Notes And Study Material for Exam Papers

Professor Marshall defines National Income as “Sum of all the physical goods produced and services provided by utilizing the natural resources of the country with the help of labour and capital. In addition to this net income from abroad is also included. Accordingly, National Income is the summation of all the goods produced and services provided and the net income from abroad.” Apparently Marshallian definition seems to be very simple and comprehensive, but it has some practical shortcomings. (1) Statistically it is difficult to estimate accurately about the produced goods and services. (2) There may be possibility of double and multiple counting. (3) Certain portion of produced goods is kept for personal consumption. Because of such shortcomings Pigou defined National Income as “Only those goods and services will be included in National Income which are gold against money.” But Pigou’s definition is not acceptable for those countries where there is limited use of m...

Inflation or deflation complicates GNP because GNP is a price times-quantity figure. The changes either in the price level or the change in output produced may affect the size of GNP. Then there rises a distinction between nominal GNP and real GNP. The nominal GNP is the representation of GNP in monetary terms while the real GNP is the representation of GNP in quantity or physical terms. Broadly, the nominal or current price GNP measures the value output at the prices prevailing in the period during which the output is produced. While the real GNP or constant price GNP measures the output produced in any period at the prices of some base year. Real GNP which values the output produced in different years at the same prices implies an estimate of the real or physical change in production or output between any specified years. If we assume 2000 as a base year, it will serve as the base year for real output measurement. US nominal GNP was $4864 billion in 1988 and it was $1598 billion ...

The Gross National Product (GNP) is the summation of all those finally produced goods and services which the labour and capital like factors of production have produced by utilizing all the resources of the country in a year. If we represent such all aggregate output in the form of money we get GNP. If we define GNP from market prices point of view then “GNP” is the market value of all goods and services produced in a country in a year.” The GNP is a flow variable, because it represents the amount of goods and services produced during some particular period of time i.e. a year. If we represent the produced goods and services by Q 1 , Q 2 , Q 3 , Q 4 ……..and their prices by P 1 , P 2 , P 3 , P 4 ………..then the GNP of a country will be as GNP = P 1 Q 1 + P 2 Q 2 + P 3 Q 3 + P 4 Q 4 ………..P n Q n But the measure of GNP by this method we have to make the following cares. 1.         To ensure GNP the value final goods will be inc...

Professor Marshall defines National Income as the “Sum of all the physical goods produced and services provided by utilizing the natural resources of the country with the help of labour and capital. In addition to this, the net income from abroad is also included. Accordingly, the National Income is the summation of all the goods produced and services provided and the income from abroad.” According to present ideas, National Income may be defined as the aggregate factor income i.e. earning of labour and property which arises from the current production of goods and services by the nation’s economy. Professor Keynes has used three methods or approaches to define National Income. 1.         The sum of all expenditures which are made on consumption and investment goods is known as National Income. Such definition of National Income on the one side, considers total output of the economy as National Income. While on the other side the total ...

We have studied various theories which explain the determination of wages but they all stand discredited as they do not offer satisfactory explanation of wages. The modern economists are of the opinion that just as the price of a commodity is determined by the interaction of the forces of demand and supply, the rate of wages cal also be determined in the same way with the help of usual demand and supply analysis. Let us now discuss in brief as to what we mean by demand and supply of labour. 1) Demand for Labour: There are various factors which influence the demand for labour. These factors in brief are as under. (a) Demand for labour is derived demand: Demand for labour is not a direct demand. It is derived from the demand for the commodities and services, it helps to produce. If the demand for a product is high in the market, the demand for labour producing that particular commodity will also be high. In case the demand for commodity is small the demand for that labour w...

Nominal Wage: By nominal wage is meant the total amount of money earned by a person during a certain period. For instance one employs a servant and pays him Rs. 2600 per month for the services he renders to him. The amount which is paid in terms of money only is named as normal wages. Real Wages: Real wages refer to the total amount of satisfaction which a worker receives in the form of necessities, comforts and luxuries in return for the services. Real wages generally include money wages and other facilities like free clothing, free housing, free accommodation, free electricity etc. If we are to judge the standard of living of the masses it can be estimated not from the nominal wages of the workers but from the real wages. In other words of Adam Smith, the labour is rich or poor, is well or ill rewarded in proportion to the real not nominal wages of the labour. Factors for Determining Real Wages If we are to determine the real wages of a labour the following fact...

Wages are remuneration paid to labour in return for the services rendered. The term labour in Economics is used in under sense. It includes the work of skilled or unskilled professional or amateur, salaried or non-salaried persons etc who put the efforts mentally or bodily in return for some reward. The reward may be paid in cash or in kind or in both. The unit of time for the payment of remuneration may be a day, a week, a month or a year. Benham has defined the term ‘wages’ in a restricted sense. According to him ‘a wage may be defined as a sum of money paid under contract by an employer to a worker in exchange for services rendered. Theories of Wages 1.         Subsistence Theory This theory originated with Physiocrats and was commonly accepted during the 18 th century. The German economist Lassale called it the ‘Iron Law of Wages’. Karl Marx made it the basis of his theory of exploitation. According to this theory wages tend t...