Circular Flow: National account aggregrates Flashcards
what is a national account aggregate?
National account aggregates are the total amount in the national income
expenditure method
income method
Production method
GDPE is to measure the standard of living in a country
GDPI is to measure the proseperity levels in a counry
GDPP measures the economic growth everybyear
injection
Leakage
Injection is the additional money put into the economies investment
leakages is money taken out from the circular flow
Production method
Income method
Expenditure Method
takes place in the primary secondary and tertiary sector
not all values are added so double counting is avoided {P+s+T= Gva at market prices} + TP-SP=Gva at market prices}
Adds the income of the owners of production(households)
compensation of employee+net operating surplus+ consumption of fixed capital= Gva at factor price + other tax on production- other subsidies on production= GVA at basic prices +tax on products- subsidies on products= GVA at market prices
Final expenditure consumption on households+ Final expenditure comsumption of goverment+ Gross capital formation+residual items= gross domestic expenditure =exports of goods and services- imports of goods and services= expenditure of gross domestic products at market price
what do injections contribute to the economy?
An increase in injections in the economy will result in larger increase in the national income
What is the multiplier?
The multiplier is based on spending by one person which is an incomes for another person ( Re-spending effect)
A household will spend on their level of income
The more they earn the more they spend this is known as MPC( Marginal Propensity to consume
Factor Market
The factors of production are purchased and sold.
These markets are also known as the resource market.
Three sectors of the factor
Labour market: Labour is traded including labour brokers
Financial Market: Finance is traded through banks and other financial institutions
Land Market: All types of natural resources are traded here
NB FOR FACTOR MARKETS
Without the factor market, production could not take place and households would not earn an income