Please enable JavaScript.
Coggle requires JavaScript to display documents.
CHAPTER 2: INTRO TO MACROECONOMICS - Coggle Diagram
CHAPTER 2: INTRO TO
MACROECONOMICS
Components of Macroeconomics
:star: Rest of the world
:star: Firms/Business
:star: Government
:star: Households
Aggregate Demand &
Aggregate Supply
Aggregate Demand
Total qty of output demanded at alternative price
levels in given period of time.
Aggregate Supply
Total qty of output supplied at alternative price
levels in given period of time.
National Income (NI)
Definition
Flow goods of services in nation
over a certain period of time.
Concept of NI
Gross Domestic Product (GDP)
The total of money value of all the final goods
and services produces within a country in a given
time period.
GDP excludes goods and services produced by
Malaysian citizen working oversea and intermediate
goods.
The output of produces by foreign workers in Malaysia
such as Indonesian or Nepalese will also included.
Gross National Product (GNP)
The total market value of all final goods and services
produced by the residents of a country during given
period of time.
GNP excludes intermediate goods.
In other words, GNP is the total amount of income earned
by nations of country regardless where they are.
National Income (NI)
Market Price and Factor Cost
Current price in the market through the forces of demand
and supply.
Market price includes indirect taxes and exclude subsidies
given to producers.
Market price does not reflect the real price. Therefore the
factor cost is the real price that is earned by producers
or sellers.
Net National Product (NNP)
The market value of the net output of final goods and services
produces by a nation during a year.
In other words, NNP is GNP minus the value of capital consumption or depreciation during the year.
In a production process, some part of the capital equipment will be obsolete. In order to replace, some portion of GNP will be kept aside and cannot be used for consumption or investment.
Personal Income (PI)
The income that is actually received by the individuals
and households in an economy in a year.
Disposable Personal Income (DPI)
Individuals and households will use a certain portion of their personal income to make payments to government in terms of direct tax.
DPI is obtained by deducting income tax from PI.
Uses of Measuring NI
Standard of living comparison
To compare the standard of living people in different
countries to people living in the same countries at
different times.
Economic performance over time
To measure performance of the economy over time by
comparing NI of one period to another.
Tell us whether the economic performance is growing,
stagnant or declining.
National planning
Tool for gov to formulate its short term and long term
economic planning.
Malaysian gov uses NI to draft the 'Malaysia's Plan' for
a five-year period.