Economic Theory and Public Finance
Semester 3 · 17 topics in 5 units
Unit I 3 topics
- National income: meaning, definitions and methods of estimationWhat national income measures, the definitions of Marshall, Pigou and Fisher, and the product, income and expenditure methods with the precautions each needs.6 min
- Concepts of national income: GDP, GNP, NNP, NI, PI and DPIThe chain from GDP to disposable income, market price against factor cost, real against nominal, and a worked numerical that adds up.5 min
- Difficulties in estimating national income, and the need for social accountingThe conceptual and statistical problems of measuring national income, why they are sharper in India, and why social accounting is needed.4 min
Unit II 3 topics
- Say's Law of Markets and the classical theory of employmentJ.B. Say's proposition that supply creates its own demand, the assumptions and implications behind it, and Keynes's criticism.4 min
- Keynes's theory of employment: effective demand, consumption and the multiplierHow aggregate demand and aggregate supply fix the level of employment, the psychological law of consumption, the multiplier, and the theory's limits in a developing economy.5 min
- Trade cycle: meaning, phases, types and controlDefinitions, the four phases with the diagram, the Kitchin to Kondratieff types, the main theories in brief, and monetary and fiscal measures to control cycles.5 min
Unit III 4 topics
- Economic growth versus economic development, and the determinants of developmentHow growth differs from development, how each is measured, and the economic and non-economic factors that determine development.4 min
- Vicious circle of poverty, causes of poverty and determination of BPLNurkse's supply-side and demand-side circles, how the circle is broken, the causes of poverty in India, and how the poverty line has been drawn from the Task Force of 1979 to Rangarajan and the MPI.5 min
- Strategies of growth: balanced versus unbalanced growthNurkse's and Rosenstein-Rodan's case for simultaneous investment across industries, Hirschman's case for deliberate imbalance through linkages, and how the two are reconciled.5 min
- Big Push theory and the Critical Minimum Effort thesisRosenstein-Rodan's three indivisibilities that call for a large minimum investment, and Leibenstein's argument that only an effort above a critical minimum lifts an economy out of quasi-equilibrium.5 min
Unit IV 5 topics
- Public finance: meaning, scope and the principle of maximum social advantageDefinitions by Dalton, Findlay Shirras and Musgrave, the scope of the subject, public and private finance compared, and Dalton's principle of maximum social advantage.5 min
- Sources of public revenue: tax and non-tax revenue of the Central GovernmentPublic revenue and public receipts, Dalton's classification, administrative and commercial revenues, and the tax, non-tax and capital receipts of the Union.5 min
- Public expenditure: meaning, classification, items of Central expenditure and effectsWhat public expenditure is, why it grows (Wagner, Peacock and Wiseman), its canons and classifications including plan and non-plan, the main items of Union spending, and its effects on production, distribution and stability.5 min
- Canons of taxation, a good tax system, and direct and indirect taxesAdam Smith's four canons and the later additions, the features of a good tax system, and the meaning, merits and demerits of direct and indirect taxes with Indian examples.6 min
- Public debt: meaning, types, burden and methods of repaymentWhy governments borrow, the classification of public debt, its burden, and the methods of redemption from sinking funds to conversion and refunding.5 min
Unit V 2 topics
- Budget: meaning, objectives, components and types; balanced and unbalanced budgetsWhat a budget is under Article 112, its objectives, the revenue and capital accounts, the types of budget from performance to zero-based, and the classical and Keynesian views of balanced and unbalanced budgets.5 min
- Types of deficit and deficit financingRevenue, fiscal, primary and budgetary deficit with a worked example, and deficit financing: meaning, objectives, methods, effects on a developing economy and limits.5 min