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Chapter 3

ECON2000_CH3.docx


Department
Economics
Course Code
ECON 2000
Professor
Mokhles Hossain
Chapter
3

Page:
of 1
ECON2000 Textbook Notes Jessica Gahtan
Chapter 3: National Income- Where It Comes From and Where It Goes
The Gross Domestic Product (GDP) measures both the nation’s total output, as well as
its total income
- Gives an impression of the standard of living in a country
Circular Flow Diagram
- Shows linkages among economic actors- households, firms, government- and how
dollars flow through the various markets in the economy
- Households receive income and uses it to: pay taxes to the government, to
consume g/s & use it to pay for the factors of production
- Both households and firms borrow in financial markets to buy investment gods
(such as housing and factories)
- The government receives revenue from taxes & uses it to pay for government
purchases
oAny excess of tax revenue over government spending is called public
saving
Can be positive (surplus) or negative (deficit)