Economics notes for class 12 pdf download

After knowing the value of goods in single unit price exchanges become easy. Secondary functions Money acts as a standard deferred payment due to the following reasons:. Medium of Exchange: Money has removed the major difficulty of the double coincidence of wants. Measure of value: Money has become measuring rod to measure the value of goods and services and is expressed in terms of price.

Store of value: It is very convenient, easy and economical to store the value and has got general acceptability which was lacking in the barter system. Standard of deferred payments: Money has simplified the borrowing and lending of operations which were difficult under barter system. It also encourages capital formation. Suppose there is an initial deposit of Rs. All the transactions are routed through banks. The borrower withdraws his Rs. The Bank receives Rs. Again the borrower uses this for payment which flows back into the banks thereby increasing the flow of deposits.

Why only a fraction of deposits is kept as Cash Reserve? Central Bank is obliged to back the currency with assets of equal value usually gold coins, gold bullions, foreign securities etc. Advantages of sole authority of note issue:. Accepts receipts and makes payments for the government. It also gives loans and Advances to the government. It influences the money supply through quantitative and qualitative instruments.

Former refers to the volume of credit and the latter refers to regulate the direction of credit. Another important function of Central Bank is the custodian of foreign exchange reserves.

It helps in stabilizing the external value of money and maintaining favorable balance of payments in the economy. Central Bank increases the bank rate during inflation excess demand and reduces the same in times of deflation deficient demand.

Reserve Bank increases CRR during inflation and decreases the same during deflation Statutory Liquidity Ratio SLR : It refers to minimum percentage of net demand and time liabilities which commercial banks required to maintain with themselves. SLR is increased during inflation or excess demand and decreased during deflation or deficient demand.

Both the parts are very different and need all your efforts to understand the concepts and topics. Short notes are a good way to learn and revise the Economics subject topics. You should either make your handwritten notes or get notes from a good source. You can scroll down to get the PDF files of the chapter wise notes. CA Wizard is a free study resource library for the students of higher secondary and Chartered Accountancy Course. CA Wizard also gives the latest updates and announcements important for you.

These notes will greatly benefit you in your studies. They are made on the latest syllabus released by CBSE. These notes are made in a simple manner to help you understand and revise the chapters quickly. The chapter focuses on basic concepts like types of goods, stocks, flows, gross investment, and depreciation.

The chapter also gives an introduction to the circular flow of income, National Income calculation methods. The whole chapter explains how the growth of a nation is dependent on its economy. So all the concepts of Macroeconomics are explained in reference to a nation.

The chapter discusses the banking sector and how they regulate the flow of money. The topics that are important in this chapter are—supply of money, money creation by the banking system, Central bank, and its functions: Bank of issue, Govt. This whole chapter is very important. However, the aggregate demand and supply are the main topics of this chapter.

Problems of excess demand and deficient demand; measures to correct them are also very important. The three main topics of this chapter are—Government Budget, Classification of receipts, Measures of government deficit.

The chapter is about how a nation needs a stable economy and how it is done in a nation. This chapter focuses on the system of exchange rates and foreign exchange rates and everything related to it. The chapter discusses how the economic conditions of India changed after Independence.

It leads to uniformity in note circulation. It gives the power to Central Bank to enhance the money supply. It also helps in maintaining stability in value of money. Bankers to Government: The RBI acts as a banker, agent and a financial advisor to the central and state government. As a banker, it carries out all the banking business of the government. As an agent, it manages the public debt. As a financial advisor, it advices the government from time to time in financial and monetary matters.

Other banks in the economy keep their reserves with the RBI. It has same relationship with other banks as the commercial banks have with the public. It obliges the commercial banks to keep CRR with them during the credit creation process. Custodian of Foreign Exchange: Central banks keep the reserves of foreign currency with themselves so that there is no excess increase or decrease in price of foreign currency.

Central bank does this so that foreign reserves are available to the public. Lender of Last Resort: When commercial banks fail to meet the needs of the public, then RBI helps the commercial banks and the public by advancing loans to them and acts as a lender of last resort.

Clearing House: Central bank has the reserves of commercial banks with themselves. All commercial banks have their accounts with the RBI. Therefore, RBI can make settlement of claims of various banks against each other by editing the entries in their accounts.

Supervisor: Central bank regulates and controls the commercial banks. It exercises regular inspection and of banks and entries passed by them.

An increase in repo rate reduces the capability of commercial banks to lend money and thus decreases money supply in the economy. A decrease in repo rate increases the money supply in the economy. Bank Rate: It is the rate at which central bank lends money to commercial banks for long- term purpose by keeping something as collateral. An increase in bank rate will decrease the lending capacity of commercial banks and thus reduces money supply in the economy.

A decrease in bank rate increases the money supply in the economy. Reverse Repo Rate: It is the rate at which commercial banks keep their reserves with central bank in order to earn interest willfully. An increase in reverse repo rate induces commercial banks to keep reserves with central bank rather than giving to public. So, money supply decreases in the economy. A decrease in reverse repo rate increases the money supply in the economy.

Legal Reserve Ratio LRR : It is the amount of deposits which the commercial banks are obliged to keep with themselves and the central bank for credit creation process.

Cash Reserve Ratio CRR : It is the amount of deposits which the commercial banks are obliged to keep with the central bank for creating credit in the economy. Statutory Liquidity Ratio SLR : It is the amount of deposits which the commercial banks are obliged to keep with themselves for the credit creation process. Purchase of securities by central bank increases the bank capacity to give credit as it receives money and thus it increases the money supply in the economy.