National income (MAC) Flashcards
What is national income?
The total value of all goods and services produced by a country in a year.
How is the circular flow of income structured?
Households provide factors of production
People then use their incomes to buy consumer goods and services
What is wealth?
The value of the total assets of worth owned by an individual firm or country
What is income?
It is a flow of money received by FOPs and it is measured over a period of time
What are injections?
They are additions to the circular flow of income.
They consist of Investment Government expenditure, Exports
What are withdrawals?
They are leakages out of the circular flow of income. They consist of Savings, Taxes, Imports
What is the equilibrium?
It is a balancing point at which there is no tendency to change.
What is the multiplier?
Describes the process by which a change in injection cause a more than proportionate change in national income.
What is the formula of the multiplier?
change in real GDP / change in injections
What is MPC?
It is the proportion of an increase in income that is spent
What is the formula of MPC?
change in consumption / change in income
How is the multiplier calculated using the MPC?
1/1-MPC
What is MPS?
Refers to the proportion of an increase in income that is saved
What is the formula of MPS?
change in saving / change in income
How is the multiplier calculated using MPS?
1/1-MPS
