National Income

Question 1

What is national income?

Answer 1

The TOTAL amount of money earned within a country

MEASURES the monetary value of the flow of output of goods and services produced in an economy over a period of time

Question 2

What are the 2 sources of national income?

Answer 2

1. Ppl or organisations WORKING for other people or organisations for which they receive payment in return
2. Ppl or organisations OWNING or having FACTORS OF PRODUCTION (labour, land, capital, enterprise)

Question 3

What are the 4 factors of production?

Answer 3

Labour (age, availability)

Land (climate, utilisation of existing resources, water)

Capital (plant and machinery, capital investment)

Enterprise (management, up to date techniques, control, combos of 1-3 more efficient)

Question 4

Why isn’t national income precise?

Answer 4

Incomplete info (tax returns)

Unpaid services

Value added (each stage of productions)

Estimates (e.g. Stock, capital consumption)

Inflation (depreciation via inflation, can artificially boost the resultant national income figure)

Question 5

How is national income measured? (3 methods)

Answer 5

National output = national expenditure = national income

In all 3 methods of measurement, the figure is deducted for estimated capital consumption in the economy - reps depreciation of equipment which has to be replaced

Question 6

What is GDP?

Answer 6

Gross domestic product

Used to measure change in economic activity

Question 7

Why is measuring the level and rate of growth of national income important?

Answer 7

Rate of economic growth

Living standards changes

Distribution of income

Mat help to attain full employment

Question 8

What is GNP?

Answer 8

GDP after account is taken of the net property income from abroad

Question 9

Measurement must also take into account…

Answer 9

Inflation
Measured on constant real prices e.g. Population and distribution of income
International comparisons but - cost of living