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Chrizanne Irah A.

Tagle October 23, 2014


 National income measures the monetary value of the flow of output of goods and
services produced in an economy over a period of time.

 Measuring the level and rate of growth of national income is important for seeing:
 The rate of economic growth
 Changes to average living standards
 Changes to the distribution of income between groups within the population

 2 Branches of economics:
1. Microeconomics is the study of how households and firms make decisions and
how they interact in markets.
2. Macroeconomics is the study of economy-wide phenomena, includinh inflations,
unemployment, and economic growth.
 Because the economy as a whole is just a collection of many households and many firms
interacting in many markets, microeconomics and macroeconomics are closely linked.
The basic tools of supply and demand, for instance are as central to macroeconomic
analysis as they are to microeconomic analysis.

 When judging whether the economy is doing well or poorly, it is natural to look at the
total income that everyone in the economy is earning. That is the task of gross domestic
product (GDP).

 Gross domestic product (GDP) (Y) is the total market value of all final goods and services
produced within a country in a given period of time

 GDP measures two things at once: the total income of everyone in the economy and the
total expenditure on the economy’s output of goods and service. The reason that GDP
can perform the trick of measuring both total income and total expenditure is that these
two things are really the same.

 For an economy as a whole, income must equal expenditure.