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National Income

QuestionAnswer
Define National Income? The income accruing to the permanent residents of a country from current economic activity during a specified period, usually one year.
Define Gross Domestic Product? Is the total output produced by the factors of production in the domestic economy irrespective of whether the factors are owned by Irish nationals or foreigners.
Define Gross National Product? Ids the total output produced(value of goods & services) by Irish owned factors of production in Ireland and elsewhere.
Define Subsidies? Payments to a producer to help reduce the cost of production(price of the good)/increase output.
Define Incomes-in-kind? Income/rewards received in a non-monetary form or payment made in the form of goods or services.
Define Net factor income from the rest of the world? This is the difference between incomes earned by foreign factors of production in Ireland and sent aboard and income earned by Irish factors of production abroad and returned to Ireland.
State the reasons why GDP in Ireland is larger than GNP? Repatriation of profits by foreign multinational in Ireland, repayment of interest on the foreign element of our national debt, remittances of immigrants in Ireland sent abroad.
State the formula for calculating the Gross National Product @ factor cost? Gross National Product at market prices + price subsidies - indirect taxes
State the formula for calculating the Net National Product at factor cost/National Income? Gross National Product @ factor cost- depreciation
State the main uses of National Income statistics? Indication of alterations in standard of living, means of comparing the SOL in different countries, assists the govt. in formulating policies, evaluate economic policy, EU budget contributions/benefits.
State the main limitations of using National Income statistics? Population changes, inflation, employment/unemployment, levels of taxation, levels of social welfare, measures flow of wealth not welfare, hidden social costs, distribution of national income, exclusion of important activities, nature of the goods.
State the relationship between Gross Domestic Product(GDP) @ current market prices and Net National Product(NNP) @ factor cost? GDP @ current market price +/- Net factor income from abroad=GNP @ current market prices- indirect taxes + subsidies=GNP @ factor cost - depreciation = NNP at factor cost.
State the injections into the Circular Flow of Income? Government spending, investment expenditure, exports.
State the leakages into the Circular Flow of Income? Taxation, saving, imports.
Define the injection 'Government Spending'? All the money spent by the government, both current & capital. It will increase the circular flow of income.
Define the injection 'Investment Spending'? Money invested by individuals, financial institutions and business/spending on capital goods. It will increase the circular flow of income.
Define the injection 'Exports'? Money spent by foreign individuals on goods/services produced within Ireland. It will increase the circular flow of income.
Define the leakage 'Taxation'? A contribution required of persons, groups, or businesses for the support of a government. It reduces spending within the economy and thus reduces the circular flow of income.
Define the leakage 'Savings'? The proportion of income not spent. It reduces spending within the economy and thereby reduces the circular flow of income.
Define the leakage 'Imports'? Money spent by Irish citizens on goods/services produced outside Ireland. It will reduce the circular flow of income.
State the factors that influence the size of 'Consumption'? Levels of income, MPC, availability of credit, rate of interest, rates of (income) taxation.
State the factors that influence the size of 'Investment'? Rate of interest/MEC, expectations of business people.
State the factor that influence the size of 'Government Expenditure'? Political decisions of the government.
State the factor that influence the size of 'Exports'? Income levels, competitiveness of Irish exports, value of the euro.
State the factor that influence the size of 'Imports'? Levels of incomes, MPM, value of the euro.
State the five sectors involved in the Circular Flow of Income? Households, Firms, Government, Financial Institutions, Foreign Markets
Define Marginal Propensity to Consume(MPC)? This is proportion of each additional unit of income which is spent.
Define Marginal Propensity to Import(MPM)? This is the proportion of each additional unit of income which is spent in imports.
Define Marginal Propensity to Save(MPS)? This is the proportion of each additional unit of income which is saved.
Created by: deborahh
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