The Determination of National Income

james liew
Mind Map by james liew, updated more than 1 year ago
james liew
Created by james liew about 4 years ago
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Leaving Certificate Economics Mind Map on The Determination of National Income, created by james liew on 02/07/2016.
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The Determination of National Income
1 The Circular Flow of Income is the flow of receipts and expenditure between companies and households
2 Income (Y) = consumption (C) + investment (I) + gov. expenditure (G) + exports (X) - imports (M)
3 Average Propensity To Consume is the proportion of total income spent
4 What Does Consumption Depend On?
4.1 Level of Income
4.2 Rate of Interest: If rates of interest are low, consumers will borrow and hence spend.
4.3 Availability of Credit: If banks are willing to offer more loans, then spending will increase.
4.4 Rate of Income Taxation
5 What Does Investment Depend On?
5.1 Cost of Capital Goods
5.2 Businesspeople's Expectations: If businesspeople are optimistic about the future, investment may increase.
5.3 Productive Capacity of the Economy
5.4 State of Technology
6 What Do Exports Depend On?
6.1 Level of Incomes Abroad
6.2 Competitiveness: If Irish products are cheaper than foreign alternatives, demand for Irish Exports will rise.
6.3 Value of the Euro
7 What Do Imports Depend On?
7.1 Marginal Propensity to Import (MPM)
7.2 Foreign Prices vs. Domestic Prices
7.3 Levels of Incomes
7.4 Value of Euro
7.5 Availability of Goods
8 Multiplier : the number of times an injection results in an increase in income
9 Factors that Affect the Savings Rate in The Irish Economy
9.1 Future Expectations For the Econnomy
9.2 Price Levels
9.3 Level of Income
9.4 Level of Taxation
10 Marginal Propensity to Import
10.1 1 / MPS + MPM
10.2 It is the percentage of money spent on imported goods out of the last increase in income
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