ECONOMICS
CLASS 12TH
CHAPTER- NATIONAL INCOME
NOTES
1. Gross means the value of product including depreciation. Net means the value of
product excluding depreciation.
2. The difference between these two terms is depreciation.
3. Where depreciation is the expected decrease in the value of fixed capital assets due
to its general use.
4. It is the result of production process.
Gross = Net + Depreciation Net = Gross – Depreciation
Note: Other names of depreciation are:
(a) Consumption of fixed capital (b) Capital consumption allowance
(c) Current replacement cost.
Important terms of this chapter
● Goods :In economics a goods is defined as any physical object, manmade, that
could command a price in the market and these are the materials that satisfy
human wants and provide utility
●
● Consumption Goods : Those final goods which satisfy human wants directly.
ex- ice-cream and milk used by the households.
●
● Capital Goods :Those final goods which help in production. These goods are
used for generating income. These goods are fixed assets of the producers.ex-
plant and machinery.
● Final Goods are those goods which are used either for final consumption or for
investment.
●
● Intermediate Goods refers to those goods and services which are used as a raw
material for further production or for resale in the same year.
● Investment :Addition made to the physical stock of capital during a period of
time is called investment. It is also called capital formation.
● capital formation:- Change in the stock of capital is also called capital
formation.
● Depreciation :means fall in value of fixed capital goods due to normal wear
and tear and expected obsolescence. It is also called consumption of fixed
capital.
, ● Gross Investment :Total addition made to physical stock of capital during a
period of time. It includes depreciation. OR Net Investment + Depreciation
● Net Investment :Net addition made to the real stock of capital during a period
of time. It excludes depreciation.
● Net Investment = Gross investment – Depreciation.
● Stocks :Variables whose magnitude is measured at a particular point of time
are called stock variables. Eg. National Wealth, Inventory etc.
● Flows :Variables whose magnitude is measured over a period of time are
called flow variable. Eg. National income, change in stock etc.
● Circular flow of income :It refers to continuous flow of goods and services and
money income among different sectors in the economy. It is circular in nature.
It has neither any end and nor any beginning point. It helps to know the
functioning of the economy.
Investment :Addition made to the physical stock of capital during a period of time is
called investment. It is also called capital formation.
capital formation:- Change in the stock of capital is also called capital formation.
Depreciation :means fall in value of fixed capital goods due to normal wear and tear
and expected obsolescence. It is also called consumption of fixed capital.
Gross Investment :Total addition made to physical stock of capital during a period of
time. It includes depreciation. OR Net Investment + Depreciation
Net Investment :Net addition made to the real stock of capital during a period of
time. It excludes depreciation.
Net Investment = Gross investment – Depreciation.
Stocks :Variables whose magnitude is measured at a particular point of time are
called stock variables. Eg. National Wealth, Inventory etc.
Flows :Variables whose magnitude is measured over a period of time are called flow
variable. Eg. National income, change in stock etc.
Circular flow of income :It refers to continuous flow of goods and services and money
income among different sectors in the economy. It is circular in nature. It has neither
any end and nor any beginning point. It helps to know the functioning of the
economy.
CLASS 12TH
CHAPTER- NATIONAL INCOME
NOTES
1. Gross means the value of product including depreciation. Net means the value of
product excluding depreciation.
2. The difference between these two terms is depreciation.
3. Where depreciation is the expected decrease in the value of fixed capital assets due
to its general use.
4. It is the result of production process.
Gross = Net + Depreciation Net = Gross – Depreciation
Note: Other names of depreciation are:
(a) Consumption of fixed capital (b) Capital consumption allowance
(c) Current replacement cost.
Important terms of this chapter
● Goods :In economics a goods is defined as any physical object, manmade, that
could command a price in the market and these are the materials that satisfy
human wants and provide utility
●
● Consumption Goods : Those final goods which satisfy human wants directly.
ex- ice-cream and milk used by the households.
●
● Capital Goods :Those final goods which help in production. These goods are
used for generating income. These goods are fixed assets of the producers.ex-
plant and machinery.
● Final Goods are those goods which are used either for final consumption or for
investment.
●
● Intermediate Goods refers to those goods and services which are used as a raw
material for further production or for resale in the same year.
● Investment :Addition made to the physical stock of capital during a period of
time is called investment. It is also called capital formation.
● capital formation:- Change in the stock of capital is also called capital
formation.
● Depreciation :means fall in value of fixed capital goods due to normal wear
and tear and expected obsolescence. It is also called consumption of fixed
capital.
, ● Gross Investment :Total addition made to physical stock of capital during a
period of time. It includes depreciation. OR Net Investment + Depreciation
● Net Investment :Net addition made to the real stock of capital during a period
of time. It excludes depreciation.
● Net Investment = Gross investment – Depreciation.
● Stocks :Variables whose magnitude is measured at a particular point of time
are called stock variables. Eg. National Wealth, Inventory etc.
● Flows :Variables whose magnitude is measured over a period of time are
called flow variable. Eg. National income, change in stock etc.
● Circular flow of income :It refers to continuous flow of goods and services and
money income among different sectors in the economy. It is circular in nature.
It has neither any end and nor any beginning point. It helps to know the
functioning of the economy.
Investment :Addition made to the physical stock of capital during a period of time is
called investment. It is also called capital formation.
capital formation:- Change in the stock of capital is also called capital formation.
Depreciation :means fall in value of fixed capital goods due to normal wear and tear
and expected obsolescence. It is also called consumption of fixed capital.
Gross Investment :Total addition made to physical stock of capital during a period of
time. It includes depreciation. OR Net Investment + Depreciation
Net Investment :Net addition made to the real stock of capital during a period of
time. It excludes depreciation.
Net Investment = Gross investment – Depreciation.
Stocks :Variables whose magnitude is measured at a particular point of time are
called stock variables. Eg. National Wealth, Inventory etc.
Flows :Variables whose magnitude is measured over a period of time are called flow
variable. Eg. National income, change in stock etc.
Circular flow of income :It refers to continuous flow of goods and services and money
income among different sectors in the economy. It is circular in nature. It has neither
any end and nor any beginning point. It helps to know the functioning of the
economy.
