7. National income Flashcards
What is national income and how is it calculated?
A measure of the value of goods and services produced in a year.
= GNP - Depreciation.
What is GDP?
Gross Domestic Product is the market value of final goods and services produced within an economy.
What is GNP?
Gross national product is GDP + net property income from abroad.
What moves between households and firms in the circular flow of income model?
Factor services (employment) moves to from the household to the firm and goods and services moves from firms to households.
What is the MPC? (Marginal propensity to consume)
A measure of the proportion of extra income that is spent on consumer goods.
What is the formula for consumer spending?
C = a + by
Where a is autonomous consumption, b is the marginal propensity to consume and y is national income.
What is the name of the economical state where national income shows no tendency to change through time?
Macro-economical equilibrium.
Planned expenditure = ?
Consumer spending + injections
What is investment spending?
Spending on creating new assets for the economy. Eg inventory, machinery.
What is the formula to calculate the multiplier?
1 / 1-MPC
What is the formula for the change in national income?
= 1 / (1 - MPC) x rise in injections
What is full-employment output?
When we are using all the resources in a country and cannot make anything else. The supply curve will become vertical.
