Page 1 - Lesson Notes

LESSON NOTES

CLASS XII

MACROECONOMICS

Chapter 2BASIC CONCEPTS

1. Factor Income
(a) Income earned by factor of production by rendering their productive services in the
production process is known as Factor Income.
(b) It is a bilateral [Two-Sided] Concept.
(c) It is included in National Income as it contribute something in the flow of goods and
services.
Examples: Rent, interest, wages and profit.
2. Transfer Income
(a) Income received without rendering any productive services is known as transfer
income.
(b) It is a unilateral [one-sided] concept.
(c) It is not included in National Income as it does not contribute anything in the flow of
goods and services.
Examples: Old Age Pension, Scholarship, Unemployment allowance.
There are two types of transfers:
(i) Current transfers (ii) Capital transfers
(i) Current Transfers
• Transfers made from the income of the payer and added to the income of the recipient
(who receive) for consumption expenditure are called current transfers.
• It is recurring or regular in nature.
For example, scholarships, gifts, old age pension, etc.
(ii) Capital Transfers
• Capital transfers are defined as transfers in cash and in kind for the purpose of
investment to recipients, made out of the wealth or saving of the donor.
• It is non recurring or irregular in nature.
For example, investment grant, capital gains tax, war damages, etc.
3. Stock
(a) Any economic variable which is calculated at a particular point of time is known as
stock.
(b) It is static in nature, i.e., it do not change.
(c) There is no time dimension in stock variables.
For example, Distance, Amount of Money, Money Supply, Water in Tank, etc.