NCERT Solutions for Class 12 Economics Chapter 1 Introduction (Introductory Macroeconomics)

1. What is the difference between microeconomics and macroeconomics?

Ans: The difference between microeconomics and macroeconomics are:

2. What are the important features of the capitalist economy?

Ans: These are the major characteristics of capitalist economics.

1. Competitiveness exists between producers and free enterprise is guaranteed.

2. The market determines the price of the commodity in accordance with demand and supply.

3. The productive resources are private.

4. The main reason for producers is to maximise profit.

3. Describe the four major sectors in an economy according to the macroeconomic point of view.

Ans: They are the four most important sectors of the economy from a macroeconomic point of view.

External sector: The sector is committed to the export and import (external trade) of goods and services. If goods and services produced in this country are sold to the rest of the world, then that's an export. If goods and services are purchased from the rest of the world, then we are talking about imports.

Government: A state or government shall keep law and order, maintain growth and stability, and provide administrative services. The primary reason for a government is to undertake development projects like dams, roads, heavy industries that usually have long gestation periods. The government invests in education and the health sector and delivers these amenities at a insignificant cost. The purpose of any government is to serve, not to make a profit.

Firms: Enterprises are economic units that perform the output. They employ and organize production factors and undertake production processes to motivate the realization of profits.

Households: Households purchase goods and services for consumption and also provide factors of production such as land, labour, capital and entrepreneurship. Households supply the business's production market.

4. Describe the Great Depression of 1929.

Ans: The Great Depression became a serious economic crisis that began in 1929. It began in the United States of America with the stock market crash and gradually spread into other countries of the world. The main cause of the crisis has been the decrease in aggregate demand due to underconsumption and over-investment. As a result of under-consumption and excessive investment, the stock of finished goods began to accumulate, resulting in a low price level and therefore a low level of profit. Money in the economy had been converted into unsold stock of finished products that lead to an acute decrease in employment and thus the level of income has fallen drastically.

The demand for commodities in the economy was so low that output was reduced leading to unemployment. In the United States, the unemployment rate had increased from 3% to 25%. The Great Depression has its own implications and importance in the economy, as it leads to the failure of the conventional approach to the economy. Those who believed in the market forces of demand and supply, opened the door to the emergence of the Keynesian approach. It was this incident that provided economists with sufficient evidence to recognize macroeconomics as a distinct sector of the economy.

Topics Covered in Economics Class 12 Chapter 1 Introduction (Introductory Macroeconomics)

Benefits of  Referring to Class 12 Economics Chapter 1 Solutions

• By learning how entire economies work, students are better able to recognise larger economic trends and patterns and strengthen their core concepts.

• Studying national income explained in Class 12 Economics Chapter 1, which is essential for analysing the state of the economy, promotes curiosity among the students to learn more about it.

• Learning about economic growth teaches students how economies expand and improve, which is important for long-term planning and development.

• Learning macroeconomics from Economics Class 12 Chapter 1 Questions And Answers helps students think more analytically, allowing them to evaluate different economic situations and make bright decisions.

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Conclusion

NCERT Solutions for Class 12 Economics Chapter 1 Introduction, provides a simple and easy understanding of how economies function on a large scale. This chapter explains the key concepts like national income, inflation, unemployment, and economic growth. By focusing on these areas, students can develop a solid foundation in macroeconomics, which is essential for both exams and real-world applications. In previous years, 2-3 questions from this chapter have appeared in exams, highlighting its importance. Students should focus more on the definitions and explanations of key terms. Practising Class 12 Economics Chapter 1 Question Answer will help in better retention and application of the concepts.

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