CBSE Class 12 Macroeconomics Revision Notes & Master Formulas

Unit 1 • Weightage: 10 Marks

National Income and Related Aggregates

High Numericals Yield

National Income is the net factor income earned by normal residents of a country during an accounting year ($NNP_{FC}$).

The 3 Fundamental Conversion Identities:

1. Gross vs. Net: Net = Gross - Depreciation (Consumption of Fixed Capital)
2. Domestic vs. National: National = Domestic + NFIA (Net Factor Income from Abroad)
3. Market Price vs. Factor Cost: Factor Cost = Market Price - NIT (Net Indirect Taxes)

⚠️ Examiner Trap: Intermediate goods and transfer payments (pensions, pocket money, gifts) are never included in National Income because they do not reflect current flow of goods and services!

Solve National Income Numericals → Get 1-on-1 Doubt Clearing

Unit 2 • Weightage: 6 Marks

Money and Banking

Theory + Formula

Covers the definition of money supply (M1: Currency with public + Demand deposits + Other deposits with RBI), commercial bank credit creation, and central bank monetary policy tools.

Credit Creation Multiplier Formula:

Total Credit Created = Initial Primary Deposit × (1 / Legal Reserve Ratio)

Where LRR consists of Cash Reserve Ratio (CRR) + Statutory Liquidity Ratio (SLR).

Quantitative Tools:

Repo Rate, Reverse Repo Rate, CRR, SLR, Open Market Operations (OMO).

Qualitative Tools:

Margin Requirements, Moral Suasion, Selective Credit Controls.

Unit 3 • Weightage: 12 Marks

Determination of Income and Employment

Highest Weightage Unit

Based on the Keynesian framework. Focuses on Aggregate Demand ($AD = C + I$), Aggregate Supply ($AS = C + S = Y$), Propensities to Consume and Save, and the Working of the Investment Multiplier.

Key Multiplier Relations:

• MPC + MPS = 1 | APC + APS = 1
• Multiplier (k) = 1 / MPS = 1 / (1 - MPC) = ΔY / ΔI
• Minimum value of k = 1 (when MPC = 0)
• Maximum value of k = ∞ (when MPC = 1)

📌 6-Mark Board Exam Question: Explain the working of the Investment Multiplier with a numerical schedule assuming an initial investment of ₹1,000 crores and MPC of 0.8.

Unit 4 • 6 Marks

Government Budget & Economy

Classification of Receipts into Revenue Receipts (tax & non-tax) and Capital Receipts (borrowings, recovery of loans, disinvestment).

Fiscal Deficit = Total Exp - (Total Receipts excl. Borrowings)

Primary Deficit = Fiscal Deficit - Interest Payments

Unit 5 • 6 Marks

Balance of Payments & Forex

Current Account (visible trade, invisibles, unilateral transfers) vs. Capital Account (FDI, FII, external commercial borrowings).

Autonomous items = "Above the line" (Profit motive)

Accommodating items = "Below the line" (To balance BoP)

Want to score 95%+ in Class 12 Economics?

Get Dr. Ashish Juneja's Complete Revision Kit

Get 50 most repeated past board questions with model answers, diagram cheat sheets, and 1-on-1 exam strategy guidance.