Sandeep Garg Class 12 Macroeconomics Solutions Chapter 2 Basic Concepts of Macroeconomics’ is explained by expert Economics teachers from the latest edition of Sandeep Garg Macroeconomics Class 12 textbook solutions.
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There are numerous concepts in Economics, but here, we provide the solutions from the basic concepts of macroeconomics, which will be useful for the students to score well in their board exams.
Sandeep Garg Solutions Class 12 – Chapter 2 – Part B
Question 1
Define factor income.
Answer:
Factor income refers to the income received by the factors of production for rendering factor services in the process of production.
Question 2
Define current transfers.
Answer:
Current transfers refer to transfers made out of the current income of the payer and added to the current income of the recipient.
Question 3
Define gross investment.
Answer:
Gross investment is the addition to the stock of capital before making allowance for depreciation.
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Question 4
Mention three differences between consumption goods and capital goods.
Answer:
The three differences between consumption goods and capital goods are as follows:
| Parameters | Consumption goods | Capital goods |
| Type of demand | These goods satisfy human wants directly. Therefore, such goods have direct demands. | Such goods satisfy human wants indirectly. Therefore, such goods have derived demands. |
| Impact on the production capacity | They do not promote production. | They help in raising the capacity of production. |
| Expected life | Most of the consumption goods (except durable goods) have a limited life expectancy. | Generally, capital goods have a life expectancy of more than one year. |
Question 5
Mention three differences between depreciation and capital loss.
Answer:
The three differences between depreciation and capital loss are as follows:
| Parameters | Depreciation | Capital loss |
| Meaning | It refers to the fall in the value of fixed assets due to normal wear and tear, and due to the passage of time or outdated technology. | It refers to the loss in value of the fixed assets because of them being outdated. |
| Provision for loss | Provisions are made for the replacement of assets as it is an expected loss. | No such provisions are made in the case of capital loss, as it is an unexpected loss. |
| Impact on the production process | It does not hamper the production process. | It hampers the production process. |
Question 6
What are the reasons for the depreciation of assets?
Answer:
The three reasons for the depreciation of assets are as follows:
Normal wear and tear– Regular use of fixed assets in the production process reduces the productive capacity and value.
Passage of time- Due to the passage of time, the value of fixed assets decreases the productive capacity even if it is not used regularly. Nature agents. like wind, water, weather, etc., add up to the fall in their value.
Expected obsolescence– The fixed assets value also decreases because technology, goods, and services become outdated.
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