In a mixed economy, apart from the private sector, there is the government which plays a very important role.
Certain goods, referred to as public goods (such as national defence, roads, government administration), as distinct from private goods (like clothes, cars, food items), cannot be provided through the market mechanism, i.e. by transactions between individual consumers and producers and must be provided by the government. This is the allocation function.
Through its tax and expenditure policy, the government attempts to bring about a distribution of income that is considered 'fair' by society.
The government affects the personal disposable income of households by making transfer payments and collecting taxes and, therefore, can alter the income distribution. This is the distribution function.
The economy tends to be subject to substantial fluctuations and may suffer from prolonged periods of unemployment or inflation.
The overall level of employment and prices in the economy depends upon the level of aggregate demand which is a function of the spending decisions of millions of private economic agents apart from the government.
These decisions, in turn, depend on many factors such as income and credit availability.
In any period, the level of expenditures may not be sufficient for full utilisation of labour and other resources of the economy. Since wages and prices are generally rigid downwards (they do not fall below a level), employment cannot be restored automatically.
Hence, policy measures are needed to raise aggregate demand. On the other hand, there may be times when expenditures exceed the available output under conditions of high employment and thus may cause inflation.
In such situations, restrictive conditions are needed to reduce demand. These constitute the stabilisation requirements of the domestic economy.
To understand the need for governmental provision of public goods, we must consider what distinguishes them from private goods. There are two major differences. One, the benefits of public goods are not limited to one particular consumer, as in the case of private goods, but become available to all.
For instance, if a person consumes a chocolate or wears a shirt, these will not be available to other individuals. This person's consumption stands in a rival relationship to the consumption of others.
However, if we consider a public park or measures to reduce air pollution, the benefits will be available to all. The consumption of such products by several individuals is not 'rivalrous' in the sense that a person can enjoy the benefits without reducing their availablity to others.
Two, in case of private goods anyone who does not pay for the good can be excluded from enjoying its benefits. If we do not buy a ticket, we are excluded from watching a film at a local theatre.
An open economy is one that trades with other nations in goods and services and, most often, also in financial assets.
Indians, for instance, enjoy using products produced around the world and some of our production is exported to foreign countries.
Foreign trade, therefore, influences Indian aggregate demand in two ways. First, when Indians buy foreign goods, this spending escapes as a leakage from the circular flow of income decreasing aggregate demand. Second, our exports to foreigners enter as an injection into the circular flow, increasing aggregate demand for domestically produced goods.
Total foreign trade (exports + imports) as a proportion of GDP is a common measure of the degree of openness of an economy. In 2013-14, this was 44.1 per cent for the Indian Economy. There are several countries whose foreign trade proportions are above 50 per cent of GDP.
Now, when goods move across national borders, money must move in the opposite direction. At the international level, there is no single currency that is issued by a central authority.
Foreign economic agents will accept a national currency only if they are convinced that the currency will maintain a stable purchasing power.
Without this confidence, a currency will not be used as an international medium of exchange and unit of account since there is no international authority with the power to force the use of a particular currency in international transactions.
Governments have tried to gain confidence of potential users by announcing that the national currency will be freely convertible at a fixed price into another asset, over whose value the issuing authority has no control. This other asset most often has been gold, or other national currencies.
There are two aspects of this commitment that has affected its credibility - the ability to convert freely in unlimited amounts and the price at which conversion takes place.
The international monetary system has been set up to handle these issues and ensure stability in international transactions. A nation's commitment regarding the above two issues will affect its trade and financial interactions with the rest of the world.
The Balance of Payments
The balance of payments (BoP) record the transactions in goods, services and assets , between residents of a country with the rest of the world for a specified time period typically a year. There are two main accounts in the BoP - the current account and the capital account.
The current account records exports and imports in goods and services and transfer payments. The trade balance which is obtained by subtracting imports of goods from the exports of goods.
When exports exceed imports, there is a trade surplus and when imports exceed exports there is more...
Adam Smith: Adam Smith (1723-1790). Regarded as the father of modem Economics, Author of Wealth of Nations.
Administered price: A price set not by the forces of demand and supply but by some authority like the Government or a regulatory authority.
Average cost: Total cost per unit of output.
Average fixed cost: Total fixed cost per unit of output.
Average product: Output per unit of the variable input.
Average revenue: Total revenue per unit of output.
Average variable cost: Total variable cost per unit of output.
Autonomous change: A change in the values of variables in a macroeconomic model caused by a factor exogenous to the model.
Autonomous expenditure multiplier: The ratio of increase, (or decrease) in aggregate output or income to an increase (or decrease) in autonomous spending.
Aggregate monetary resources: Broad money without time deposits of post office savings organisation .
Automatic stabilisers: Under certain spending and tax rules, expenditures that automatically increase or taxes that automatically decrease when economic conditions worsen, therefore, stabilising the economy automatically.
Asian Development Bank (ADB): ADB was established in December, 1966. The aim of this Bank is to accelerate economic and social development in Asia and Pacific region.
The Bank started its functioning on 1 January, 1967. The head office of the Bank is located at Manila, Philippines.
Association of South-East Asian Nations (ASEAN): ASEAN is a union of 10 South- East Asian Nations. The object of ASEAN is to promote economic co-operation in South- East Asia and also to ensure economic stability in the region its headquarter is in Jakarta.
Asia Pacific Economic Co-operation (APEC): APEC was founded in November, 1989 to devise programmes of co-operation between member nations. It was institutionalized in June, 1992 after a meeting in Bangkok, at which it was agreed to set up a secretariat in Singapore.
Business Process Outsourcing (BPO): Outsourcing of business processes (activities constituting a service) by companies to other companies. This term is frequently associated with Outsourcing of such activities (e.g. receiving and making calls on behalf of other companies popularly known as call centres), by foreign companies to Indian companies in the field of IT-enabled services.
Barriers to Entry: This refers to the factors which make it disadvantageous for new entrants to enter an industry as compared with the firms already established within the industry.
Brundtland Commission: A Commission established by United Nations Organisation in 1983 to study the world's environmental problem and propose agenda for addressing them. It came out with a report. The definition provided by the Commission for the term, "sustainable development', is very popular and widely cited all over the world.
Balance of payments: A set of accounts that summarise a country's transactions with the rest of the world.
A large number of hypotheses were put forth by different philosophers and scientists regarding the origin of the earth.
One of the earlier and popular arguments was by German philosopher Immanuel Kant. Mathematician Laplace revised it in 1796.
It is known as Nebular Hypothesis. The hypothesis considered that the planets were formed out of a cloud of material associated with a youthful sun, which was slowly rotating.
Later in 1900, Chamberlain and Moulton considered that a wandering star approached the sun.
As a result, a cigar-shaped extension of material was separated from the solar surface.
As the passing star moved away, the material separated from the solar surface continued to revolve around the sun and it slowly condensed into planets.
Sir James Jeans and later Sir Harold Jeffrey supported this argument.
At a later date, the arguments considered of a companion to the sun to have been coexisting.
These arguments are called binary theories. In 1950, Otto Schmidt in Russia and Carl Weizascar in Germany somewhat revised the 'nebular hypothesis', though differing in details.
They considered that the sun was surrounded by solar nebula containing mostly the hydrogen and helium along with what may be termed as dust.
The friction and collision of particles led to formation of a disk-shaped cloud and the planets were formed through the process of accretion.
However, scientists in later period took up the problems of origin of universe rather than that of just the earth or the planets.
Modem Theories of the Origin of the Universe
The most popular argument regarding the origin of the universe is the Big Bang Theory. It is also called expanding universe hypothesis.
Edwin Hubble, in 1920, provided evidence that the universe is expanding.
As time passes, galaxies move further and further apart. Similarly, the distance between the galaxies is also found to be increasing and thereby, the universe is considered to be expanding.
Scientists believe that though the space between the galaxies is increasing, observations do not support the expansion of galaxies.
The Big Bang Theory considers the following stages in the development of the universe
In the beginning, all matter forming the universe existed in one place m the form of a “tiny ball” (singular atom) with an unimaginably small volume, infinite temperature and infinite density.
At the Big Bang the “tiny ball” exploded violently. This led to a huge expansion. It is now generally accepted that the event of big bang took 13.7 billion years before the present.
The expansion continues even to the present day. As it grew, some energy was converted into more...
The earth's radius is 6,370 km. No one can reach the centre of the earth and make observations or collect samples of the material.
Most of our knowledge about the interior of the earth is largely based on estimates and inferences.
Yet, a part of the information is obtained through direct observations and analysis of materials.
Direct Sources
The most easily available solid earth material is surface rock or the rocks we get from mining areas.
Gold mines in South Africa are as deep as 3-4 km. Going beyond this depth is not possible as it is very hot at this depth.
Besides mining, scientists have taken up a number of projects to penetrate deeper depths to explore the conditions in the crustal portions.
Scientists world over are working on two major projects such as "Deep Ocean Drilling Project" and "Integrated Ocean Drilling Project".
The deepest drill at Kola, in Arctic Ocean, has so far reached a depth of 12 km.
Volcanic eruption forms another source of obtaining direct information.
As and when the molten material (magma) is thrown onto the surface of the earth during volcanic eruption it becomes available for laboratory analysis.
However, it is difficult to ascertain the depth of the source of such magma.
Indirect Sources
Analysis of properties of matter indirectly provides information about the interior.
We know through the mining activity that temperature and pressure increase with the increasing distance from the surface towards the interior in deeper depths.
Moreover, it is also known that the density of the material also increases with depth.
It is possible to find the rate of change of these characteristics.
Another source of information are the meteors that at times reach the earth.
However, it may be noted that the material that becomes available for analysis from meteors, is not from the interior of the earth.
The material arid the structure observed in the meteors are similar to that of the earth.
They are solid bodies developed out of materials same as, or similar to, our planet.
Hence, this becomes yet another source of information about the interior of the earth
The other indirect sources include gravitation, magnetic field, and seismic activity
The gravitation force (g) is not the same at different latitudes on the surface.
It is greater near the poles and less at the equator.
This is because of the distance from the centre at the equator being greater than that at the poles.
The gravity values also differ according to the mass of material.
The uneven distribution of mass of material within the earth influences this value The reading of the more...
The earth is composed of various kinds of elements. These elements are in solid form in the outer layer of the earth and in hot and molten form in the interior.
About 98 per cent of the total crust of the earth is composed of eight elements like oxygen, silicon, aluminium, iron, calcium, sodium, potassium and magnesium and the rest is constituted by titanium, hydrogen, phosphorous, manganese, sulphur, carbon, nickel and other elements.
The elements in the earth's crust are rarely found exclusively but are usually combined with other elements to make various substances. These substances are recognized as minerals.
Though the number of elements making up the lithosphere are limited they are combined in many different ways to make up many varieties of minerals.
There are at least 2,000 minerals that have been named and identified in the earth crust; but almost all the commonly occurring ones are related to six major mineral groups that are known as major rock forming minerals.
The basic source of all minerals is the hot magma in the interior of the earth.
When magma cools, crystals of minerals appear and a systematic series of minerals are formed in sequence to solidify so as to form rocks.
Continents cover 29 per cent of the surface of the earth.
Observe the shape of the coastline of the Atlantic Ocean. You will be surprised by the symmetry of the coastlines on either side of the ocean. No wonder, many scientists thought of this similarity and considered the possibility of the two Americas, Europe and Africa, to be once joined together.
It was Alfred Wegener - a German meteorologist who put forth a comprehensive argument in the form of "the continental drift theory" in 1912.
This was regarding the distribution of the oceans and the continents.
According to Wegener, all the continents formed a single continental mass and Mega Ocean surrounded the same.
The super continent was named Pangaea, which meant all earth.
The mega-ocean was called Panthalassa, meaning all water.
He argued that, around 200 million years ago, the super continent, Pangaea, began to split.
Pangaea first broke into two large continental masses as Laurasia and Gondwanaland forming the northern and southern components respectively.
Subse-quently, Laurasia and Gondwanaland continued to break into various smaller continents that exist today.
A variety of evidence was offered in support of the continental drift. Some of these are given below.
Evidence in Support of the Continental Drift
The Matching of Continents (Jig-Saw-Fit)
The shorelines of Africa and South America facing each other have a remarkable and unmistakable match.
It may be noted that a map produced using a computer programme to find the best fit of the Atlantic margin was presented by Bullard in 1964.
It proved to be quite perfect. The match was tried at 1,000-fathom line instead of the present shoreline.
Rocks of Same Age Across the Oceans
The radiometric dating methods developed in the recent period have facilitated correlating the rock formation from different continents across the vast ocean.
The belt of ancient rocks of 2,000 million years from Brazil coast matches with those from western Africa.
The earliest marine deposits along the coastline of South America and Africa are of the me Jurassic age.
This suggests that the ocean did not exist prior to that time.
Tilllite
It is the sedimentary rock formed out of deposits of glaciers.
The Gondawana system of sediments from India is known to have its counter parts in six different landmasses of the Southern Hemisphere.
At the base the system has thick tillite indicating extensive and prolonged glaciation.
Counterparts of this succession are found in Africa, Falkland Island, Madagascar, Antarctica and Australia besides India,
Water is an essential component of all life forms that exist over the surface of the earth.
The creatures on the earth are lucky that it is a water planet, otherwise we all would have no existence.
Water is a rare commodity in our solar system. There is no water on the sun or anywhere else in the solar system.
The earth, fortunately has an abundant supply of water on its surface. Hence, our planet is called the 'Blue Planet'.
Water is a cyclic resource. It can be used and re-used.
Water also undergoes a cycle from the ocean to land and land to ocean.
Next to air, water is the most important element required for the existence of life on earth.
The hydrological cycle, is the circulation of water within the earth's hydrosphere in different forms i.e. the liquid, solid and the gaseous phases.
About 71 per cent of the planetary water is found in the oceans.
The remaining is held as freshwater in glaciers and icecaps, groundwater sources, lakes, soil moisture, atmosphere, streams and within life.
Nearly 59 per cent of the water that falls on land returns to the atmosphere through evaporation from over the oceans as well as from other places.
Relief of the Ocean Floor
The oceans are confined to the great depressions of the earth's outer layer.
The geographers have divided the oceanic part of the earth into five oceans, namely the Pacific, the Atlantic, the Indian, Southern ocean and the Arctic.
The various seas, bays, gulfs and other inlets are parts of these four large oceans.
The floors of the oceans are rugged with the world's largest mountain ranges, deepest trenches and the largest plains.
These features are formed, like those of the continents, by the factors of tectonic, volcanic and depositional processes.
Divisions of the Ocean Floors
The ocean floors can be divided into four major divisions :
the Continental Shelf
the Continental Slope
the Deep Sea Plain
the Oceanic Deeps
Besides, these divisions there are also major and minor relief features in the ocean floors like ridges, hills, sea mounts, guyots, trenches, canyons, etc.
Continental Shelf
The continental shelf is the extended margin of each continent occupied by relatively shallow seas and gulfs.
India is a vast country. Lying entirely in the Northern hemisphere the main land extends between latitudes 8°4'N and 37°6'N and longitudes 68°7'E and 97°25'E.
The Tropic of Cancer (23°30'N) divides the country into almost two equal parts. To the southeast and southwest of the mainland, lie the Andaman and Nicobar islands and the Lakshadweep islands in Bay of Bengal and Arabian Sea respectively.
The southernmost point of the Indian Union - 'Indira Point' got submerged under the sea water in 2004 during the Tsunami.
Size
The land mass of India has an area of 3.28 million square km. India's total area accounts for about 2.4 per cent of the total geographical area of the world.
India is the seventh largest country of the world. India has a land boundary of about 15,200 km and the total length of the coast line of the mainland including Andaman and Nicobar and Lakshadweep is 7,516.6 km.
From Gujarat to Arunachal Pradesh there is a time lag of two hours. Hence, time along the Standard Meridian of India (82°30'E) passing through Mirzapur (in Uttar Pradesh) is taken as the standard time for the whole country.
Since the opening of the Suez Canal in 1869, India's distance from Europe has been reduced by 7,000 km.
The Peninsular BlockIndia Physical
Current estimation shows that the earth is approximately 460 million years old.
Based on the variations in its geological structure and formations, India can be divided into three geological divisions. These geological regions broadly follow the physical features.
The Peninsula is formed essentially by a great complex of very ancient gneisses and granites, which constitutes a major part of it.
Since the Cambrian period, the Peninsula has been standing like a rigid block with the exception of some of its western coast which is submerged beneath the sea and some other parts changed due to tectonic activity without affecting the original basement.
As a part of the Indo-Australian Plate, it has been subjected to various vertical movements and block faulting.
The rift valleys of the Narmada, the Tapi and the Mahanadi and the Satpura block mountains are some examples of it.
The
Peninsula mostly consists of relict and residual mountains like the Aravali hills, the Nallamala hills, the Javadi hills, the Veliconda hills, the Palkonda range and the Mahendragiri hills, etc.
The air is an integral part of the earth's mass and 99 per cent of the total mass of the atmosphere is confined to the height of 32 km from the earth's surface.
The atmosphere is composed of gases, water vapour and dust particles.
The proportion of gases changes in the higher layers of the atmosphere in such a way that oxygen will be almost in negligible quantity at the height of 120 km.
Similarly, carbon dioxide and water vapour are found only up to 90 km from the surface of the earth.
Carbon dioxide is meteorologically a very important gas as it is transparent to the incoming solar radiation but opaque to the outgoing terrestrial radiation.
It absorbs a part of terrestrial radiation and reflects back some part of it towards the earth's surface.
It is largely responsible for the greenhouse effect.
The volume of other gases is constant but the volume of carbon dioxide has been rising in the past few decades mainly because of the burning of fossil fuels.
This has also increased the temperature of the air.
Ozone is another important component of the atmosphere found between 10 and 50 km above the earth's surface and acts as a filter and absorbs the ultra-violet rays radiating from the sun and prevents them from reaching the surface of the earth.
India Physical
