Question

What are the components of output and income? The value of total expenditure must equal the...

What are the components of output and income? The value of total expenditure must equal the value of total income. Why?

Homework Answers

Answer #1

The components of output and income = Consumption spending of the consumers + Investment expenditure + Government spending + Total Value of exports - Total value of imports.

The value of the total expenditure must equal the value of total income for the economy to be in equilibrium. If value of total expenditure exceeds the value of total income, then firms will have shortage inventories in their stock and thus in the next period firms will produce more to match the quantity produced with quantity demanded. Similarly if total expenditure is less than total output, then there will be excess inventory in their stock and thus in next period firms will reduce production to prevent wastage. Thus, value of total expenditure must always equal the value of total income.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
short Essays questions 1-the value of total expenditure must equal the value of total income. why?...
short Essays questions 1-the value of total expenditure must equal the value of total income. why? 2- If an inflationary GDP gap exists, what will happen to business inventories ? how will producers respond . 3-how might rapid inflation affect collage enrollments?
The income-expenditure model illustrates when what is out of balance or inefficient? A) levels of output...
The income-expenditure model illustrates when what is out of balance or inefficient? A) levels of output or national income B) net exports C) price levels
2. Total income of residents (Yp) is equal to gross income (Y) minus taxes (T) plus...
2. Total income of residents (Yp) is equal to gross income (Y) minus taxes (T) plus net income from international transfers (R). Private sector total savings is S = Yp – C. The domestic absorption of total expenditure is private sector consumption (C) plus investment (I) plus government expenditure (G), and foreign demand equals net export (i.e. export X minus import Z). Based on these identities answer the following: b) If the current account value is minus five percent of...
Total income of residents (Yp) is equal to gross income (Y) minus taxes (T) plus net...
Total income of residents (Yp) is equal to gross income (Y) minus taxes (T) plus net income from international transfers (R). Private sector total savings is S = Yp – C. The domestic absorption of total expenditure is private sector consumption (C) plus investment (I) plus government expenditure (G), and foreign demand equals net export (i.e. export X minus import Z). Based on these identities answer the following: a) The current account of the balance of payments (defined as X–Z–R)...
The short-run equilibrium in the output market is achieved when the value of income from production...
The short-run equilibrium in the output market is achieved when the value of income from production (output) Y equals the value of aggregate demand D, which is a function of the real exchange rate, disposable income, investment expenditure and government purchases, i.e., Y = D(EP*/P, Y-T, I, G). The DD schedule shows combinations of output and exchange rate at which the output market is in short-run equilibrium. a) Why does the DD schedule slope upward? b) List the factors which...
Explain why the total value of all of the securities used to finance a firm must...
Explain why the total value of all of the securities used to finance a firm must be equal to the value of the firm.
to the aggregate expenditure model, what spending components respond to changes in interest rates?  How do they...
to the aggregate expenditure model, what spending components respond to changes in interest rates?  How do they respond when interest rates rise?  Fall?
The total expenditure schedule in Macroland begins with these initial levels (in billions of dollars): Income...
The total expenditure schedule in Macroland begins with these initial levels (in billions of dollars): Income = 1,000; Consumption = 900; Investment = 200; Government = 300; Net Exports = −100. If the MPC = 0.75 and income increases in increments of 200, find the equilibrium level of income. If full employment requires an income level of 2,000, what (if anything) should the government do? Indicate both the direction of the spending change and the size of the spending change.
Are sums of components? powers equal to zero? Why?
Are sums of components? powers equal to zero? Why?
We said in the national income accounts, S = I, savings must equal investment; it is...
We said in the national income accounts, S = I, savings must equal investment; it is an identity. Does this mean that actual investment is the same thing as planned investment? Briefly explain why or why not