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Non Specific topics - Essay Example

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The GDP of a specific country is the market value, in total, of all products in a given fiscal year, usually a year. The expenditure method is the most common approach to calculate the GDP. GDP,…
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Download file to see previous pages Then all the exports in the domestic area are added.
It is a fact that income equals to spending or savings is equal to investments. This, however, does not imply that at all times there is enough spending such that all of the economies’ resources are fully employed. Even in fulltime employment, where employment is the investment spending there is still more room for extra investments in the economy.
In an injections-leakage model, on one side there are injections. These injections will include non-consumption expenditures on an aggregate production. Investment, expenditures, exports, and government purchases are the three injections. They are known as injections since they are inputted/ ‘injected’ to the circular flow of production, consumption, and income (Bade, & Michael, 2002). The other half of the model is the leakages. They are non-consumption uses coming from income production generates’. The leakages are imports, savings, and taxes. They are taken out of the circular flow hence the term leakages. Equilibrium in this model will be dependent on the balance existing between injections towards the core of the circular flow and leakages. If they are equal, the core circular flow’s volume will not change. When this two are equal, equilibrium exists.
In the measuring of national income, there is a need to understand some limitations that will come with it. National income accounting will not measure the social welfare but the domestic economic performance. However, there is need for there to be a strong relationship between the two. National income measure will understate transactions in social welfare- non – market. In national income measures, there is no accounting of changes in the quality of product and increase in variables like work satisfaction (McEachern, 2012). It has also been suggested that per capita income is a superior measure of standards of living compared to the total national income
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