NCERT Solutions Class 12 Macro Economics Chapter 1

NCERT Solutions Class 12 Macroeconomics Chapter 1 – Introduction

Class 12 Macroeconomics Chapter 1 gives an introduction to the discipline of Macroeconomics. This chapter will provide the students with a basic explanation of the principles used for Macroeconomics analysis. The primary questions for a macroeconomic analysis are those that generally affect the common people. They include questions like, “Will the prices as a whole rise or come down?” “Is the employment condition of the country as a whole, or some sectors of the economy, getting better or worsening?” “What reasonable indicators would show that the economy is better or worse?” “What steps, if any, can the state take, or the people ask for, to improve the state of the economy?”

An introduction to Macroeconomics will help students comprehend the meaning of Macroeconomics. This knowledge can help students understand whether they would wish to go forward with Economics for their higher studies. A thorough study of Macroeconomics will help them understand the economy and its problems as a whole. It will also explain consumer behaviour, the theory of prices and marketing principles.

It is frequently recommended that students read through the NCERT Solutions for each chapter to gain better comprehension and clarity of the chapter’s contents. Finding solutions to the NCERT exercises can be challenging for many students. To motivate students to learn, frame their answers and further enhance them with the aid of solutions, Extramarks has created NCERT Solutions Class 12 Macroeconomics Chapter 1. These Class 12 Macroeconomics Chapter 1 NCERT Solutions were created by subject experts who followed the most recent CBSE guidelines and wrote them in a manner that meets the needs of all students, irrespective of their level. It gives students a thorough comprehension of the material and helps them perform well on exams.

Key Topics Covered in NCERT Solutions Class 12 Macroeconomics Chapter 1

The key topics covered in Ncert Solutions Class 12 Macroeconomics Chapter 1 are as follows:

• Introduction to Macroeconomics
• How Macroeconomics and Microeconomics Differ
• Economic Agents
• The Great Depression
• Important Features of a Capitalist Economy
• Major Sectors of an Economy from a Macroeconomic Point of View
• Entrepreneurs
• Revenue
• Expenditure
• Objectives of Macroeconomic Policies

Students must have a solid understanding of Chapter 1: Introduction to Macroeconomics to complete all of the NCERT Class 12 Macroeconomics Chapters. If students want to learn more regarding this chapter, they should use the NCERT Solutions Class 12 Macroeconomics Chapter 1 provided by Extramarks to help them prepare for their exams. The principles are thoroughly addressed to aid students in understanding the concepts. These solutions will help students in having a full grasp of each chapter and hence score well in the examinations.

Let us now look at the in-depth information on each of the above-listed subtopics in the NCERT Solutions Class 12 Macroeconomics Chapter 1:

Introduction to Macroeconomics

• The term macro is derived from the Greek word ‘Makro,’ which means “big.” It is a field of economics focusing on explaining and describing aggregate-based economic processes.
• A group of economic subjects with a few things in common are called aggregates.
• The Theory of Employment, Interest and Money by John Maynard Keynes, which was published in 1936 marked the beginning of macroeconomics. This field looks into the connections or economic problems that have an overall impact, like saving and total consumption.
• It looks into the theories, challenges, and policies around achieving full employment and raising the production level.

How Macroeconomics and Microeconomics Differ

Microeconomics

• Microeconomics is the area of economics that focuses on human behaviour, specifically how individuals and organisations behave and how decisions are made in light of scarce resources. Microeconomics study shows how households and businesses interact or work together. A market for goods and services is created as a result of this interaction, which significantly impacts product pricing.
• Alfred Marshall developed the concept of Microeconomics.
• Microeconomics can be used to identify consumer behaviour, pricing of products and marketing principles.

Macroeconomics

• Macroeconomics is the discipline of economics that analyses an economy’s overall behaviour and performance. It focuses on the general developments in the economy, including inflation, growth rate, GDP and unemployment.
• The beginning of the theory of Macroeconomics was by economist JM Keynes.
• Macroeconomics can be used to explain aggregate performance, unemployment, growth and overall market predictions.

Economic Agents

• Economic units or agents refer to those individuals or institutions that take financial decisions.
• A consumer can be an economic agent who will decide what and how much to consume. Similarly, a manufacturer or service provider can be a financial agent in determining what and how much to produce.
• Government, banks and corporations can be economic units when they identify how much to spend, what interest rates should be charged on credit, how much tax should be levied, etc.

The Great Depression

• One of the greatest economic depressions in recorded history was the Great Depression of 1929. It started in 1929 with the collapse of the US stock market and lasted until the 1930s were over. The main contributor to the crisis was the market’s oversupply of food grains, which led to a decline in agricultural prices. Because there was less demand for commodities in the economy, less was produced, which led to increased unemployment.
• The economic slowdown is thought to be the result of several factors. Some of these factors include; rising debt levels, declining earnings, and the gold standard system.
• The economy and the people experienced several issues due to the Great Depression. Production and consumption both fell sharply in the economy. People throughout the population were suffering due to the skyrocketing unemployment rate. The unemployment rate in the US increased from 3% to 25%. Numerous well-known banks went out of business and collapsed.
• Canada, Australia and the United States became new alternative centres for wheat production during the conflict. Underconsumption and excessive investment caused stocks of finished items to start to build up, which led to low prices and, as a result, low-profit margins. The money in the economy was transformed into unsold finished items, which caused a dramatic decline in employment and precipitously decreased income levels.
• Ultimately, the Great Depression influenced American politics and set the stage for The New Deal.
• The Great Depression had its own implications and relevance in economics because it led to the breakdown of the classical economic method. Those who believed in supply and demand market dynamics laid the foundation for the Keynesian model to emerge.
• The occurrence provided researchers with sufficient data to classify macroeconomics as a separate branch of economics.

Students can register at Extramarks to access various other study materials in addition to NCERT Solutions Class 12 Macroeconomics Chapter 1.

Important Features of a Capitalist Economy

• A majority of industrial activities are carried out by capitalist companies in a capitalist nation. Entrepreneurs are individuals who exercise control over important decisions and assume a significant portion of the risk connected with the firm or enterprise that makes up a typical capitalist enterprise. The money needed to run the business can be provided directly, or they can borrow it.
• It is primarily managed by the price mechanism, with no government interference. The government’s sole responsibility is to maintain law and order. These production methods are motivated by profit. This economic system is often known as a free-market economy or a laissez-faire system.
• Hong Kong, Singapore, Canada, the United Arab Emirates, Ireland and other nations have capitalist economies.

The primary features of a capitalist economy are as follows:

• Private property
• No government interference
• Profit motive
• Freedom of enterprise
• Freedom of ownership
• Flexibility in labour markets
• Consumer sovereignty
• Price mechanism

Major Sectors of an Economy from a Macroeconomic Point of View

The four broad macroeconomic sectors comprise the framework for macroeconomic analysis: the household, business, government and foreign.

These four functions are responsible for four GDP(Gross Domestic Product) spending types.

The four major market sectors mentioned under NCERT Solutions Class 12 Macroeconomics Chapter 1:

1. Household: This industry includes consumers, individuals and all members of society. The household sector provides the production inputs—land, labour, capital and entrepreneurs—and the goods and services purchased for consumption. This industry is in charge of managing GDP’s consumption expenditures component. In a nutshell, a household is characterised as a person or a group of people who decide independently on their economic activities, such as consumption and production.
2. Firms: People in the household sector earn a living by working as business employees. Firms are economic units that manufacture things and provide services. They use, organise and carry out manufacturing processes to make a profit. It includes companies, partnerships and single proprietorships. This sector regulates the investment spending of the Gross Domestic Product.
3. Government Sector: A government maintains law and order, encourages development and stability, and manages public services. This sector is in charge of the government’s contribution to GDP through purchases. The main objective of a government is to charge taxes to finance long-term development projects like highways, dams and heavy industries. Additionally, the government invests in health and education and offers these services at a reduced cost. The Environmental Protection Agency and the Department of Transportation are two examples.
4. Foreign/ External Sector: Export and import of goods and services are dealt with in this industry. It is known as an export when domestically produced goods and services are sold to other countries. Import is the term used to describe acquiring products and services abroad.

In addition to the export and import of goods, a nation may also experience an inflow of goods, the welcoming of foreign capital, the outflow of foreign capital, or the investment of foreign money. The contribution of the foreign sector to GDP is measured by net exports (exports minus imports).

Entrepreneurs

An entrepreneur is a person who is determined to begin their own company based on a concept they came up with or a product they created, taking on most of the risks and reaping a majority of the rewards.

Revenue

The amount of money made from regular business activities is known as revenue, and it is calculated by dividing the number of units sold by the average selling price.

Investment Expenditure

Any cost incurred by a person, a company or the government for creating new capital assets like machines, buildings, etc., is referred to as an investment expenditure.

Objectives of Macroeconomic Policies

Government or statutory organisations like the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), and other similar organisations implement macroeconomic policy. The main objectives of the macroeconomic policies include:

1. Sustainability
2. Price stability
3. Full employment
4. External balance
5. Social objectives

Access these NCERT Solutions Class 12 Macroeconomics Chapter 1 from the Extramarks website for a well-rounded study session for your exam preparations.

NCERT Solutions Class 12 Macroeconomics Chapter 1: Exercise and Solutions

NCERT Solutions Class 12 Macroeconomics Chapter 1 is a thorough reference covering all central themes from the standpoint of the test and was created by Extramarks subject matter experts. To ace any tests or examinations and pass with flying colours, students can study with NCERT solutions, which include a variety of questions, including MCQs, short answer questions and long answer questions, among others.

Click on the below to view NCERT Solutions Class 12 Macroeconomics Chapter 1:

Class 12 Macroeconomics 1: Very Short Answer Type Questions

Class 12 Macroeconomics 1: Short Answer Type Questions

Class 12 Macroeconomics 1: Long Answer Type Questions

Students may access NCERT Solutions Class 12 Macroeconomics Chapter 1 and other chapters by clicking on the links below. In addition, students can also explore NCERT Solutions for other classes below.

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By referring to Extramarks NCERT Solutions Class 12 Macroeconomics Chapter 1, students can easily understand the basics of Macroeconomics and know how it differs from Microeconomics.

Key Features of NCERT Solutions Class 12 Macroeconomics Chapter 1

NCERT Solutions Class 12 Macroeconomics Chapter 1 provided by Extramarks helps in easy comprehension of the fundamental concepts present in the chapter. Revising the ideas with the help of this resource will help students have a quick revision of all essential points covered in class which will ultimately help them in scoring good marks in their examinations.

The essential features of Extramarks NCERT Solutions Class 12 Macroeconomics Chapter 1 include the following:

• To give students authentic and trustworthy study material, the notes are created by highly skilled and experienced professors who attentively follow the most recent NCERT textbooks.
• These solutions are revised and improved in accordance with the most recent CBSE syllabus. Since most exam questions are drawn from the NCERT textbooks, students can rely on Extramarks NCERT Solutions Class 12 Macroeconomics Chapter 1 for any support.
• The answers assist in removing the students’ doubts and obstacles by providing a framework and outlining the central concepts of the chapter.