Sandeep Garg Macroeconomics Class 12: Chapter 2 Basic Concepts of Macroeconomics

Sandeep Garg Class 12 Macroeconomics Solutions Chapter 2 Basic Concepts of Macroeconomics is explained by the expert Economic teachers from the latest edition of Sandeep Garg Macroeconomic Class 12 textbook solutions. We at BYJU’S provide Sandeep Garg economics class 12 Solutions to give comprehensive insight about the subject to the students. These insights help as a priceless benefit to students while completing their homework or while studying for their exams. There are numerous concepts in economics, but here we provide you the solution from Basic Concepts of Macroeconomics, which will be useful for the students to score well in the board exams.

Sandeep Garg Solutions Class 12 – Chapter 2 – Part B

Question 1

Define factor income.


Factor income refers to the income received by the factors of production for rendering factor services in the process of production.

Question 2

Define the current transfer.


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


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 vs Capital Goods.


The three differences between consumption goods and capital goods are.

Parameters Consumption Goods Capital Goods
Type of Demand These goods satisfy human wants directly. So, such goods have direct demand Such goods satisfy human wants indirectly. So, such goods have derived demand
Impact on Production Capacity They do not promote the production They help in raising production capacity
Expected Life Most of the consumption goods (except durable goods) have limited expected life Capital goods generally have an expected life of more than one year

Question 5

Mention three differences between Depreciation vs Capital Loss.


The three differences between Depreciation and Capital Loss are

Parameters Depreciation Capital Loss
Meaning It refers to the fall in the value of fixed assets due to normal wear and tear, the passage of time or outdated technology It refers to the loss in value of the fixed assets because it is outdated
Provision for loss Provision is made for replacement of assets as it is an expected loss No such provision is made in case of capital loss as it is an unexpected loss
Impact on 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


The three reasons for the depreciation of assets are.

  • 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’s not used regularly. Nature agents like wind, water, weather add up to the fall in their value.
  • Expected Obsolescence– The fixed assets value also decreases because the technology, goods, and services become outdated.

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