NCERT Notes Class 12 Macroeconomics Chapter 1 Macro economics NCERT Notes Class 12 by admin - May 3, 2024May 6, 20240 NCERT Notes Class 12 Macroeconomics chapter 1 Introduction with Macroeconomics notes along with NCERT textbook exercise solution and key definitions. PDf of the chapter is also included. Online test also available for the chapter 1-Introduction with macro economics Table of ContentsPDF of NCERT Book Chapter 1-IntroductionNCERT Notes Class 12 Macro Economics Chapter 1 Introduction with Macroeconomics1- Origin of Macroeconomics2- Economic agentsSolution of NCERT Text Book exerciseQ1. What is the difference between microeconomics and macroeconomics?Q2. What are the important features of a capitalist economy?Q3. Describe the four major sectors in an economy according to the macroeconomics point of view.Q4. Describe the great depression of 1929. PDF of NCERT Book Chapter 1-Introduction NCERT Notes Class 12 Macro Economics Chapter 1 Introduction with Macroeconomics NCERT Notes Class 12 Macroeconomics Key Definitions 1- Origin of Macroeconomics The word ‘macro’ in English has its origin in the Greek word ‘Makros’ which means large. So study of macroeconomics means study of economy as a whole. Macroeconomics emerged as a separate branch of economics in 1936 when famous British economist John Maynard Keynes published his book ‘The general theory of Employment, Interest and Money’. It is also known as ‘Income and Employment’. Macro economics can be defined as that branch of economics which studies economic problems at the level of an economy as a whole for example GDP of a nation, employment etc. . While micro economics studies the economic problems at the level of an individual like a consumer, a producer. 2- Economic agents By Economic agents or economic units, we mean those individuals or institutions which take decisions. In micro economics these may be a consumer (who decides what and how much to consume) or producers (who decides what and how much goods and services to produce). While in macroeconomics economic agents meant by entities or institutions like government, RBI, SEBI. NCERT Notes Class 12 Macroeconomics Solution of NCERT Text Book exercise Q1. What is the difference between microeconomics and macroeconomics? Ans.1. The difference between microeconomics and macroeconomics can be explained from the following table – Basis of differenceMicroeconomicsMacroeconomicsarea of studyIn microeconomics, economic problems of economic relations are studied at the level of individuals such as a consumer, a firm and a family.Macroeconomics is the study of economic relations or economic problems and issues at the level of the entire economy.The amount of collectabilityMicroeconomics deals with the determination of output and price within an individual firm or industry.Macroeconomics is concerned with the determination of total output and general price level in the entire economyDifferent beliefsIn the study of microeconomics, the assumption is that macro variables remain constant.The study of macroeconomics assumes that micro variables remain constant.The central problemThe central problem of microeconomics is price determination.The central problem of all economics is determination of production and employment.The individual whole paradoxThe facts which are logical and correct at the micro level may not be correct at the macro level as well.In macroeconomics, the facts which are logical and correct at the macro level are not logical and correct at the micro level.Government interventionGovernment intervention is not a core subject in microeconomics.Government intervention is a basic topic in macroeconomics.difference between micro economics and macro economics Q2. What are the important features of a capitalist economy? Ans. 2 Features of a Capitalist Economy Capitalist economy refers to an economy in which economic activities are left to the free interaction of market forces. The producer is free to produce those goods and services which have maximum demand so that he can maximize his profit. Similarly, the consumer is also free to buy goods and services according to his interest and choice so that he can maximize his satisfaction. There is no interference of the government in what and how much to produce and what and how much to consume. The main characteristics of capitalism are as follows- 1- Private Property In a capitalist economy, people have the full right to hold private property and use it as per their wish. All the means of production such as machines, tools, land, mines etc. are under private ownership. Capitalists have the freedom to hold and increase capital to any extent. They have the freedom to buy and sell any type of property. Under capitalism, there are some properties over which the government or the entire society has the right such as roads, railways, parks, universities, hospitals, libraries etc. 2. Price Mechanism In a capitalist economy, the price is determined by the price system. The meaning of the price system is that the price is determined by the forces of demand and supply without any external interference. The price system helps the producers to decide which goods and services should be produced in what quantity, at what time and where. The control and coordination of demand and supply in the economy is brought about by the price system. All economic activities – consumption, production, exchange, distribution, investment and savings – run as per the instructions of the price system. 3- Freedom of Enterprise In a capitalist economy, every person has complete freedom to use his means of production in whatever business he wants and start any type and size of industry wherever he wants. In short, an entrepreneur can decide freely about what to produce, where to produce and how much to produce. An entrepreneur can choose any business or job he wants according to his ability, efficiency, education, resources and practice. 4- Competition and Co-operation Due to freedom of enterprise in the economy, there are usually a large number of producers of every commodity. There is competition among them to sell those commodities. There is competition among buyers to buy a commodity and among labourers to get a job. These labourers work together and with the help of machines. In this way, both competition and cooperation go hand in hand. 5- Profit Motive In this economy, the desire to earn profit is the most important motivation for performing any economic activity. In a capitalist economy, no work is done without profit. All entrepreneurs run such industries in which there is a hope of getting maximum profit. Therefore, in capitalism, production is done mainly to earn profit. 6- Sovereignty of the Consumer Consumer sovereignty has a special place in the capitalist economy. The entire production structure is based on the desires and demand of consumers. Therefore, entrepreneurs will produce only those goods and services which consumers demand, that is, for which consumers are ready to pay a higher price. 7- Labor as a Commodity In a capitalist economy, like other commodities, there is a market for labour as well. Here labour is bought and sold. The basic reason for this is that the population deprived of the means of production is helpless in using its labour power itself. Therefore, it has to sell its labour to earn its living. 8- There is no government interference In capitalism, the government does not interfere in economic activities. Producers and consumers are free to take their own decisions. The job of the government is to maintain law and order in the country and protect the country from external attacks. 9- Self-Interest The main driving force of capitalism is the satisfaction of self-interest. Self-interest refers to the desire due to which workers and businessmen want to earn more monetary income and the consumer wants to get maximum satisfaction. All the members of this society are considered rational. (NCERT Notes Class 12 Macroeconomics) Q3. Describe the four major sectors in an economy according to the macroeconomics point of view. Ans 3. Four major sectors of macroeconomics -(Components of Macro Economics) 1. Producer Sector The productive sector produces goods and services. This sector buys/hires factors of production (land, labour, capital and enterprise) from the household or family sector and produces goods and services and sells them to the household sector. 2- Household Sector The household sector consumes goods and services. This sector is the owner of the factors of production. This sector contributes to the production of goods and services by providing these factors to the production sector and purchases goods and services from the income received in exchange for factor services. 3- Government Sector This sector performs functions related to taxation and financial assistance etc. The government sector receives income in the form of direct taxes from the household sector and indirect taxes and corporate taxes from the productive sector. This sector provides financial assistance to the household sector in the form of old age pension, stipends etc. and to the productive sector. 4- Rest Of the World Sector This sector exports and imports. Selling of goods and services by one country to another country is called export while in import goods are purchased by one country from another country. Q4. Describe the great depression of 1929. During the great depression of 1929 the output and employment levels fall by huge amounts in the countries of Europe and North America and in other countries as well. In USA, unemployment rate rose from 3% to 25% and aggregate output fell by about 33%. Demand for goods in the market was low, many factories were lying idle, workers were thrown out of jobs. NCERT Notes Class 12 Macroeconomics For the notes of rest of chapter Click Here Click here Chapter 1 Introduction with Macro economics Online test.