CUET Economics: MacroNational Income. Free, no login required.

Inventory and Investment.

Inventories are treated as capital. Addition to stock of capital of a firm is known as investment. There can be three major categories of investment. Change in inventories may be planned or unplanned. In case, of an unexpected fall in sales, firm will have unsold stock of goods which it had not anticipated. Hence, there will be unplanned accumulation of inventories. In opposite case, where there is unexpected rise in sales, there will be unplanned decumulation of inventories.

What can be examples of planned accumulation or decumulation of inventories? Suppose firm wants to raise inventories from 100 shirts to 200 shirts during year. Expecting sales of 1100 shirts (1000 shirts during year as before), firm produces 1100 shirts (1000 + 100 =1100 shirts). If sales, are actually 1100 shirts (1000 shirts), then firm indeed ends up with a rise in inventories. The new stock of inventories is 200 shirts, which was indeed planned by firm. This rise is an example of planned accumulation of inventories. On the other hand, if firm had wanted to reduce inventories from 100 to 25, then it would produce 1100 shirts (1000-75 =925 shirts. This is because it plans to sell 75 shirts out of inventory of 100 shirts it started with ( so that inventory at ends of year becomes 100 -75 =25 shirts, which firm wants.). If sales, indeed turn out to be 1100 shirts (1000 as expected by firm, firm will be left with planned, reduced inventory of 25 shirts.

Inventory and Investment.

Inventories are treated as capital. Addition to stock of capital of a firm is known as investment. There can be three major categories of investment. Change in inventories may be planned or unplanned. In case, of an unexpected fall in sales, firm will have unsold stock of goods which it had not anticipated. Hence, there will be unplanned accumulation of inventories. In opposite case, where there is unexpected rise in sales, there will be unplanned decumulation of inventories.

What can be examples of planned accumulation or decumulation of inventories? Suppose firm wants to raise inventories from 100 shirts to 200 shirts during year. Expecting sales of 1100 shirts (1000 shirts during year as before), firm produces 1100 shirts (1000 + 100 =1100 shirts). If sales, are actually 1100 shirts (1000 shirts), then firm indeed ends up with a rise in inventories. The new stock of inventories is 200 shirts, which was indeed planned by firm. This rise is an example of planned accumulation of inventories. On the other hand, if firm had wanted to reduce inventories from 100 to 25, then it would produce 1100 shirts (1000-75 =925 shirts. This is because it plans to sell 75 shirts out of inventory of 100 shirts it started with ( so that inventory at ends of year becomes 100 -75 =25 shirts, which firm wants.). If sales, indeed turn out to be 1100 shirts (1000 as expected by firm, firm will be left with planned, reduced inventory of 25 shirts.

Inventory and Investment.

Inventories are treated as capital. Addition to stock of capital of a firm is known as investment. There can be three major categories of investment. Change in inventories may be planned or unplanned. In case, of an unexpected fall in sales, firm will have unsold stock of goods which it had not anticipated. Hence, there will be unplanned accumulation of inventories. In opposite case, where there is unexpected rise in sales, there will be unplanned decumulation of inventories.

What can be examples of planned accumulation or decumulation of inventories? Suppose firm wants to raise inventories from 100 shirts to 200 shirts during year. Expecting sales of 1100 shirts (1000 shirts during year as before), firm produces 1100 shirts (1000 + 100 =1100 shirts). If sales, are actually 1100 shirts (1000 shirts), then firm indeed ends up with a rise in inventories. The new stock of inventories is 200 shirts, which was indeed planned by firm. This rise is an example of planned accumulation of inventories. On the other hand, if firm had wanted to reduce inventories from 100 to 25, then it would produce 1100 shirts (1000-75 =925 shirts. This is because it plans to sell 75 shirts out of inventory of 100 shirts it started with ( so that inventory at ends of year becomes 100 -75 =25 shirts, which firm wants.). If sales, indeed turn out to be 1100 shirts (1000 as expected by firm, firm will be left with planned, reduced inventory of 25 shirts.

Inventory and Investment.

Inventories are treated as capital. Addition to stock of capital of a firm is known as investment. There can be three major categories of investment. Change in inventories may be planned or unplanned. In case, of an unexpected fall in sales, firm will have unsold stock of goods which it had not anticipated. Hence, there will be unplanned accumulation of inventories. In opposite case, where there is unexpected rise in sales, there will be unplanned decumulation of inventories.

What can be examples of planned accumulation or decumulation of inventories? Suppose firm wants to raise inventories from 100 shirts to 200 shirts during year. Expecting sales of 1100 shirts (1000 shirts during year as before), firm produces 1100 shirts (1000 + 100 =1100 shirts). If sales, are actually 1100 shirts (1000 shirts), then firm indeed ends up with a rise in inventories. The new stock of inventories is 200 shirts, which was indeed planned by firm. This rise is an example of planned accumulation of inventories. On the other hand, if firm had wanted to reduce inventories from 100 to 25, then it would produce 1100 shirts (1000-75 =925 shirts. This is because it plans to sell 75 shirts out of inventory of 100 shirts it started with ( so that inventory at ends of year becomes 100 -75 =25 shirts, which firm wants.). If sales, indeed turn out to be 1100 shirts (1000 as expected by firm, firm will be left with planned, reduced inventory of 25 shirts.

Inventory and Investment.

Inventories are treated as capital. Addition to stock of capital of a firm is known as investment. There can be three major categories of investment. Change in inventories may be planned or unplanned. In case, of an unexpected fall in sales, firm will have unsold stock of goods which it had not anticipated. Hence, there will be unplanned accumulation of inventories. In opposite case, where there is unexpected rise in sales, there will be unplanned decumulation of inventories.

What can be examples of planned accumulation or decumulation of inventories? Suppose firm wants to raise inventories from 100 shirts to 200 shirts during year. Expecting sales of 1100 shirts (1000 shirts during year as before), firm produces 1100 shirts (1000 + 100 =1100 shirts). If sales, are actually 1100 shirts (1000 shirts), then firm indeed ends up with a rise in inventories. The new stock of inventories is 200 shirts, which was indeed planned by firm. This rise is an example of planned accumulation of inventories. On the other hand, if firm had wanted to reduce inventories from 100 to 25, then it would produce 1100 shirts (1000-75 =925 shirts. This is because it plans to sell 75 shirts out of inventory of 100 shirts it started with ( so that inventory at ends of year becomes 100 -75 =25 shirts, which firm wants.). If sales, indeed turn out to be 1100 shirts (1000 as expected by firm, firm will be left with planned, reduced inventory of 25 shirts.

Basic Concepts of Macro Economics

On the basis of given passage answer the following questions:

It is important to introduce concepts of stocks and flows. Income, or output, or profits are concepts that make sense only when a time, period is specified. These are called flows because they occur over a period during time. In contrast, stock variables are defined at a particular point of time. If we consider all final goods, and services produced over an economy, over a given period during a period of time, they are either over form during consumption goods, (both durable and non-durable) or capital goods. As final goods, they do not undergo any further transformation over economic process. Of total production taking place over economy, a large number during products do not end up over final consumption and are not capital goods, either. Such goods, may be used by other producers as materials inputs. These are intermediate goods, mostly used as raw materials or inputs for production during other commodities. They do not comprise during final expenditure. The sum total during final consumption, investment, government, and exports expenditures received by all firms over economy, is aggregate final expenditure over a four-sector economy.

Let us understand flow during income over a simplified economy. There is only one way over which households may dispose during their earnings—by spending their entire income on goods, and services produced by domestic firms. The other channels during disposing their income are closed: we have assumed that households do not save, they do not pay taxes to government– since there is no government, and neither do they buy imported goods, since there is no external trade over this simple economy. In other words, factors during production use their remunerations to buy goods, and services which they assisted over producing.

Basic Concepts of Macro Economics

On the basis of given passage answer the following questions:

It is important to introduce concepts of stocks and flows. Income, or output, or profits are concepts that make sense only when a time, period is specified. These are called flows because they occur over a period during time. In contrast, stock variables are defined at a particular point of time. If we consider all final goods, and services produced over an economy, over a given period during a period of time, they are either over form during consumption goods, (both durable and non-durable) or capital goods. As final goods, they do not undergo any further transformation over economic process. Of total production taking place over economy, a large number during products do not end up over final consumption and are not capital goods, either. Such goods, may be used by other producers as materials inputs. These are intermediate goods, mostly used as raw materials or inputs for production during other commodities. They do not comprise during final expenditure. The sum total during final consumption, investment, government, and exports expenditures received by all firms over economy, is aggregate final expenditure over a four-sector economy.

Let us understand flow during income over a simplified economy. There is only one way over which households may dispose during their earnings—by spending their entire income on goods, and services produced by domestic firms. The other channels during disposing their income are closed: we have assumed that households do not save, they do not pay taxes to government– since there is no government, and neither do they buy imported goods, since there is no external trade over this simple economy. In other words, factors during production use their remunerations to buy goods, and services which they assisted over producing.

Basic Concepts of Macro Economics

On the basis of given passage answer the following questions:

It is important to introduce concepts of stocks and flows. Income, or output, or profits are concepts that make sense only when a time, period is specified. These are called flows because they occur over a period during time. In contrast, stock variables are defined at a particular point of time. If we consider all final goods, and services produced over an economy, over a given period during a period of time, they are either over form during consumption goods, (both durable and non-durable) or capital goods. As final goods, they do not undergo any further transformation over economic process. Of total production taking place over economy, a large number during products do not end up over final consumption and are not capital goods, either. Such goods, may be used by other producers as materials inputs. These are intermediate goods, mostly used as raw materials or inputs for production during other commodities. They do not comprise during final expenditure. The sum total during final consumption, investment, government, and exports expenditures received by all firms over economy, is aggregate final expenditure over a four-sector economy.

Let us understand flow during income over a simplified economy. There is only one way over which households may dispose during their earnings—by spending their entire income on goods, and services produced by domestic firms. The other channels during disposing their income are closed: we have assumed that households do not save, they do not pay taxes to government– since there is no government, and neither do they buy imported goods, since there is no external trade over this simple economy. In other words, factors during production use their remunerations to buy goods, and services which they assisted over producing.

Basic Concepts of Macro Economics

On the basis of given passage answer the following questions:

It is important to introduce concepts of stocks and flows. Income, or output, or profits are concepts that make sense only when a time, period is specified. These are called flows because they occur over a period during time. In contrast, stock variables are defined at a particular point of time. If we consider all final goods, and services produced over an economy, over a given period during a period of time, they are either over form during consumption goods, (both durable and non-durable) or capital goods. As final goods, they do not undergo any further transformation over economic process. Of total production taking place over economy, a large number during products do not end up over final consumption and are not capital goods, either. Such goods, may be used by other producers as materials inputs. These are intermediate goods, mostly used as raw materials or inputs for production during other commodities. They do not comprise during final expenditure. The sum total during final consumption, investment, government, and exports expenditures received by all firms over economy, is aggregate final expenditure over a four-sector economy.

Let us understand flow during income over a simplified economy. There is only one way over which households may dispose during their earnings—by spending their entire income on goods, and services produced by domestic firms. The other channels during disposing their income are closed: we have assumed that households do not save, they do not pay taxes to government– since there is no government, and neither do they buy imported goods, since there is no external trade over this simple economy. In other words, factors during production use their remunerations to buy goods, and services which they assisted over producing.

Basic Concepts of Macro Economics

On the basis of given passage answer the following questions:

It is important to introduce concepts of stocks and flows. Income, or output, or profits are concepts that make sense only when a time, period is specified. These are called flows because they occur over a period during time. In contrast, stock variables are defined at a particular point of time. If we consider all final goods, and services produced over an economy, over a given period during a period of time, they are either over form during consumption goods, (both durable and non-durable) or capital goods. As final goods, they do not undergo any further transformation over economic process. Of total production taking place over economy, a large number during products do not end up over final consumption and are not capital goods, either. Such goods, may be used by other producers as materials inputs. These are intermediate goods, mostly used as raw materials or inputs for production during other commodities. They do not comprise during final expenditure. The sum total during final consumption, investment, government, and exports expenditures received by all firms over economy, is aggregate final expenditure over a four-sector economy.

Let us understand flow during income over a simplified economy. There is only one way over which households may dispose during their earnings—by spending their entire income on goods, and services produced by domestic firms. The other channels during disposing their income are closed: we have assumed that households do not save, they do not pay taxes to government– since there is no government, and neither do they buy imported goods, since there is no external trade over this simple economy. In other words, factors during production use their remunerations to buy goods, and services which they assisted over producing.