ECON 1010 Chapter Notes - Chapter 5: Gdp Deflator, Gross Domestic Product
9 Jul 2013
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To judge a person economically you look at their income (higher income = higher standard of living) To judge nation"s overall economy (whether good or poor), you look at the total income that everyone in the economy is earning. Total income economy earns is determined by gdp. Total expenditure on the economy"s output of goods and services. Income = expenditure (true because every transaction has 2 parties, a buyer and a seller) Another way to see the equality of income and expenditure is Describes all the transactions between households and firms in a simple economy. Households buy goods and services from firms. Expenditures flow through the markets for goods and services. Firms in turn use the money they receive from sales to pay workers wages, landlord rent and firms owner profit. Income flows through the markets for the factors of production. In this economy, money flows from households to firms and back to households.
