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Govt, budget is a statement of its expected receipts and expected expenditure for the given financial year.

Govt, budget can be of three types:

1. Deficit budget. Deficit budget is that budget in which the govt, expenditure exceeds its income. In case of deficit demand, deficit budget is thought to be suitable.
2. Surplus budget. That budget in case of which the income of govt, exceeds its expenditure is called as surplus budget. This type of budget is suitable to control excess demand.
3. Balanced budget. Balanced budget is that budget in case of which the income of the govt, equals its expenditure.

Bank rate is that minimum rate at which the Central Bank lends money to other commercial banks.

According to Keynes, “Saving is the excess of income over consumption.” In other words,

Saving = Income – Consumption.

The sale and purchase of securities in the open market by the Central Bank.

It means all types of loans taken by the government.

It is the method of measuring the poverty of any country.

Marginal propensity to consume lies in between zero and one.

According to the classical economists, the following types of unemployment may exist even at the stage of full employment:

• Voluntary unemployment
• Frictional unemployment
• Seasonal unemployment
• Structural unemployment
• Technical unemployment.

As a matter of fact, absence of involuntary unemployment signifies full employment in the economy.

The concept of poverty line is used to measure poverty in a country. The people who are living below the poverty line are called as poor.

Poverty line signifies a sum that is needed by a person to meet his minimum consumption needs per month. In other words, by poverty line we mean that sum which is required by a person monthly to meet his minimum needs (food, clothing, housing, education and health, etc.).

Limits of Poverty line in India—In their book “Poverty in India”, V.M. Dandekar and Nilkanth Rath are of the opinion that all those who do not get food worth 2,250 calories are to be considered as poor. In order to get food worth 2,250 calories, the per capita monthly income in the rural areas and the urban areas must be ₹ 15 and ₹ 22.5 respectively at 1960-61 prices.

The Planning Commission has defined the poverty line on the basis of the recommended nutritional intake of 2,400 calories per person per day for rural areas and 2,100 calories per person per day for urban areas. On this basis, in rupee terms, the poverty line works out at ₹ 1407 per head per month for rural areas and ₹ 972 per head per month for urban areas both at the 2013-14 prices. 21.9 per cent of population was below poverty line in India during 2011-12.

Seasonal unemployment is the unemployment due to the seasonal nature of activity in some industries.

When a worker is not willing to work at the current wage rate, then he is said to be voluntarily unemployed. On the other hand, a worker is said to be involuntarily unemployed when he is willing to work at the current wage rate but does not get work.

Growth rate of per capita income =  \(\frac{Change\, in \,Per \,Capita \,Income }{ Initial\, Per\, Capita \,Income}\)  × 100

An addition to capital is called Investment.

Growth rate is that percentage rate from which it is known that in comparison to one year how much percentage change has taken place in national income or per capita income in any other year.

Growth rate is calculated by using the following formula:

Per Capita Income Growth Rate =  \(\frac{Change\, in\, Per\, Capita\, Income }{ Original\, Per\, Capita\, Income}\)  × 100

The calculation of growth rate may be made clear with the help of an example. Suppose in 2001 the per capita income of India was ₹ 10,000 and it increased to ₹ 12,000 in 2002. Clearly, the change in per capita income = 12,000 – 10,000 = ₹ 2000.

Initial Per Capita Income = ₹ 10,000

Growth Rate of Per Capita Income = 2000 / 10,000 × 100 = 20%

Thus Growth Rate of Per Capita Income = 20%.

Consumption function signifies the functional relationship between income and consumption. In other words,

C = f(Y)

where C = Consumption and Y – Income.

It is the ratio of change in savings to the change in income.

There is positive relationship between income and consumption.

According to Kingsly Devis:

“Community is the smallest territorial group that can embrace all aspects of social life” 

According to E.S. Bagardus: 

“Community is a Social Group with some degree of “we feeling” and living in a given area”.

National income at constant prices =  \(\frac{National\, income\, at\, current\, prices}{  Price \,Index}\)  × 100

(i) Direct taxes like income tax, wealth tax, etc. are based on the principle of ability to pay, so equity or justice in the allocation of tax burden is well secured by these taxes.

(ii) Direct taxes satisfy the canon of certainty. The State as well as tax-payers are certain about the amount of tax.

It refers to the physical, mental and social differences found among people. Likeness and differences are like the two faces of the same coin.

Society is not static it is dynamic. Society is like water in a stream or river that ever flows. It is always in flux. Old men die and new ones born.

1. Locality or Geographical area 

2. Community Sentiment 

3. Stability or Relative Permanence 

4. Naturalness.

National income calculated by using the current year prices is called national income at current prices.

When national income is calculated by using base year prices, it is called national income at constant prices.

According to Dernburg, “National income may be defined as the factor income in the form of rent, wages, interest and profit of the normal residents of a country in one year. It is composed of domestic factor income and net factor income from abroad.”

Per capita income is considered to be a better measure of economic progress as compared to that of national income.

Per capita income is the average income of the people of a country in a definite period. Obviously per capita income is the average income. Thus, per capita income does not mean that each and every individual of the country is having income equal to it. Some people might be having income greater than it and some less than it. For example, the per capita income of India at current prices in 2013-14 was ₹ 74380 and that of Punjab was ₹ 74606.

Per capita income can be calculated by dividing national income by the population.
In other words,

Per Capita Income =  \(\frac{National \,Income }{ Population}\) 

Use of goods and services produced in order to satisfy human wants is called as consumption. In other words, consumption means expenditure made on consumption during one year in an economy.

Correct option is (a) Consumption

Aristotle was the first person to say “Man is social animal”.

The term Society is derived from Latin word ’Socius’ which means “companionship or friendship".

The reciprocal contact between two or more persons. Social relationships have a wide range.

The mutual co-operation between male and female is essential for the reproduction of human race and lead to the growth of culture and civilization.

Caste community, linguistic community.

Community sentiment is “a feeling of belongingness towards” or “a kind of conscious identification with the local group.

Price index number signifies a single value with the help of which change is measured in the price/prices of a single commodity or a group of related commodities over a period of time.

Locality means Geographical area.

Urban community consist of people living in towns and cities and depending mainly on non- agricultural occupations. This is heterogeneous in nature, relatively bigger in size and has a dominance of non- intimate or secondary relations.

Rural community consist of people living in village and depending mainly on agriculture and allied occupations. Rural community is homogeneous in nature relatively smaller in size and has a dominance of primary relations.

Tribal community consist of mostly Indigenous people living far away from the area of influence of civilisation. It constitutes a group speaking a common dialect inhabiting in a common area and following a common culture.

Public Expenditure: The expenditures incurred by the government are called Public Expenditures.

These can be of four types :

1. Public Works. The expenditure incurred on the roads, dams and bridges etc.
2. Public Welfare Works. The expenditure incurred on education, public health etc.
3. The expenditures on the security and law and order of the country like on Police, Prisons etc.
4. The expenditure on subsidies given to the producers to increase production, exports and transfer payments.

Example of direct tax is Income Tax.

The principle of “Likeness” is essential for society. It exists among the people who have similarities with regards to their needs, works, aims, ideals, values and so on.

Political parties, trade union, student union, rotary clubs, lion club, professional association etc.

Elements of community E.A. Bogardus identified the following elements by community. Geographical area or locality and community sentiments are considered as the essential elements of community. They are also considered as characteristics of community.

(a) Locality or Geographical area: A Community is a territorial group. It always occupies some geographic area. Locality is the physical basis of a community. Locality Means- "A group of people became a community only when it starts to reside permanently in a definite locality".

In contrast with Society a community is more or less locally limited. Living together facilitates people to develop social contacts, gives fulfill their common interests. In community physical conditions may influence peoples social life, family, religion, belief, employment etc.

(b) Community Sentiment: Community sentiment: "a feeling of belongingness towards", or “a kind of conscious identification with the local group.” Community sentiment makes the people share their joys and sorrows and brings social integrity in them. Common interests, and similar lifestyles awaken community sentiments in people.

Other Characteristics of community:

1. Stability or Relative Permanence: A community is not temporary group like a crowd or a mob. It includes a permanent life in a definite territory. As along as there is life on the earth, People continue to reside permanently all through their life in the communities.

2. Naturalness: Communities are normally established in a natural way. They are not deliberately created. They are not made by planned efforts. The members of a community are the individual who are born in a community. As people live over a period of time in a particular territory naturally the community feeling develops.

3. Size of the Community: Community has no certain size. A community may be big or small. A village is small community where as a city is a big one. A city and a village may be included in a wider community called the district. Hence there are communities within communities. Nation as a big community, may include communities like, Village, towns cities etc.

According to Maclver and Page “An association is an organization deliberately formed for the collective pursuit of some interest or a set of interests, which its members share”.

According to Maclver and Page “An association is an organisation deliberately formed for the collective pursuit of some interest or a set of interests, which its members share”.

Balanced budget is that budget in which the income of the govt, equals its expenditure.

According to Ogburn and Nimkoff say that “Groups which provide experience lacking in intimacy can be called secondary groups”. 

Ex. Schools and Colleges.

The division of labor depends on peoples interest, ability, sex, and age etc. Due to division of labor in various fields task are performed more efficiently. In modem society, skilled and specialized persons have more importance.