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

Calculate rental price of capital, Let the real interest rate, i r , equal ...

Let the real interest rate, i r , equal 5 percent and the rate of depreciation, d, equal 10 percent.  In this case, if the price of a piece of capital is P K = $10,000, what is th

Explain augmented saving, Augmented Saving An alternative way of determ...

Augmented Saving An alternative way of determining equilibrium  GDP  is to find the level of income where the sum of desired injections equals the sum of desired leakages. Desi

Index numbers of production, INDEX NUMBERS OF PRODUCTION  Among the com...

INDEX NUMBERS OF PRODUCTION  Among the commonly used economic indicators to monitor current trends in the economy are indices of production. The main aggregative indices used t

The risk and term structure of interest rates, The Risk and Term Structure ...

The Risk and Term Structure of Interest Rates Expectations Theory and Bond Maturity Level Analysis Prepare calculations and a one to two page analysis, following the APA 6th edi

Peace time goods and war time goods, Draw the PPC model of peace time goods...

Draw the PPC model of peace time goods and war time goods and describe its characteristics. Label point A as being more toward peace time goods than war time goods and show graphic

Positive and normative economics, POSITIVE AND NORMATIVE ECONOMICS E...

POSITIVE AND NORMATIVE ECONOMICS Economics as a social science adopts an analytical approach to the study of changes in economic variables on the actions of human beings. Th

Aggregate production function, The aggregate production function Defin...

The aggregate production function Definition Imagine the national economy during a short period of time (say one week). We refer:  L: total amount of work used duri

Determine velocity approach to money demand, Determine Velocity Approach to...

Determine Velocity Approach to Money Demand. The Velocity Approach to Money Demand: The velocity of money: V = (P × Y)/ M The real quantity of money demanded is pr

Evaluate the additional social loss, A monopoly has a total cost function o...

A monopoly has a total cost function of C(Q) = 8Q and faces a market demand Q = 100 ? 2p, (a) calculate the deadweight loss; (b) The firm now spent an amount equal to half of

Islm curve, why lm curve upward sloping and is curve downward sloping?

why lm curve upward sloping and is curve downward sloping?

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