CBSE Class 12 Macroeconomics Notes

Macroeconomics deals with the study of the national economy as a whole. In Class 11th notes, we covered the study of individuals through microeconomics, now we will learn about the whole economy through Macroeconomics. GeeksforGeeks has designed Notes for Class 12 Macroeconomics in a way that provides detailed knowledge about the subject and the related topics. The notes of Macroeconomics contain six chapters covering important topics, like National Income, Circular Flow of Income, Balance of Payment, Government Budget, and many more. 

Chapter 1: Introduction

The first chapter, ‘Introduction’ of Class 12 Macroeconomics notes gives a brief introduction to macroeconomics and the important terms used in this field of study. 

• Introduction to Macroeconomics 
• Basic Concepts of Macroeconomics
• What is Factor Income and Transfer Income?
• Consumption Goods and Capital Goods
• Final Goods and Intermediate Goods
• What is Net Indirect Tax (NIT)?
• What is Net Factor Income from Abroad (NFIA)?
• Circular Flow of Income: Meaning, Phases, Types, and Significance
• Difference between Real Flow and Money Flow
• Circular Flow of Income
• Leakages and Injections in Circular flow of Income

Chapter 2: National Income Accounting

National Income is the total amount of income generated by a country with the production of goods and services throughout a financial year. The second chapter, ‘National Income Accounting’ of Class 12 Macroeconomics covers detailed information about national income and related topics. The notes of this chapter consist of important topics, like Stock, Flow, Methods of Calculating National Income, National Income Aggregates, GDP, and many more. The learners can gain knowledge about National Income through the quick links mentioned below.

• National Income and Related Aggregates
• Domestic Income and Personal Income
• Private Income: Meaning, Types and Steps
• Personal, National, and Gross National Disposable Income
• Difference between Stock and Flow
• Circular Flow of Income and Methods of Calculating National Income
• Product or Value Added Method of Calculating National Income
• Expenditure Method of Calculating National Income
• Income Method of Calculating National Income
• Three Methods of calculating National Income: Value added Method, Expenditure Method and Income Method
• Treatment of Different Items in National Income
• Treatment of Different Items in Domestic Income
• National Income at Current Price and Constant Price
• Difference between Nominal GDP and Real GDP
• GDP and Welfare
• GDP Deflator

Chapter 3: Money and Banking

Money is usually accepted as a measure of exchange, besides other things, and plays a major role in the functioning of an economy. The third chapter of Class 12 Macroeconomics ‘Money and Banking’ covers important topics, like Functions of Money, Money Supply, Money Creation, Central Bank and Commercial Banks. 

• What is Barter System and Double Coincidence of Wants?
• Evolution and Definitions of Money
• Significance of Money
• Functions of Money
• Contingent, Static and Dynamic Functions of Money
• Classification of Money
• Demand for Money
• Monetary System in India
• Money Supply – Features and Measures
• Functions of Commercial Bank: Primary Functions and Secondary Functions
• Commercial Banks: Advantages and Disadvantages
• Credit Creation
• Money Multiplier
• Functions of Central Bank
• Difference between Commercial Bank and Central Bank

Chapter 4: Determination of Income and Employment

The notes of the fourth chapter of Class 12 Macroeconomics ‘Determination of Income and Employment’ contains detailed information about important topics, like Aggregate Demand, Income in Two-Sector Model, Equilibrium Income, Multiplier, Autonomous Change and related topics. 

• Components of Aggregate Demand
• Explain the Components of Aggregate Supply or National Income.
• What is Consumption Function (Propensity to Consume)?
• Types of Propensities to Consume
• Difference between APC and MPC
• What is Saving Function (Propensity to Save)?
• Types of Propensities to Save
• Difference between APS and MPS
• Relationship between different propensities (APC, MPC, APS and MPS)
• Explain the Derivation of Saving Curve from Consumption Curve.
• Investment Function: Induced Investment, Autonomous Investment and Determinants of Investment
• Difference between Induced Investment and Autonomous Investment
• Ex-Ante and Ex-Post Investment
• Full Employment and Involuntary Unemployment
• Determination of Equilibrium Level of Income: Aggregate Demand-Aggregate Supply Approach (AD-AS Approach) and Saving-Investment Approach (S-I Approach)
• Aggregate Demand-Aggregate Supply (AD-AS) Approach
• Saving-Investment (S-I) Approach
• How can we achieve equilibrium level?
• What is Investment Multiplier?
• Explain the working of Investment Multiplier.
• Short-run Fixed Price Analysis of Product Market
• What is Excess Demand?
• What is Deficient Demand?
• Difference between Excess Demand and Deficient Demand
• How to control Excess Demand?
• How to Control Deficient Demand?
• What are the different measures to control Excess Demand and Deficient Demand?
• Excess and Deficient Demand in Three-Sector Economy
• What is Fiscal Policy and how does it correct Excess Demand and Deficient Demand?

Chapter 5: Government Budget and the Economy

A budget means planning in advance how to spend a given amount of money during a specific time period. Preparation of a budget is essential for everyone, whether it is a household, business or government. The fifth chapter of Class 12 Macroeconomics, ‘Government Budget and the Economy’, covers detailed information about the Objectives and Components of the Government Budget, the Classification of Receipts and Expenditure, and the Measures of the Government Budget. 

• Government Budget and the Economy: Characteristics, Objectives and Components of Budget
• Revenue Receipt and Revenue Expenditure: Meaning and Classification
• Difference between Direct and Indirect Tax
• Capital Receipt and Capital Expenditure: Meaning and Sources of Capital Receipts
• Difference between Revenue Receipt and Capital Receipt
• Difference between Revenue Expenditure and Capital Expenditure
• Measures of Government Deficit: Revenue Deficit, Fiscal Deficit and Primary Deficit
• Difference between Fiscal Deficit and Revenue Deficit
• Difference between Primary Deficit and Fiscal Deficit
• Plan and Non-plan Expenditure
• Developmental and Non-developmental Expenditure

Chapter 6: Balance of Payments

Every country has receipts and payments to and from the outside world of that country, and it is essential to record those transactions. Balance of Payments is the statement that contains all of these transactions and helps an economy in determining its economic condition during a financial year. The notes of the last chapter of Class 12 Macroeconomics, ‘Balance of Payment’ cover everything required to know about Balance of Payment. It consists of important topics, like Capital and Current Account, Balance of Trade, Surplus, Deficit, and Balanced BOP, Foreign Exchange Rate, Foreign Exchange Market and Determination of Foreign Exchange Rate. 

• Foreign Exchange Rate: Meaning and Types
• Currency Depreciation and Currency Appreciation
• Types of Foreign Exchange Rate
• Demand and Supply for Foreign Exchange
• Determination of Exchange Rate
• Foreign Exchange Market: Functions and Types
• Fixed Exchange Rate System | Meaning, Methods, Merits and Demerits
• Flexible Exchange Rate System | Meaning, Merits and Demerits
• Managed Floating Exchange Rate System | Meaning, Objectives, Merits and Demerits
• Devaluation of Currency| Reasons, Effects, Example and Critical Evaluation
• Depreciation of Currency | Effects, Examples and Critical Evaluation
• Difference between Devaluation and Depreciation
• Balance of Payment and its Components: Capital and Current Account
• Difference between Current Account and Capital Account of BoP
• Difference between Balance of Payment and Balance of Trade
• Balance of Payments: Surplus and Deficit, Autonomous and Accommodating Transactions, Errors and Omissions