Class 12 Economics — Chapter 2: National Income Accounting

What you'll learn

• ▸Final Goods vs. Intermediate Goods
• ▸Consumption Goods and Capital Goods
• ▸Stocks and Flows
• ▸Gross Investment and Depreciation
• ▸Circular Flow of Income
• ▸Methods of Calculating National Income
• ▸National Income Aggregates
• ▸Nominal vs. Real GDP
• ▸Price Indices: CPI and WPI
• ▸GDP and Welfare

Chapter Summary

--- PAGE 1 --- 12105CH02 National Income Accounting In this chapter we will introduce the fundamental functioning of a simple economy. In section 2.1 we describe some primary ideas we shall work with. In section 2.2 we describe how we can view the aggregate income of the entire economy going through the sectors of the economy in a circular way. The same section also deals with the three ways to calculate the national income; namely product method, expenditure method and income method. The last section 2.3 describes the various sub-categories of national income. It also defines different price indices like GDP deflator, Consumer Price Index, Wholesale Price Indices and discusses the problems associated with taking GDP of a country as an indicator of the aggregate welfare of the people of the country. 2.1 SOME BASIC CONCEPTS OF MACROECONOMICS One of the pioneers of the subject we call in economics today, Adam Smith, named his most influential work – An Enquiry into the Nature and Cau…

Practice Questions from this Chapter

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1. Explain GDP simply. Get Solution →
2. Define capital goods clearly. Get Solution →
3. Show examples of services. Get Solution →
4. According to the text, an item that is meant for final use and will not pass through any more stages of production or transformations is called what? Get Solution →
5. What is the common measuring rod used to get a quantitative measure of the aggregate level of final goods and services produced in an economy? Get Solution →
6. Concepts like income, output, or profits, which are defined over a period of time, are called what? Get Solution →
7. What are variables like capital goods or consumer durables that are defined at a particular point in time called? Get Solution →
8. What is the term for goods like food and clothing that are consumed when purchased by their ultimate consumers? Get Solution →

Did you know?

• 💡 The world's oldest company started building temples in Japan over 1,400 years ago.
• 💡 Humans use more steel each year than any other metal for making countless goods.
• 💡 A single tulip bulb once cost more than a house during a wild market craze in Holland.
• 💡 The clothes you wear were once raw fibers that traveled across the world to become fabric.
• 💡 Some giant factory machines are so big they need a football field-sized building to hold them.

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