CBSE Class 12 Macro Economics Revision Notes

Class 12 Macroeconomics Notes

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The CBSE Class 12 Macroeconomics is a branch of the economics Syllabus which deals with the decision making, behaviour and performance of the economy as a whole. Students can refer to Class 12 Macroeconomics Notes on the Extramarks website for a chapter-wise in-depth understanding of the critical topics. The subject is complex, but the Notes prepared by the expert faculty of Extramarks make concepts simple and straightforward. The Class 12 Macroeconomics Notes have explained the curriculum in the form of questions and answers that help you revise the complete Syllabus efficiently.

Key Topics Covered in Class 12 Macroeconomics Notes

There are six main chapters in NCERT Class 12 Macroeconomics textbook. The Class 12 Macroeconomics Notes come with several sections and subsections. 

Chapter 1. Introduction to Macroeconomics

The term ‘Macro’ means “Large” and is derived from the Greek word ‘Makro’. Class 12 Macroeconomics Notes deals with the description and explanation of economic processes involving aggregates. Macroeconomics is the segment of economic theory that considers the economy as a whole, such as aggregate consumption, national income, general price level, aggregate employment and aggregate investment. It looks into principles, issues, and policies associated with obtaining full employment and enlarging production capacity.

Economic units or economic agents are individuals or institutions making financial decisions like manufacturers or service providers who choose what and how much to produce and entities such as the banks, government and corporations that drive economic decisions such as spending, the interest rate charged on credit, tax price and so on.

The foundation for macroeconomic analysis is laid by four principal sectors of the economy that oversee four expenditures on the gross domestic product (GDP), which is given in detail in Class 12 Macroeconomics Notes.

Household Sector: 

This sector includes a single or group of people like consumers, individuals, and every member of society who makes independent decisions about their consumption and production. 

Firms: 

This consists of sole proprietorships, partnerships, and corporations. People in the household sector make a living by working in firms that profitably produce goods and services.

Government Sector: 

A government’s primary goal is to levy taxes to fund development projects such as roads, large industries and dams. Also, maintain law and order, nurture growth and stability, and administer government services. 

Foreign/ External Sector: 

This sector deals with the export and import of products and services. Apart from an exchange, there can be welcoming capital and investments from and in foreign countries.

Chapter 2. National Income Accounting 

The national income indicates the market value of goods and services produced by a firm during an accounting year. National income studies the economic accomplishment of an economy and shows its strengths and weaknesses. It assists in deciding the structural changes needed in the economy. It also shows the country’s economic activity level by comparing nations based on national income. 

The three means used to calculate federal income are the income method, value-added method, and expenditure method. The Class 12 Macroeconomics Notes explain how national income is the total of all the factor income produced during a production year. Types of goods ( products or services that meet people’s needs) are:

Consumption goods:

They are final products that are utilised directly to satisfy human needs.

Capital goods:

The machinery and equipment used in producing consumer goods are long-lasting and can be easily converted to cash.

Final goods:

The goods used by consumers to satisfy current needs. Example: medicines, food and television.

Intermediate goods:

These products are made during the manufacturing process and used to produce other goods. Example: wood, sugar.

Methods of calculating national income are :

• Product method or value-added method
• Expenditure method
• Income method

Chapter 3. Money and Banking 

Money is an economic unit most often used as a means of exchange that is universally accepted in a transactional economy. Money is a means of exchange and acts as a store of value, measure, and standard of deferred payment. The Class 12 Macroeconomics Notes explain the role of both in detail.

Role of Money: 

The functions of money are mainly Classified as:

• Primary functions
• A mode of exchange and a standard measure and common unit of value.

• Secondary functions
• Value storage, value transfer, and deferred payment standard.

• Contingent Functions
• This includes the basis of credit, liquidity, maximum profit to the producers, and maximum consumer satisfaction.

Banking is the business of protecting public money. Banks lend money to generate interest that creates profits for the bank and its customers. A bank is a financial institution authorized to receive deposits, make loans, and perform other financial services. The banking system consists of the central bank and commercial bank. 

Commercial Banks:

Commercial Banks are financial institutions that receive deposits from the public and cater to loan facilities for investment to earn profit.

• Primary functions

• Accepting deposits, advancing loans, and discounting bills of exchange.

• Secondary functions

• Agency function – Transfer of funds, collection of funds, and collection of dividend and interest

• General utility function – Purchase and sell foreign exchange, issuance of cheques, and safe custody of valuable goods in lockers.

Central Banks: 

The Central Bank is a pinnacle that makes the country’s monetary policy in the public interest and the financial system. It governs, supervises, and smoothens the banking system of a nation.

Chapter 4. Determination of Income and Employment

The income and employment theory is the body of economic analysis concerned with the relative employment levels, output, and prices in an economy. By establishing the interrelation of these macroeconomic factors, governments try to generate policies that contribute to economic stability.

Note:

Determinations of Income and Employment are called ‘Aggregate Demand’ and ‘Aggregate Supply’.

Aggregate demand: 

• It refers to the total cost of all final goods and services that are scheduled to be bought by all the sectors of the economy at a given level of income during a period. Aggregate demand means the gross expenditure on goods and services in an economy during a certain period of time.

Components of Aggregate demand are:

• Household consumption expenditure
• Investment expenditure
• Govt. consumption expenditure
• Net export 

Aggregate Supply:

• The money value of all the final goods and services accessible for purchase by an economy during a given period is known as aggregate Supply. It is the circulation of goods and services in the economy. The monetary worth of ultimate goods and services equals the net value-added. 

Note:

Aggregate Supply is nothing but the national income. 

Chapter 5. Government Budget and the Economy 

A budget is created to get an estimate of income over expenditure. The budget is an integral part of the economy of any country since it helps in planning and administering its financial affairs. A government budget is a yearly financial statement where an itemized estimate of expected revenue and expenditure is listed for the current fiscal year, which runs from April 1 to March 31 of the following year. The essential elements of a government budget are as follows:

Public Expenditure: 

A national budget approves public expenditures under two groups:

• Government procures goods and services to serve the community with defense, health care, and education.
• They also offer subsidies and liquidation to industries and commercial companies.

Revenues: 

The government discovers ways and means to earn income to meet their spending. 

Actual Receipts and Expenditure List: 

At the end of the financial year, on March 31, every year, a detailed list of genuine revenue and expenditure and reasons for deficits or surplus is materialised for that financial year.

Economics Government Budget: The financial policy for the coming fiscal year includes taxation proposals, revenue prospects, spending programs, and the introduction of new projects.

The Need for Government Budget

• Resource Reallocation
• Reduce the Difference in Income and Wealth
• Improvement in Economic Growth
• Reduce Differences in Regional Development

Chapter 6. Open-Economy Macroeconomics 

An open Economy conducts business with other countries and maintains economic relations with the rest of the world. An open market is identified by the absence of tariffs, licensing requirements, subsidies, and other regulations or practices.

The open economy is a two-sector economy where most consumption and investment expenditures occur. Thus, the economy’s overall output is the total consumption and investment expenditure.

Advantage:

The advantage is that an open economy grows faster than a closed economy. The salaries and working atmosphere are generally healthier in companies that are involved in direct trade. An open economy presents welfare and opportunity worldwide and helps promote more excellent balance and security for everyone.

Class 12 Macroeconomics Notes: Chapter Summary

Macroeconomics concentrates on the performance of economies – inflation, poverty reduction, changes in economic output, the balance of payments, interest and foreign exchange rates, social equity, and sustainable growth. A sound economy can establish strong monetary and fiscal policies.

Class 12 Macroeconomics Notes: Exercises and  Solutions

The Extramarks website presents the new and updated Class 12 Macroeconomics Notes as per NCERT regulations. Extramarks also cater to all other subjects of the Class 12 CBSE Syllabus. Students can clear their doubts by clicking on the links to prepare for the upcoming economics board examinations.

A list of detailed Solutions for all the questions is listed below:

• Very Short Answer Type Questions and Solutions- 5 Questions
• Short Answer Type Questions and Solutions- 7 Questions
• Long Answer Type Questions and Solutions- 6 Questions

This was all about Class 12 Macroeconomics Notes. Go through the Extramarks website to learn more about the subject, where you can read all the content by registering on the website. 

NCERT Exemplar Class 12 Macroeconomics

NCERT Exemplar Class 12 Macroeconomics are provided here to assist the students in their final examination preparation. These exemplar questions are a little more complex, and they cover a variety of concepts covered in each chapter of Class 12 Macroeconomics. Extramarks provide students with access to these exemplar problems and Solutions for Macroeconomics Class 12 chapters.