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Macroeconomics > 2.4 National income > Flashcards

2.4 National income Flashcards

1
Q

Injection definition

A

An expenditure within the circular flow that arises from outside

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2
Q

Exports

A

Goods produced domestically and sold abroad

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2
Q

Investment

A

Real capital formation

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3
Q

Withdrawal definition

A

Expenditure not passed on within the circular flow

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4
Q

Taxation

A

Money taken by the government either directly or indirectly

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5
Q

Savings

A

Income not spent

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6
Q

Withdrawals examples (3)

A

Taxation, imports, savings

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7
Q

Injections examples (3)

A

Government spending, exports, investment

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8
Q

Circular flow of income diagram

A
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9
Q

Closed economy

A

Closed to international trade

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10
Q

Income vs wealth

A

Income refers to the money earned on a regular basis through employment, investments, or other sources, reflecting a flow of resources over time. Wealth, on the other hand, encompasses the total value of assets owned by an individual or entity, representing accumulated resources and possessions at a specific point in time.

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11
Q

Multiplier relationship with MPW

A

k = 1/MPW (reciprocal)

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12
Q

Multiplier definition

A

The ratio of the change in the equilibrium level of real national income to the change in expenditures that brought it about

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13
Q

MPC formula

A

Change in consumption/change in incomes

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14
Q

MPW relationship with MPC

A

MPW = 1-MPC

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15
Q

Effect of an increase in MPC on multiplier

A

Increase (+v.v.)

16
Q

Multiplier evaluation (3)

A

Hard to predict
No time period
Downward multiplier is possible

17
Q

How to find multiplier coefficient

A

Final change in real GDP/Initial change in AD

18
Q

Multiplier effect diagram

A
19
Q

Withdrawals from multiplier system

A

MPS - income not spent
MPM - Marginal propensity to import
MPT - marginal propensity to tax

Macroeconomics (18 decks)

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