National Income

Question 1

Stock

Answer 1

Value at a point in time

Question 2

Flow

Answer 2

Value over a period of time

Question 3

National output

Answer 3

Measure the actual goods and services produced by the economy

Question 4

National income

Answer 4

Measures the incomes received by labour and other factors of production when producing the goods and services

Question 5

Recession

Answer 5

Two consecutive quarters of negative economic growth in real GDP that is followed by a significant rise in the unemployment rate.

Question 6

National wealth

Answer 6

The sum of physical assets owned by a nation that have value

Question 7

Depreciation + capital

Answer 7

• The wearing out of capital stock
• This is the same as capital capital consumption (we are using up the capital)
• If capital is reduced, we can assume, ceteris paribus, that the output in the from of national income will reduce (economy/ growth slows down)

Question 8

Consumption

Answer 8

Is spending on goods and services by households

Question 9

Net investment

Answer 9

• (gross investment - capital depreciation), is the ‘extra’ investment = growth in the economy
• Only net investment increases the size of the capital stock and thus enabling long term (positive) economic growth
• If gross investment is greater than capital depreciation then businesses will have a higher production capacity

Question 10

Chain of reasoning how rising house prices may lead to increase in AD

Answer 10

If house prices were to increase - homeowners would feel wealthier due to their homes having a higher value - this can lead to higher consumer confidence and spending. - therefore homeowners may be more inclined to spend more on goods and services - contributes to an increase in consumption and expenditure in the economy (factor of AD) - this is called the wealth effect

Question 11

National income = national output = national expenditure