Determination Of Income And Employment

सीमान्त उपभोग प्रवृत्ति (MPC) का अर्थ है—आय में की एकाई वृद्धि से उपभोग में जितनी वृद्धि होती है। अतः (1) व (3) औसत अनुपात हैं (APC या उसका व्युत्क्रम), जबकि (2) MPC का उलटा है।

Keynes के अनुसार वर्तमान उपभोग मुख्य रूप से वर्तमान प्रयोज्य आय का फल है। रेखीय रूप में वह न्यूनतम व्यय है जो शून्य आय पर भी करना पड़ता है, जबकि बताता है कि आय की अतिरिक्त इकाई से कितना उपभोग बढ़ेगा। चूँकि परिवार कुछ आय बचाते हैं, . इसीलिए औसत उपभोग प्रवृत्ति प्रायः आय बढ़ने पर घटती देखी जाती है। दीर्घकाल में अपेक्षाएँ, संपत्ति, ऋण‑सुगमता, जनसांख्यिकी और कर नीति उपभोग‑आय संबंध को स्थानांतरित कर सकती हैं। यह सम्बन्ध गुणक, स्थिरीकरण नीति और व्यापार चक्र विश्लेषण का आधार है।

कंपनियाँ पूँजी स्टॉक का आकार अपेक्षित बिक्री और क्षमता उपयोग के आधार पर तय करती हैं। जब समष्टि माँग और आय बढ़ती है, तो एक्सीलरेटर सिद्धान्त के अनुसार वांछित पूँजी‑उत्पादन अनुपात बरकरार रखने के लिए निवेश में अनुपात से अधिक वृद्धि हो सकती है; यह प्रेरित निवेश कहलाता है। इसके विपरीत, आय घटने पर पूँजी स्टॉक अधिशेष होने से नया निवेश रुक जाता है और केवल प्रतिस्थापन किया जाता है। स्वायत्त निवेश सड़क, बांध, रक्षा, अनुसंधान या नयी तकनीक जैसी योजनाओं से प्रेरित होता है और आय से स्वतंत्र माना जाता है। व्यापार चक्रों में प्रेरित निवेश का चक्रवृद्धि प्रभाव आय को ऊपर‑नीचे करता है, इसलिए स्थिरीकरण नीति निवेश अपेक्षाओं और ऋण‑शर्तों को संतुलित रखने पर जोर देती है।

अतिरेक माँग वह स्थिति है जब पूर्ण‑रोज़गार के निकट समग्र माँग संभाव्य उत्पादन से ऊपर चली जाती है; इसे स्फीतिक अंतराल भी कहते हैं। अल्पावधि में फर्में ओवरटाइम, स्टॉक‑घटाने और उच्च क्षमता उपयोग से उत्पादन कुछ बढ़ाती हैं, किंतु आपूर्ति लोच सीमित होने से कीमतों में तेज वृद्धि होती है। परिणाम: माँग‑खींच मुद्रास्फीति, संसाधनों पर दबाव, आयात में बढ़ोतरी, वितरण में विकृति। सुधार हेतु सरकार व्यय घटाती/कर बढ़ाती, केंद्रीय बैंक रेपो/CRR बढ़ाकर तरलता सिकोड़ता और क्रेडिट नियंत्रित करता है। दीर्घकाल में अर्थव्यवस्था संभाव्य उत्पादन पर लौटती है, पर उच्च मूल्य‑स्तर स्थायी रह सकता है। % Topic - macro stabilization (excess demand effects)

Deflationary gap वह अंतर है जो पूर्ण रोजगार पर संभाव्य उत्पादन पर आवश्यक संचयी माँग और वास्तविक संचयी माँग के बीच रह जाता है। इसका अर्थ है कि अर्थव्यवस्था में कुल माँग अपर्याप्त है, परिणामस्वरूप बेरोजगारी और उत्पादन क्षमता का अपूर्ण उपयोग होता है।

अधिशेष माँग तब उत्पन्न होती है जब पूर्ण रोजगार के स्तर पर संचयी माँग उत्पादन क्षमता से अधिक हो जाती है। इसके प्रमुख कारण हैं सरकारी व्यय में वृद्धि, निवेश में उछाल, उपभोग प्रवृत्ति में वृद्धि, करों में कमी, तथा मुद्रा आपूर्ति में तेज बढ़ोतरी। अतः (1) और (2) दोनों अधिशेष माँग के कारण हैं, जबकि करों में वृद्धि माँग को दबाती है।

न्यून माँग को बढ़ाने के राजकोषीय उपाय हैं: सरकारी व्यय बढ़ाना, करों में कमी करना, घाटा वित्त या सार्वजनिक ऋण के माध्यम से खर्च बढ़ाना। बैंक दर मौद्रिक नीति का उपकरण है जिसे केंद्रीय बैंक प्रयोग करता है, राजकोषीय नहीं।

अधिशेष माँग वह स्थिति है जब पूर्ण रोजगार पर संभाव्य आउटपुट की कीमतों पर माँग अधिक हो जाती है। इसके स्रोत समझें। प्रथम, वित्तीय विस्तार—सरकारी व्यय, सब्सिडी, वेतन‑भत्ते या कर कटौती से प्रयोज्य आय और माँग बढ़ती है। द्वितीय, मौद्रिक विस्तार—निम्न ब्याज दरें, ऋण ढील और उच्च क्रेडिट ग्रोथ निवेश तथा उपभोग को बढ़ाती है। तृतीय, बाह्य माँग जैसे निर्यात उछाल और विनिमय दर प्रभाव। इसके परिणामस्वरूप कीमतों पर उर्ध्व दबाव, आयात में वृद्धि, और उत्पादन क्षमता पर तनाव दिखाई देते हैं। सुधार हेतु सरकार खर्च घटाती या कर बढ़ाती है तथा केंद्रीय बैंक दरें/CRR बढ़ाकर तरलता सिकोड़ता है।

Saving function आय और बचत के बीच सम्बन्ध बताता है। सरल रूप में जहाँ स्वायत्त उपभोग और है। यह दिखाता है कि उच्च आय स्तर पर बचत का अनुपात बढ़ता है; ।

खुली अर्थव्यवस्था में विदेशी क्षेत्र भी शामिल होता है। इसलिए . यहाँ शुद्ध निर्यात है—निर्यात माँग को बढ़ाता है, आयात घरेलू माँग का लीकेज है।

यह पुस्तक J. M. Keynes ने 1919 में लिखी। इसमें प्रथम विश्व युद्ध के बाद वर्साय संधि से जर्मनी पर लादे गए कठोर दायित्वों की आलोचना की गई और चेतावनी दी गई कि अत्यधिक क्षतिपूर्ति मांगें यूरोप की अर्थव्यवस्था को अस्थिर करेंगी। इस पुस्तक ने युद्धोत्तर वित्त और अंतरराष्ट्रीय आर्थिक नीति पर गहरा प्रभाव डाला।

आय का सीमान्त विभाजन नियम: दिया है . अतः यह बताता है कि अतिरिक्त आय का 80 प्रतिशत भाग बचत में जाएगा।

सरल Keynesian निवेश गुणक में है। जितना बड़ा (लोग अतिरिक्त आय का उतना अधिक भाग उपभोग में खर्च करते हैं), गुणक उतना अधिक और आय‑परिणाम उतना बड़ा।

R.\,F. Kahn (1931) ने Employment Multiplier की परिकल्पना दी—एक प्राथमिक रोजगार के सृजन से व्युत्पन्न (secondary) रोजगार के कई दौर बनते हैं। Keynes ने 1936 में इसे Investment Multiplier के रूप में आय‑निर्धारण में प्रतिपादित किया।

औसत उपभोग प्रवृत्ति (APC) की परिभाषा: यह बताती है कि आय का औसतन कितना अंश उपभोग में व्यय हो रहा है। MPC होता है।

J.\,M. Keynes ने पूर्ण रोजगार के निकट/पर कुल माँग और पूर्ण‑रोजगार उत्पादन के बीच अधिमाँग को Inflationary Gap की संज्ञा दी—युद्धकालीन वित्तन (How to Pay for the War, 1940) में इसका विश्लेषण मिलता है। यह अत्यधिक माँगजन्य स्फीति को समझाने का उपकरण है।

यह पुस्तक J.\,M. Keynes (1936) की रचना है, जिसने पारम्परिक/क्लासिकल धारणा (पूर्ण रोजगार, Say's Law) को चुनौती देकर प्रभावी माँग (effective demand), निवेश–बचत असंतुलन, तरलता वरीयता (liquidity preference) और अनैच्छिक बेरोज़गारी जैसे विचारों से आधुनिक समष्टि अर्थशास्त्र की नींव रखी।

आय का विभाजन उपभोग और बचत में होता है: । अतः सीमांत रूप में , यानि । दोनों का मान 0 और 1 के बीच रहता है।

Keynesian उपभोग फलन में ही MPC है—आय में वृद्धि से उपभोग में की वृद्धि। इसलिए (0 और 1 के बीच)। (1) उसका व्युत्क्रम, (3) निवेश गुणक से संबंधित है।

Keynesian गुणक का सूत्र: . जब . इसका अर्थ—स्वायत्त निवेश में 1 इकाई वृद्धि से आय 5 इकाइयों तक बढ़ेगी (अन्य बातें समान)।

Step 1: Understanding the consumption function.
The consumption function represents the relationship between total consumption (C), autonomous consumption ( ), and income (Y). In this equation, represents the marginal propensity to consume, which shows the change in consumption resulting from a change in income. This is mathematically expressed as .

Step 2: Analyzing the options.
(A) : Correct. This is the definition of the marginal propensity to consume, which is represented by in the consumption function.
(B) Minimum subsistence consumption: This refers to the level of consumption that is needed to survive, but it is not represented by in the function.
(C) Autonomous consumption: This is the consumption level that occurs even when income is zero, represented by , not .
(D) All of these: This is incorrect, as only (A) correctly defines .

Step 3: Conclusion.
The correct answer is (A) , as this defines the marginal propensity to consume.

Step 1: Understanding the consumption function.
The consumption function is given as , where is autonomous consumption and is the marginal propensity to consume (MPC). The value of represents the fraction of additional income that is consumed. Typically, is a positive value less than one, but it can be greater than zero, equal to one, or less than one depending on the economic conditions.

Step 2: Analyzing the options.
(A) More than zero: This is true as the marginal propensity to consume is always greater than zero.
(B) Equal to one: This is also true. If , then all additional income is consumed.
(C) Less than one: This is true in most cases, as the marginal propensity to consume is typically less than one.
(D) All of these: Correct. can be greater than zero, equal to one, or less than one, depending on the situation.

Step 3: Conclusion.
The correct answer is (D) All of these, as can take any value greater than zero, equal to one, or less than one.

Step 1: Understanding the multiplier effect.
The multiplier effect refers to the change in income resulting from an initial change in expenditure. In an open economy, the multiplier is larger than in a closed economy because an open economy also includes exports, which can further increase total output. The presence of foreign trade adds to the multiplier effect, as spending on exports leads to more income.

Step 2: Analyzing the options.
(A) Multiplier of open economy: Correct. The multiplier of an open economy is larger because exports contribute to the increase in income and output.
(B) Multiplier of closed economy: This is incorrect, as the multiplier in a closed economy is smaller because it only considers domestic expenditure.
(C) Both are equal: This is incorrect because the multiplier of an open economy is typically larger due to the additional effect of exports.
(D) None of these: This is incorrect because the correct answer is (A).

Step 3: Conclusion.
The multiplier of an open economy is larger than that of a closed economy due to the additional impact of exports. Therefore, the correct answer is (A) Multiplier of open economy.

Step 1: Understanding open economy equilibrium.
In an open economy, equilibrium is achieved when the total production is equal to the total expenditure. Total expenditure consists of consumption ( ), investment ( ), government spending ( ), exports ( ), and imports ( ). Therefore, the equilibrium equation for an open economy is .

Step 2: Analyzing the options.
(A) : This is incorrect because it does not account for government spending, exports, and imports.
(B) : This is incorrect as it does not account for the trade balance (exports and imports).
(C) : Correct. This is the correct equilibrium equation for an open economy, as it accounts for all components of expenditure.
(D) None of these: This is incorrect because the correct answer is (C).

Step 3: Conclusion.
The equilibrium of an open economy is . Therefore, the correct answer is (C) .

Step 1: Understanding marginal cost.
Marginal cost is the change in total cost that arises when the quantity produced changes by one unit. It is calculated by the change in total cost divided by the change in quantity ( ).

Step 2: Analyzing the options.
(A) Average cost: Average cost is calculated as total cost divided by the quantity produced. It is not the same as marginal cost.
(B) Marginal cost: Correct. Marginal cost is the change in total cost divided by the change in quantity.
(C) Total variable cost: Total variable cost is the total cost incurred for variable inputs, but it is not the same as marginal cost.
(D) None of these: This is incorrect because the correct answer is (B).

Step 3: Conclusion.
The correct formula for is marginal cost. Therefore, the correct answer is (B) Marginal cost.

In economics, total cost (TC), marginal cost (MC), and average cost (AC) are key concepts used to understand a firm's cost structure. Below is an explanation of these costs and the diagrams that represent them.

Step 1: Total Cost (TC).
Total cost refers to the total expense incurred by a firm in producing a given level of output. It is the sum of total fixed costs (TFC) and total variable costs (TVC). The formula is:

Step 2: Marginal Cost (MC).
Marginal cost is the change in total cost that results from producing one more unit of output. It is the derivative of total cost with respect to output. The formula is: where is the change in total cost and is the change in output.

Step 3: Average Cost (AC).
Average cost is the total cost divided by the quantity of output produced. It is the cost per unit of output. The formula is: where is the quantity of output produced.

Step 4: Diagrams.
The following diagrams show the relationships between total cost, marginal cost, and average cost: 1. Total Cost Curve: The total cost curve is typically U-shaped. It rises as output increases, reflecting increasing variable costs, and initially decreases as fixed costs are spread over a larger output.
2. Marginal Cost Curve: The marginal cost curve intersects the average cost curve at its lowest point. It initially decreases, then increases due to the law of diminishing returns.
3. Average Cost Curve: The average cost curve is U-shaped, initially declining as the firm increases output, and then rising as production becomes less efficient.

Step 1: Understanding capital in the economy.
In economics, capital refers to physical assets that are used to produce goods and services. These include infrastructure such as roads, buildings, and other public facilities that aid in economic activities.

Step 2: Analyzing the options.
(A) Building: Correct. Buildings are considered capital in the economy as they are used for commercial or residential purposes, facilitating production and services.
(B) Office place: Correct. Office places are capital assets that are used for business activities and services.
(C) Road, bridge, airport: Correct. These are public infrastructure assets that support economic activity by providing transportation and connectivity.
(D) All of these: Correct. All of the options listed are forms of capital that contribute to the economy.

Step 3: Conclusion.
The correct answer is (D) All of these, as all listed options represent forms of capital in the economy.

Step 1: Defining the market.
A market refers to a place or system where buyers and sellers interact to exchange goods and services. Markets can take various forms, such as physical locations, digital platforms, or even indirect communication through technologies.

Step 2: Analyzing the options.
(A) Place like a square, local market etc.: This refers to a physical market, such as a local market or a marketplace. This is a valid interpretation of a market.
(B) Means by which the buyer and seller are in touch with each other like phone: This is correct, as markets can also operate through communication methods such as phones, where buyers and sellers interact without being in the same physical location.
(C) Online shopping portal: This is also valid, as online platforms like Amazon or eBay are modern forms of markets.
(D) All of these: Correct. A market can take many forms, including physical locations, virtual interactions, and online portals.

Step 3: Conclusion.
The correct answer is (D) All of these, as the term 'market' encompasses various forms where buyers and sellers engage in transactions.

Step 1: Understanding market dynamics.
In a perfectly competitive market, firms enter when they see an opportunity for profit and exit when they cannot earn at least a normal profit. A normal profit occurs when total revenue equals total costs, including opportunity costs, and no firm has an incentive to enter or leave the market.

Step 2: Analyzing the options.
(A) When firms are earning supernormal profit: Firms will enter the market when supernormal profits exist, but entry will stop once normal profits are reached.
(B) When the firms are earning normal profit: Correct. In the long run, firms will enter and exit the market until they are earning only normal profits, and no further entry or exit will occur.
(C) When firms are experiencing loss: If firms are experiencing a loss, they will exit the market until supply is reduced and the price rises.
(D) None of these: This option is incorrect, as the correct answer is (B).

Step 3: Conclusion.
The correct answer is (B) When the firms are earning normal profit, as this represents the equilibrium point where no new firms will enter or exit the market.

Step 1: Understanding the concept of minimum support price (MSP).
The minimum support price is a policy implemented by the government to ensure that farmers get a minimum price for their produce, preventing them from selling at a loss. It is intended to support the income of farmers, especially during times of low prices.

Step 2: Analyzing the options.
(A) Excess supply: Correct. When the government sets a minimum support price that is higher than the market equilibrium price, it leads to excess supply, as producers are encouraged to supply more, but demand remains limited at the higher price.
(B) Excess demand: This is incorrect, as excess demand occurs when the price is set too low. At a higher minimum support price, supply exceeds demand.
(C) Low supply: This is incorrect, as the policy aims to support farmers and increase supply by guaranteeing a minimum price.
(D) None of these: This option is incorrect, as the correct answer is (A) Excess supply.

Step 3: Conclusion.
The minimum support price policy leads to excess supply when the set price is above the equilibrium market price.

Step 1: Understanding market structures.
In economics, market structures are categorized based on the number of firms in the market and the nature of competition. In an oligopoly, a market is dominated by a small number of sellers. This makes it a special case of a market where only two sellers exist.

Step 2: Analyzing the options.
(A) Perfect competition: In perfect competition, there are many firms in the market, all selling identical products. This does not apply to the case of two sellers.
(B) Monopoly: A monopoly is a market structure where only one seller exists. This does not fit the scenario of two sellers.
(C) Oligopoly: Correct. An oligopoly is a market structure in which a small number of sellers dominate the market. Two sellers are a special case of this.
(D) None of these: This is incorrect, as the correct answer is (C) Oligopoly.

Step 3: Conclusion.
Two sellers represent an oligopoly, a market structure where a few firms dominate. Therefore, the correct answer is (C) Oligopoly.

Step 1: Understanding the concept of durable goods.
Durable goods are those that do not get consumed or destroyed in the short term. They are used over an extended period and typically provide value over time, such as machinery, vehicles, and appliances.

Step 2: Analyzing the options.
(A) Intermediate goods: This refers to goods used in the production of other goods and are consumed during production. These are not durable goods.
(B) Final goods: These are goods that are ready for consumption, but they may or may not be durable.
(C) Durable goods: Correct. Durable goods are designed to last for a long period, and their consumption does not lead to their immediate destruction.
(D) Capital goods: While capital goods are long-lasting, they are used for the production of other goods and do not fit the definition of consumer durable goods.

Step 3: Conclusion.
The correct answer is (C) Durable goods, as they are the ones not destroyed by short term consumption.

Step 1: Understanding the role of the state in the economy.
In most modern economies, the state plays a significant role alongside the capitalist sector. This role varies by country, but typically includes regulations, public services, and sometimes direct ownership of certain industries. In both developed and developing countries, the state plays an important role in ensuring economic stability and growth.

Step 2: Analyzing the options.
(A) Developed country: In developed countries, the state often plays a role in regulating markets and providing public goods and services.
(B) Developing country: In developing countries, the state may have a more direct role in the economy, often involved in planning and economic development.
(C) Both (A) and (B): Correct. Both developed and developing countries have state involvement in their economies, though the degree and manner of involvement may differ.
(D) None of these: This is incorrect, as the state plays a role in both developed and developing countries.

Step 3: Conclusion.
The correct answer is (C) Both (A) and (B), as the state plays a role in the economy in both developed and developing countries.

Step 1: Understanding what an economy produces.
An economy primarily produces goods and services, which are essential for satisfying the needs and wants of consumers.

Step 2: Analyzing the options.
(A) Goods: This is correct, as an economy produces various goods like food, clothing, and machinery.
(B) Services: This is also correct, as an economy also produces services like healthcare, education, and entertainment.
(C) Profit: While profit is a goal of businesses in an economy, it is not something directly produced by the economy.
(D) Both (A) and (B): Correct. An economy produces both goods and services to meet the needs of its people.

Step 3: Conclusion.
The correct answer is (D) Both (A) and (B), as the economy produces both goods and services.

The law of diminishing marginal productivity states that as more units of a variable input (such as labor) are added to a fixed amount of other inputs (such as capital or land), the additional output (marginal product) produced by each additional unit of input will eventually decrease, holding all other factors constant. This law is fundamental in the study of production and helps explain why firms experience decreasing returns to scale in the short run.
Step 1: Explanation of the Law.
Initially, when a firm increases the quantity of variable inputs, such as labor, the marginal productivity of each additional unit of input may increase or remain constant due to better utilization of fixed resources. However, after a certain point, the marginal product of labor starts to decline because the fixed inputs become fully utilized, and overcrowding or inefficiency occurs.

Step 2: Example of Diminishing Returns.
For example, consider a factory where more workers are hired, but the number of machines remains constant. Initially, each additional worker might increase production significantly. However, as more workers are hired, they may have to share machines, and the factory becomes overcrowded. Eventually, adding more workers leads to smaller increases in output, and may even result in a decrease in productivity.

The Average Variable Cost (AVC) curve shows the per-unit variable costs at different levels of output. It is derived by dividing the total variable cost (TVC) by the quantity of output produced. The AVC curve typically has a U-shape, initially decreasing due to increasing returns to the variable factor, and later increasing as the law of diminishing marginal returns sets in.
Step 1: Characteristics of the AVC Curve.
- Initially, as more units of the variable input are added, the average variable cost declines. This is because of economies of scale and better utilization of variable inputs. - After a certain point, the AVC starts rising due to the law of diminishing returns. As the firm hires more variable inputs, the added costs become higher because fixed resources (such as machinery) are increasingly stretched.

Step 2: U-Shaped Curve.
The AVC curve is U-shaped because, at first, the additional output produced by the variable inputs lowers the average cost. But as more input is added, the marginal productivity of the variable input declines, causing the average variable cost to rise.

In perfect competition, a competitive firm is a price taker, meaning it accepts the market price as given and cannot influence it. The price line of a competitive firm is horizontal at the prevailing market price. This is because the firm can sell any amount of output at this price, but if it raises the price even slightly, it will lose all its customers to competitors. The diagram below shows the price line for a competitive firm:
In the diagram above, the horizontal line represents the market price ( ). The firm’s total revenue will increase linearly with the quantity of output produced, as long as it sells at the same price. The firm's marginal revenue is also equal to the price ( ), which is a characteristic feature of competitive firms.
Step 1: Price Line Characteristics.
- The price line is perfectly horizontal at the market price because the firm cannot charge more than the market price.
- The firm can produce any level of output at this price and sell it in the market.
- The firm’s demand curve is perfectly elastic at the market price.

Step 1: Understanding high-powered money.
High-powered money refers to the money supply controlled by the central bank, including currency in circulation and reserves. The Reserve Bank controls this money supply through open market operations, such as buying and selling government securities.

Step 2: Analyzing the options.
(A) Will purchase government securities: Correct. When the Reserve Bank purchases government securities, it injects money into the banking system, increasing high-powered money.
(B) Will sell government securities: This would reduce high-powered money, not increase it, as it pulls money out of the banking system.
(C) Will increase cash reserve ratio: Increasing the cash reserve ratio would reduce the amount of money banks can lend, thus reducing high-powered money.
(D) None of these: This is incorrect, as the correct answer is (A) Will purchase government securities.

Step 3: Conclusion.
The correct answer is (A) Will purchase government securities, as buying government securities increases the high-powered money supply in the economy.

Step 1: Understanding marginal cost and average variable cost.
The marginal cost (MC) curve represents the additional cost of producing one more unit of output, while the average variable cost (AVC) curve represents the variable cost per unit of output. The marginal cost curve intersects the average variable cost curve at its minimum point. This is because when marginal cost is less than average variable cost, AVC is decreasing; when marginal cost is greater than AVC, AVC is increasing.

Step 2: Analyzing the options.
(A) Highest point: This is incorrect, as marginal cost cuts AVC at the minimum, not the highest point.
(B) Minimum point: Correct. The MC curve intersects the AVC curve at the minimum point, where AVC is at its lowest.
(C) In declining portion: This is incorrect, as the MC curve cuts AVC after the AVC curve starts rising.
(D) In rising portion: This is incorrect because the MC curve cuts the AVC curve before it starts rising.

Step 3: Conclusion.
The correct answer is (B) Minimum point, as the marginal cost curve intersects the average variable cost curve at its minimum point.

Step 1: Understanding production goods.
In the process of production, firms use various types of goods to create finished products. These goods can be divided into raw materials and intermediate goods. Raw materials are the basic inputs, while intermediate goods are used in the production process but are not the final product. Both are consumed by firms in production.

Step 2: Analyzing the options.
(A) Raw material: Raw materials are essential inputs for production, but firms also use intermediate goods in the process.
(B) Intermediate goods: Intermediate goods are goods that are used in the production process to create final goods. Firms do consume these goods during production.
(C) Final goods: Incorrect. Final goods are the end products sold to consumers and are not used in the production process.
(D) Both (A) and (B): Correct. Firms use both raw materials and intermediate goods during the production process.

Step 3: Conclusion.
Firms consume both raw materials and intermediate goods during the production process. Thus, the correct answer is (D).