State the private sector in the circular flow, Macroeconomics

Assignment Help:

State the Private sector in the circular flow

  • Private sector total income is known as the national income. As private sector receives entire return from the factors of production, national income is equal to GDP and we can use symbol Y for national income as well. Note that in a more explained analysis of components of GDP, including for example depreciation and factor income from abroad, it's no longer case that national income is exactly same as GDP though they will often be close to each other.
  • Private sector pays taxes to government. Here we should include all income taxes, taxes, value added taxes, payroll taxes and selective purchase taxes (which are ultimately paid by the private sector as it owns firms).
  • Part of these taxes would be returned to private sector in the form of pensions, child allowances, unemployment benefits and sickness benefit and so on. All these are instances of transfers from government.
  • Net taxis then stated as taxes minus transfers and is denoted by NT.
  • National income minus net tax is known as disposable income or personal disposable income and is referred by YDisp where YDisp= Y- NT.
  • Total consumption by private sector is referred by C. C need not be equal to disposable income as private sector can borrow and save. We define private sectors savings as SH= YDisp- C (H for household). If C> YDisp then SH< 0, that implies that private sector (in the aggregate) is borrowing money.

 


Related Discussions:- State the private sector in the circular flow

Benefits of private actions, Public policies often alter the costs and bene...

Public policies often alter the costs and benefits of private actions. Why is it important for policymakers to consider both the direct and indirect effects of public policies? Sel

Components of trade policy, COMPONENTS OF TRADE POLICY: External secto...

COMPONENTS OF TRADE POLICY: External sector reforms beginning with 1991 included dismantling of  trade restrictions along with tariff rationalization, a move towards current a

How firm produce an output, A firm sells its product in a perfectly competi...

A firm sells its product in a perfectly competitive market where other firm charges a price of $90 per unit. The firm's total costs are C(Q) = 50 + 10Q + 2Q2. How much output shoul

Neo-Keynesian Synthesis, how would you describe a neo-keynesian (or neoclas...

how would you describe a neo-keynesian (or neoclassical) synthesis? and why did Joan Robinson label it "bastard Keynesian"

Determine the current in the neutral conductor, A 415V, 3-phase, 4 wires, s...

A 415V, 3-phase, 4 wires, star-connected system supplies three resistive loads as shown in Figure. Determine (a) The current in each line and (b) The current in the neutr

Survivor Island, the central economic problem facing the group of survivors...

the central economic problem facing the group of survivors

Personal income tax is progressive, Because the structure of the personal i...

Because the structure of the personal income tax is progressive, a larger share of income is taxed at higher rates as real income increases. Therefore, economic growth automaticall

Explain quantity supplied and supply, What is the difference between 'quant...

What is the difference between 'quantity supplied' and 'supply'?  There is a distinction among supply and quantity supplied. Supply explains the behavior of sellers at every pr

Market Demand., Ask question #The market demand for brand X has been estima...

Ask question #The market demand for brand X has been estimated as Qx=1500-3Px-0.05I-2.5Py+7.5Pz Where Px is the price of brand X, I is per-capita income, Py IS the price of brand Y

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd