national income definitions Flashcards
circular flow of incomes
model that shows flow of goods and services in an economy
withdrawals
income taken out of circular flow
injections
income can be put into the circular flow
macro-economic equilibrium
when aggregate demand equals aggregate supply
multiplier effect
process of increase in a component of AD leads to increase that I greater for role of AD
multiplier
figure used to multiply a change in an injection into the circular flow such as investment to find final change in income
national income
value of the output, expenditure or income of an economy over a period of time
closed economy
economy where there’s no foreign trade
marginal propensity to import - MPM
increase in imports divided by increase in income
marginal propensity to save - MPS
increase in saving divided by increase in income
marginal propensity to tax
increase in tax revenues divided by increase in income
marginal propensity to withdraw - MPW
increase in withdrawals from circular flow divided by increase in income
= SAME AS MPS+MPT+MPM
multiplier
figure used to multiply change in injection into circular flow , such as investment, to find final change in income
ratio of final change in. income to initial change in injection
multiplier effect
increase in investment or other injection will lead to even grater increase in income
national income
value of output expenditure or income of economy over [eriod of time
open economy
economy where trade is with other countries
wealth
stock of assets which can be used to generate flow of production of income
withdrawals or leakages
in circular flow, spending by households which doesn’t flow back to domestic firms . includes savings, taxes and imports
income method
total of all four factor incomes - wages rent interest profits
output method
total of value added by every firm in the economy
expenditure method
total of all final expenditure on consumer goods and capital goods by households firms gov and foreign residents
