Nobody downloaded yet

The National Income - Essay Example

Comments (0) Cite this document
Summary
The national income account identity sums up total output in the economy as the total of consumption of domestic goods and services (C), investment in domestic goods and services (I), government expenditures on domestic goods (G) and services and net exports of domestic goods and services (NX or Export - Import)…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER91.5% of users find it useful
The National Income
Read TextPreview

Extract of sample "The National Income"

Download file to see previous pages Thus, net exports denote the difference what a country can produce and what it actually consumes. If the output it produces is insufficient to satisfy consumption, investment, and government expenditures, it will tend to source output from other countries.
On the other hand, the net capital outflow is the difference between domestic savings and domestic investment while the trade balance is shown as the total amount that the country receives for its net exports. Through the national income identity discussed above, it can be seen that net capital outflow is always equal to the country's trade balance. If the trade balance and the net capital outflow is positive, the country is running a trade surplus which means that it is a lender in the international financial market and that its exports is greater than its imports. However, if it is negative, it is running a trade deficit which means that it is a borrower in the financial market and imports is greater than exports.
Following from this, the impact of any policy on the balance of trade can be identified and assessed by considering its effect in the country's savings and investment. Logically, any policy which causes savings and investment to increase supports a trade surplus while one which causes decline in savings and investment will lead to a trade deficit.
In order to ...
There are two type of exchange rates: nominal which is the relative price of currency of two countries while real is the relative price of goods of two countries. These two are related in the sense that the real exchange rate is equal to the nominal exchange rate multiplied by the ratio of price levels in the two countries. Thus, if the real exchange rate is high, foreign goods are relatively cheap, and domestic goods are relatively expensive. On the other hand, if the real exchange rate is low, foreign goods are relatively expensive, and domestic goods are relatively cheap.
The real exchange rate is directly related to net exports in the sense that when real exchange rate is high and domestic goods are less expensive, it is expected that net exports will be greater as domestic goods will appeal more to other countries and exports are higher. Another determinant of real exchange rate is net capital outflow. It should be noted that the equilibrium real exchange rate is the rate at which the quantity of net exports demanded equals to the net capital outflow.
On the other hand, since the nominal exchange rate is determined by the prices of commodities in one country compared to the other, the price level is its most significant determinant. Empirical evidence shows that the high level of inflation which makes domestic goods priced higher will tend to cause a depreciating currency.
Chapter 12
The Mundell-Fleming model has been recognized as a dominant policy paradigm for the study of open-economy monetary and fiscal policy. It is the same as the IS-LM Model in the sense that both emphasize the interaction between the goods and money market. Also, these models assume that price is fixed while showing what affects short-run ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“The National Income Essay Example | Topics and Well Written Essays - 1250 words”, n.d.)
The National Income Essay Example | Topics and Well Written Essays - 1250 words. Retrieved from https://studentshare.org/politics/1506973-the-national-income
(The National Income Essay Example | Topics and Well Written Essays - 1250 Words)
The National Income Essay Example | Topics and Well Written Essays - 1250 Words. https://studentshare.org/politics/1506973-the-national-income.
“The National Income Essay Example | Topics and Well Written Essays - 1250 Words”, n.d. https://studentshare.org/politics/1506973-the-national-income.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF The National Income

The differences between National Income and Gross National Happiness

... Table of Changes Topic A: Differences between Gross Domestic Product and Gross National Happiness 2 Topic B: Problems in measuring Gross Domestic Product and Gross National Happiness 4 Revisions in Government Policies and Business Strategies 5 References 7 Topic A: Differences between Gross Domestic Product and Gross National Happiness Gross Domestic Product Gross Domestic Product is a measure of the level of income yielded by an economy over a stipulated period – generally this time period varies between one quarter and a complete year depending upon the end period when data is published by the authoritative body. It is actually an estimation of the size of the...
8 Pages(2000 words)Essay

Gross National Income of different countries

...? GNI of different countries Submitted to, Submitted By, of the Submitted on, [July 7th, The report comprises of two parts. First part consists of statistical analysis of Gross National Income of 173 countries of the world. The main theme is to comment on the data through selection of appropriate measure of central tendency. The second part consists of the analysis of data related to the visitors to UK and the revenue that UK generates. The regression analysis and coefficient of correlation are used to determine the required results. Table of Contents:  1. Cover Page 2. Abstract 3. Problem Statement 4. Descriptive Statistics 5. Procedures 6. Results 7. Conclusions Problem Statement Data was collected by...
3 Pages(750 words)Statistics Project

National Income and Product Accounts Discussion

...?Running Heading: Project Part 2 Project Part 2 Business Economics GM545 [Academic Term] [Email Address] CHAPTER # 15 QUESTION # 14: One of the most used method of determining the overall performance and output of the economy is the National Income and Product Accounts (NIPA). With the help of this method, the economists can interpret the living standard of a particular economy or country (Mankiw, 2011). This method of using national income accounts for evaluating the performance of the economy and interpreting the standard of living have some limitations. For instance, it does not includes the most of the non market transactions. It does includes the work done by the...
3 Pages(750 words)Essay

Replacing the income tax with a national sales tax

...?The current issue of great concern for stakeholders throughout the American society is with respect to updating and ultimately improving the currenttax code. Many suggestions have come to light over the past several decades for the ways in which this could take place. However, one of these suggestions that simply refuses to go away and has a great many positive and negative aspects is with regards to replacing the current income tax with a federal sales tax. Many nations around the world currently employ a federally mandated sales tax in lieu of deriving government revenue via other methods; namely import taxes, export tariffs, and/or other alternative methods. As might be expected, one of the reasons...
6 Pages(1500 words)Research Paper

National Income Determination

...National Income determination Introduction The most well known indicator of the quantity of goods and services which people can enjoy is the nationalincome. It is the measure of output. Famous economist J.M. Keynes defined it as "national income is the money value of all goods and services produced in the country during a year". National income shows the economic position of a nation; every economy wants to achieve progress which is achieved by the coordination of human resource, natural resource, capital, technology etc. National income helps in assessing and comparing the progress...
6 Pages(1500 words)Term Paper

Problems in calculating national income

...Running Head: Problems in calculating National Income Problems in calculating National Income [Institute’s Problems in calculating National Income Since decades, national income has remained the most significant notion in the economic world that plays a crucial role in deciding the status of a nation economically. For this purpose, calculation of the national income is an imperative process that involves various approaches such as income approach, product approach, and expenditure approach. However, recent studies (Tucker, pp. 40-44,...
2 Pages(500 words)Essay

Measures and Indicators: GDP, national income, unemployment, inflation

...Starbucks The purpose of this paper is to provide a critical discussion of the impact that external variables have on the bottom line of Starbucks. The format that this paper will utilize is to first provide a brief background on the organization followed by a discussion as to what extent the company is affected by Federal tax policy and make some predictions as to what changes might be forthcoming to Starbucks. Furthermore, this paper will discus what other parts of the Federal budget might have an effect on the organization. According to the company website (2010) it is the case that Starbucks was founded in the 1970’s in Seattle with just a single store which operated as an independent coffee retailer, wholesaler, and vendor... The...
2 Pages(500 words)Essay

ECO202 Macroeconomics Measures and Indicators: GDP, national income, unemployment, inflation

...Examine the most recent issue of International Economic Trends, published by the Federal Reserve Bank of St. Louis. The figures you see in the graphsare percent changes compared to the year before in economic data for seven countries and the Euro Area. Your assignment is to compare indicators for the United States, Japan, Canada, and the United Kingdom, and form a view about their future.  The pattern of growth of Real Gross Domestic Product has been almost identical for the four countries. In very early 2007 Japan had hit a peak while the others had hit a minor trough. Japans Real Gross Domestic Product was the highest (around 3.5 percent) among the four countries at that point of time followed by the United Kingdom (at about 3... the most...
3 Pages(750 words)Admission/Application Essay

National Income Determination

...National Income Determination al Affiliation) Media on consumer and investor confidence Consumer confidence refers to the economic indicator that measures how consumers understand and interpret the current economic situation and what they expect. Investor confidence can have different meanings depending on the economic parameter. It may be defined as having confidence investments paying expected income or investments protecting capital value (Godley, 2009). It is therefore important for media to inform the nation on these two aspects since they are economically important. Economic impact of confidence in economic agents Various economists have constantly claimed that...
1 Pages(250 words)Assignment

Equilibrium national income

...Equilibrium of national income affiliation Equilibrium of national income Equilibrium in the national income is achieved when there are stable planned withdraws that are same as the planned injections to the economy. This at the end of the day will lead to a balance between savings, import spending and taxation to a country’s expenditure on export revenue, government spending and investments. Moreover, this should be in line with the planned aggregate supply, which is equal to planned aggregate demand. However, aggregate expenditure play a much greater role in determining the equilibrium price as compared to the aggregate supply. All the...
2 Pages(500 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 Essay on topic The National Income for FREE!

Contact Us