NATIONAL INCOME Free Essay, Term Paper and Book Report
NATIONAL INCOME
The national income is the money value of the total amount of goods and services produced in country over a period, usually a year.
It is variously called GDP, GNP.
The Circular Flow of Income shows how the national income is created and how it is measured.
The circular flow of income can be explained using a simple model with the following assumptions:
1. Only 2 groups/sectors: households and firms: no international trade, no gov't.
2. Households spend all their incomes on goods: no savings, no taxes.
3. Firms do not retain any profits for re-investments, and they do not pay taxes.
Factors services: they are paid factor incomes: rent, wages/salaries, interests, profits.(upper section)
Firms supply goods/services: they receive payments by way of consumer spending.(lower section)
In such a simple economic model, what is earned is what is spent; what is spent is equal to the value of goods and services i.e. income = expenditure = output.
In the real world situation,
1. Gov't enters into the economy both as a producer and a consumer......
Word Count: 1444
Page Count: 5.7 (250 words a page / double spaced)
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