National Income Accounting

National Income Accounting - CHAPTER FIVE: NATIONAL INCOME...

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CHAPTER FIVE: NATIONAL INCOME ACCOUNTING SIMPLE CIRCULAR FLOW DIAGRAM Shows important relationships in an economy. In what two markets do firms and households interact in an economy? Product (or goods) and factor markets Draw a Simple Circular Flow Diagram. Be sure to accurately label all parties, markets, and flows. Do leakages and/or injections exist? No, not in simple circular flow Note 1. The dollar value paid by a buyer exactly equals the amount by the seller 2. Revenue received by either firms or households is an expense for the other 3. Total income received by households equals the total value of what is produced Firms pay workers wages and salaries for labor. They also pay rent to land owners and capital owners. These payments are made so firms can hire resources for production. GROSS DOMESTIC PRODUCT (GDP) Define GDP The market value of all final goods produced in a nations borders in a given time period. Note
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National Income Accounting - CHAPTER FIVE: NATIONAL INCOME...

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