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

Describe about monetary policy, Q. Describe about Monetary policy? By m...

Q. Describe about Monetary policy? By monetary policy we mean policy directed at controlling the money supply and interest rates. In most nations, central bank is responsible f

Assignment, explain the profit maximizing/loss minimizing rule may be appli...

explain the profit maximizing/loss minimizing rule may be applied under the 3 scenarios

Macroeconomic problems, Question 1: The common characteristics of LDC...

Question 1: The common characteristics of LDCs include low GDP per capita, capital scarcity, high unemployment, chronic budget deficit, high levels of external debt, hig

#title.national income ddetermkination, explain how national income is dete...

explain how national income is determined under the following economies; 1.frugal economy 2.governed economy

What are the responsibilities of central banks, What are the Responsibiliti...

What are the Responsibilities of central banks Responsibilities include providing banking services to commercial banks and the government and regulating financial markets and i

Find out reserve-deposit ratio and currency-deposit ratio , 1.  Assume the ...

1.  Assume the required reserve-deposit ratio is 12%, and the currency-deposit ratio is 38%. How much would money supply change if the Fed made open market purchases of $100 millio

Staic general equilibrium model, given the consumer maximizing problem subj...

given the consumer maximizing problem subjest to consumption, the firm''s maximizing problem subject to revenue as a function of labour demand, and the government''s budget as G=T.

Eco, illustrate and discuss the implications of various market structures (...

illustrate and discuss the implications of various market structures (competitive and non-competitive)for price determination.

Money, determinants of money supply

determinants of money supply

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