ECONOMICS

Diagram Library

Every must-know diagram for CBSE board exams, drawn as crisp, theme-aware SVG charts. Use the toggle to test yourself: draw the diagram first, then reveal the answer.

Circular Flow of Income (Two-Sector Model)

Unit 1
HouseholdsSuppliers of factorsFirmsProduce goods & servicesFactor payments (₹)Consumption (₹)Factors → goods & services (real flow)

Households supply factors of production to firms (real flow) and receive factor income (money flow); they spend it on goods and services which returns to firms as revenue. The loop never ends.

HouseholdsSuppliers of factorsFirmsProduce goods & servicesFactor payments (₹)Consumption (₹)Factors → goods & services (real flow)

Remember for the exam

  • Outer loop = money flow (factor payments down, consumption expenditure up).
  • Inner loop = real flow (factors up, goods & services down).
  • Savings, taxes, imports are leakages; investment, government spending, exports are injections.

📌 Exam tip: CBSE asks you to draw and label the two-sector circular flow diagram (3 marks). Use labelled arrows for money flow and real flow.

Aggregate Demand–Supply Equilibrium (45° Line)

Unit 3
Income (Y)ADAS (45°)AD = C + IEY₀

AS is the 45° line (planned output = income). AD = C + I is flatter than AS because MPC < 1. Equilibrium E is where AD crosses AS, giving equilibrium income Y₀.

Income (Y)ADAS (45°)AD = C + IEY₀

Remember for the exam

  • 45° line represents AS where Y = C + S.
  • AD curve slope = MPC (less than 1).
  • Left of Y₀: AD > AS (unplanned decumulation of stocks) → income rises.
  • Right of Y₀: AS > AD (unplanned accumulation) → income falls.

📌 Exam tip: 6-mark favourite: explain equilibrium income with this diagram and the S = I condition.

Consumption Curve (C = C̅ + bY)

Unit 3
YC, SC = YC = C̅ + bYbreak-evenY₀C̅

The consumption curve starts above origin at C̅ (autonomous consumption at zero income) and slopes upward with slope b = MPC. The 45° line shows C = Y; where they meet is the break-even point (saving = 0).

YC, SC = YC = C̅ + bYbreak-evenY₀C̅

Remember for the exam

  • Intercept = autonomous consumption C̅.
  • Slope = MPC (constant for linear function).
  • Below break-even: dissaving; above: positive saving.

📌 Exam tip: Draw the consumption curve and mark the break-even point where C = Y (3 marks).

Saving Curve (S = −C̅ + (1−b)Y)

Unit 3
YSS = −C̅ + MPS·YY₀ (S = 0)S < 0S > 0−C̅

The saving curve starts below zero at −C̅ (dissaving at zero income) and slopes upward with slope = MPS. It cuts the income axis at the break-even point where S = 0.

YSS = −C̅ + MPS·YY₀ (S = 0)S < 0S > 0−C̅

Remember for the exam

  • Vertical intercept = −C̅.
  • Slope = MPS = 1 − MPC.
  • S = 0 at break-even income; negative below, positive above.

📌 Exam tip: Draw the saving curve and show the break-even point. Often drawn together with the consumption curve.

Equilibrium Exchange Rate (Demand & Supply of Forex)

Unit 5
Qty of forexRateSupplyDemandQ₀R₀

Demand for foreign exchange (from imports, outflows) slopes down; supply (from exports, inflows) slopes up. Their intersection gives the equilibrium exchange rate.

Qty of forexRateSupplyDemandQ₀R₀

Remember for the exam

  • Demand rises → rate rises (depreciation of home currency).
  • Supply rises → rate falls (appreciation).
  • Under flexible regime, the market sets the rate.

📌 Exam tip: Draw the D–S diagram and show the effect of a rise in imports (shift of demand right → depreciation).

Saving–Investment Equilibrium

Unit 3
YS, II = ĪSEY₀S < IS > I

The S curve slopes upward; autonomous investment I is horizontal. Equilibrium income is where S = I. Left of E, S < I; right of E, S > I.

YS, II = ĪSEY₀S < IS > I

Remember for the exam

  • Investment line is horizontal (autonomous).
  • Equilibrium condition: planned S = planned I.
  • S > I → unplanned stocks rise → output falls.

📌 Exam tip: Alternative to the AD–AS diagram for 6-mark equilibrium questions.

Inflationary and Deflationary Gap

Unit 3
YADASYFexcessdeficient

At full employment output YF, if actual AD is above the full-employment AD, the vertical gap is the inflationary gap (prices rise). If below, the vertical gap is the deflationary gap (unemployment).

YADASYFexcessdeficient

Remember for the exam

  • Always measure the gap vertically at YF.
  • Inflationary gap: AD too high → demand-pull inflation.
  • Deflationary gap: AD too low → involuntary unemployment.
  • Close gaps with monetary + fiscal policy.

📌 Exam tip: 6-marker: draw and explain gaps + corrective policies.

Government Budget Relationships

Unit 4
Government BudgetReceiptsExpenditureRevenue receiptstaxes · fees · interestCapital receiptsborrowings · disinvestmentRevenue expendituresalaries · subsidies · interestCapital expenditureroads · dams · machinesDeficits: Revenue · Fiscal · PrimaryFiscal = Total Exp − (Rev Rec + Non-debt Cap Rec)Primary = Fiscal − Interest

Budget receipts split into revenue and capital; budget expenditure likewise. The deficits are differences: Revenue Deficit = Rev Exp − Rev Rec; Fiscal Deficit = Total Exp − (Rev Rec + Non-debt Capital Rec); Primary Deficit = Fiscal Deficit − Interest.

Government BudgetReceiptsExpenditureRevenue receiptstaxes · fees · interestCapital receiptsborrowings · disinvestmentRevenue expendituresalaries · subsidies · interestCapital expenditureroads · dams · machinesDeficits: Revenue · Fiscal · PrimaryFiscal = Total Exp − (Rev Rec + Non-debt Cap Rec)Primary = Fiscal − Interest

Remember for the exam

  • Receipts test: liability/asset change → capital.
  • Expenditure test: asset created/liability reduced → capital.
  • Fiscal deficit = total borrowing requirement.

📌 Exam tip: Classification flow questions: identify which items are revenue/capital receipts and expenditures (4 marks).