National Income and Accounts (GDP (Aggregate Demand Equation (Y = C + I +…
National Income and Accounts
total income of every resident of the country in one year
measure of the total income of every resident and the total expenditure on the country’s goods and services
Total exp by households OR total income by firms
Assuming all income is spent by households, the result for each calculation is the same figure.
as the value of all goods and services produced by the country in one year.
the total amount of money spent on goods and services in the country in one year.
National Income=national output = national expenditure
Circular Flow Diagram
Simple 2 flow: households and firms
Goods and Services
Factors of Production
Payment for same
Draw Diagram (closed system)
Households – Savings, Taxation, Imports
Firms – Investments, Expenditure, Exports
5 sector circular flow of income model.
When the model is in equilibrium, total leakages will equal to total injections.
When money is spent on goods and services it becomes income for the firm and an output to be sold to a household. National expenditure = National Income = National output
A statistical record of economic activity in the economy.
Used by government and businesses in planning/ forecasting
Used by economists for analysis
National Accounts are a statistical record and are not measure economic welfare.
UN Human development Index looks at GDP, Educational attainment of the population and life expectancy
Aggregate Demand Equation
Y = C + I + G + NX
household expenditure on goods and services..
Investment: investment in goods and services in order to create more goods and services
on goods and services at national and local level.
Nominal GDP - current market prices
Real GDP - takes rate of inflation into account. more accurate
CPI changes in a defined basket of goods over time.
GDP Per capita - more accurate re countrys standard of living
Not included in National Income-
Social Welfare payments
Non-marketable goods and services