Economics Bytes

What is the Consumption Function in Macroeconomics?

1.Expenditure on consumption is a very important concept in Keynesian economics because it is a part of Aggregate Income. Y=C+I.

2. According to Keynes, the performance of the economy depends on the behaviour of consumers. It is the fall in the aggregate consumption expenditure that leads to recession or depression.

3. Consumption function explains a functional relationship between consumption and income.

4. Initially consumption is more than income but after a point, income becomes more than consumption and the economy experiences saving.

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Why was a New Industrial Policy introduced in India in1991?

1.The New Industrial Policy of 1991 was announced at the time of the economic crisis of the 1990s.

2.Due to the large-scale changes, the Industrial Policy of 1991 represents a major change from the early policy of 1956.

3.The industrial policy of 1991 is the big reform introduced in the Indian economy since independence. The policy caused big reforms in the industrial sector.

4.These reform measures were made in different areas related to the industrial sector. As part of the policy, the role of the public sector has been redefined.


5.All the later reform measures were derived out of the new industrial policy and it has brought comprehensive changes in economic regulation in the country.

6.But the most important reform measure of the new industrial policy was that it ended the practice of industrial licensing in India. Industrial licensing represented red -tapismsm.

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What is the barter system of exchange?

1.Before the development of money, the exchange took place in the form of commodity to commodity.

2.The history of bartering dates back to 6000 BC. Introduced by Mesopotamia tribes, the barter system was adopted by Phoenicians. Phoenicians bartered goods to those located in various other cities across oceans.

3. The barter system has various limitations as it involved the high physical cost of waiting.

4. The barter system of exchange was relied upon by early civilizations. There are even cultures within modern society that still rely on this type of exchange.

5.Barter system of exchange has a psychological benefit because it can create a deeper personal relationship between trading partners than a typical monetized transaction.

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