Nobody downloaded yet

GDP and the circular flow of income and expenditures - Research Paper Example

Comments (0) Cite this document
Summary
The tutorial gives the big picture of what economics looks like. It mainly compares macroeconomics to microeconomics. From the tutorial, sometimes economics can sometimes be…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER92.9% of users find it useful
GDP and the circular flow of income and expenditures
Read TextPreview

Extract of sample "GDP and the circular flow of income and expenditures"

Download file to see previous pages roductivity, expenditure, or income (gross domestic product of a nation) (Ouanes, Abdessatar, Subhash, Thakur, Lienert, Marciniak and Swiderski, 1997, p.87).
Consumption is a primary concept in economics, and many other social sciences also study it. Economists are very much interested in the relationship that exists between income and consumption. According to some economists, consumption entails the final purchase of goods and services by individuals. Other economists define consumption in a much broader manner. They define it as the aggregate of all economic activities that does not include the design, marketing of goods and services and production. An example is the adoption, selection, use, disposal and the recycling of the services and products (Ouanes, Abdessatar, Subhash,Thakur, Lienert, Marciniak and Swiderski, 1997, p.87)
According to economists, Investment is the accumulation of physical entities that are newly produced, such as goods inventories, houses, machinery, and factories. Also in macroeconomics, it is the amount purchased per unit time of goods that are not utilized but are employed in at a future date production. It is as a function of interest rates and income. An increase in the amount of revenue will contribute to higher investment and, on the other hand, higher rates of interest may lead to the discouragement of investment since it will be more costly to borrow money. More so if a company decides to use its funds in an investment. The interest rate will represent an opportunity cost of investing the funds rather lending out the money for interest (Ouanes, Abdessatar, Subhash ,Thakur, Lienert, Marciniak and Swiderski, 1997, p.87)
According to economists, government spending entails all consumptions of the government, investments, and transfer payments. Government spending can be by taxes, seigniorage, and government borrowing. Changes in the government expenditure are a primary component of fiscal policy which is used to stabilize the ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“GDP and the circular flow of income and expenditures Research Paper”, n.d.)
GDP and the circular flow of income and expenditures Research Paper. Retrieved from https://studentshare.org/macro-microeconomics/1679123-gdp-and-the-circular-flow-of-income-and-expenditures
(GDP and the Circular Flow of Income and Expenditures Research Paper)
GDP and the Circular Flow of Income and Expenditures Research Paper. https://studentshare.org/macro-microeconomics/1679123-gdp-and-the-circular-flow-of-income-and-expenditures.
“GDP and the Circular Flow of Income and Expenditures Research Paper”, n.d. https://studentshare.org/macro-microeconomics/1679123-gdp-and-the-circular-flow-of-income-and-expenditures.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF GDP and the circular flow of income and expenditures

Circular Income Flow in Macro Economy

...? Circular income flow in Macro economy Circular income flow in macro economy; A closed economy consists of two units: households and firms. Both of these in conjunction generate national expenditure and national output of a given country. For instance, household’s main objective is to provide basic resources of production. Examples are capital, land, and labour. These production basics generate their rewards as interest, rent, and wages respectively (Williamson, 2005). However, the firms’ main objective is to supply goods and services for both local and foreign consumption. A closed economy is an economy that is independent and self-centered. It is an economy that does not have trading links with external firms apart from itself... Cash...
3 Pages(750 words)Research Paper

GDP

... (expenditure method) (Baumol et al 69). Both methods can give you roughly a similar total. With the income approach, which is also known as (GDP) I is calculated by adding the total compensation to gross profits, employees for both incorporated and non-incorporated firms in addition to taxes without any subsidies. On the contrary, the expenditure method is a more usable or common approach and is calculated by adding investment, total consumption, government spending and net exports. Introduction GDP is termed as the market value of all the final goods and services that are produced domestically in one year. It is also regarded as the single most important measure of macroeconomic performance. It is closely related to the measure... there is...
7 Pages(1750 words)Essay

Factors of production and circular flow of income

...them out. Export injects and imports leaks. This model demonstrates that economic practices are a flow. The size indicates the extent of economic activities involved (O'Connor, 2004, Pg. 54). Economists consider three angles of analyzing the economic flow with each angle analyze a different sector of the flow of income. These are the output method, the expenditure method and the income method. Below is a complete circular flow of income. Conclusion Factors of production are essential for economic growth. They are scarce and must be utilize carefully to maintain production of goods and...
5 Pages(1250 words)Coursework

Factors of production and circular flow of income

...encourages income, output and hence increases inflationary tendency.(Kennedy, 2011) Circular flow of income helps in the controlling the economy too as it identifies where the policies are required to be implemented either fiscal or monetary policy. Monetary policy involves changes in money supply and interest rates so this could help to stabilize the economy when to control consumption, by increasing interest rates. On the other side for the fiscal policy to work it controls government expenditure and the level of taxes in an economy. It represents that the economy is in equilibrium where Leakages Savings(S) + Taxes (T) + Imports (M) = Injections...
11 Pages(2750 words)Coursework

Factors of production and circular flow of income

...in making choices between inputs and outputs. The aim of this paper is thus to discuss the factors of production and the circular flow of income. To achieve this, the paper will be divided into various sections. The first section will be discussion on what economics is and the problems it seeks to address. It will also cover the importance of economics and brief explanation of different economies such as the market, command and mixed economy as mechanisms of allocating scarce resources. The second section will address the factors of production: land, labour, capital and enterprise. It will discuss their functions, qualities and how their productivity can be improved. The third section...
6 Pages(1500 words)Coursework

W/J approach to circular flow of income in an economy (Business Enviroment Module)

...from financial institutions for further investments hence inject money into the flow thus offsetting the withdrawals. Withdrawals in the circular flow are therefore equal to injections other factors like prices held constant. Withdrawals are denoted using letter W and include savings(S), taxes (T) and imports (M). Injections are denoted by J and include investments (I), government spending (G) and exports (E). The simple equation of Keynes model therefore is; W=J; S+T+M=I+G+E. Total income (Y) is equal to total expenditure (E) and is equal to total output as it is assumed that all income is spent on consumption Y=G+E+I+C where G, E, I...
4 Pages(1000 words)Essay

Lobbying Expenditures and Contributions

...Lobbying Expenditures and Contributions The term lobbying comes from the activities of private citizenry regularly congregating in the lobbies of legislative chambers before a session to petition legislators. (Schmidt, Shelley and Bardes, 2011, pg. 234) Lobbying has become a huge business involving battles over governmental public policies, and trillions of dollars in appropriations, contracts, and profits are up for grabs. Between 1998 and 2006, the american medical association spent in excess of $1.5 million on lobbying the federal government, and that total placed it second on the biggest spender list to the$3.17 million spent by the U.S chamber of commerce (Morgan and Hrebenar, 2009, pg.33). Overall, lobbying ...
1 Pages(250 words)Essay

GDP

...was earned after deducting the allowable expenditures of the dentist work (Landeefeld, Seskin and Fraumeni 195-196) e. Money received by Smith by selling his textbook to a book buyer is not included in the calculation of GDP since its value had already been included in the GDP in the year Smith purchased it. f. The monthly allowance a student receives from home is not included in the calculation of the GDP since it is only a payment transfer. g. Rent received on a two-bedroom apartment is an income to an individual and should be included in the GDP on the year the income was earned. h. Money received by Mac when he...
1 Pages(250 words)Assignment

The Market System and the Circular Flow

...The Invisible Hand The Market System and the Circular Flow The invisible hand as used in the marketing system and the circular flow refers to a natural trend that guides capitalism and free marketers in competing with scarce resources. People pursue their own interests in order to promote the goodness of the society. For example, the brewer, butcher or baker has their own self-interests of preparing dinner. In regard to invisible hand theory, everybody acts on his or her own interests creating demand for services and goods that coerce other people to deliver those services and goods in efficient manner where he or she may receive compensation and make a profit in return...
1 Pages(250 words)Essay

The Circular Flow of Income and Expenditure + Measuring Economic Activity: Prices and Unemployment + Measuring Economic Activity: GDP and Real GDP summary

.... The income method of calculating GDP involves adding up all the salaries and wages received. It also includes all the business and corporate profits, all the interests collected by banks and other financial lenders and all the taxes received by the government. The expenditure method of calculating GDP involves summing up all government spending, all the spending done by consumers, all the business and investment spending and net exports. The two measures of calculating GDP are said to be equal. Works Cited Cohen, Jacob. Circular Flow Models In The Flow Of Funds. International Economic Review 4.2...
3 Pages(750 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Research Paper on topic GDP and the circular flow of income and expenditures for FREE!

Contact Us