## National income determination, Microeconomics

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National Income Determination:

National Income Determination deals with what determines the size of a nation’s national income. The size of a nation’s national income is determined primarily by the size of its planned aggregate expenditure.

This is planned total spending in an economy on domestically produced goods and services within a specified period of time. It is determined as the sum of planned spending by all sectors of the macro economy represented as household spending on consumption (C), firms (I), government (G), exports (X) and imports (M)

Equilibrium national income occurs when the total level of output produced in the economy exactly matches the level of planned total spending (aggregate expenditure) in the economy.

The Multiplier analyses the magnifying effects of changes in leakages and/or injections on equilibrium income.

The accelerator principle deals with the relationship between net investment, the stock of capital and the level of income or output. The principle indicates that net investment will take place only when aggregate output is increasing.

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