategies and profit curves but the previous paragraph is a simple basic answer.
85.What are the ways of achieving the intensive economic growth?
Economic growth is measured by an increase in gross domestic product, or GDP, which is defined as the combined value of all goods and services produced within a country in a year. Many forces contribute to economic growth; unfortunately, no one is 100% clear about what these forces are or how to put them into motion. If this information was known, the economy, spurred by these forces, could grow at a constant rate unencumbered by recessions and stagnation.
Politicians and economists are forever holding debates on the different ideas trotted out with the promise of being economic panaceas. Once an idea is on the table, interminable squabbling ensues over its merits and pitfalls. Measures taken to induce economic growth include infrastructure spending, deregulation, tax cuts and tax rebates.
86What are the ways of achieving the extensive economic growth?
Economic growth is the increase in the amount of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP. Growth is usually calculated in real terms, i.e. inflation-adjusted terms, in order to obviate the distorting effect of inflation on the price of the goods produced.
In economics, "economic growth" or "economic growth theory" typically refers to growth of potential output, i.e., production at "full employment", which is caused by growth in aggregate demand or observed output
.Extensive Economic Growth: Economic growth is achieved by increasing number of production factors

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