Answered: aggregate demand or national income.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Part A.

The income and expenditure approaches to measuring a nation’s GDP can be combined using the circular flow model.

Categorize each flow in the following table as part of either aggregate demand or national income.

Part B. Fill in the blank with the choices in parentheses

While national income and domestic product must be equal, income must also equal expenditure for each of the six sectors in the circular flow diagram: firms, consumers, government, financial system, investors, and the “rest of the world.”

For example, the amount of __________(options for blank: disposable income, investment spending, saving, taxes) flowing into the financial system sector must equal the amount of ____________ (saving, consumption plus savings, transfers plus government purchases, investment spending) flowing out of this sector.

Flow
Aggregate Demand
National Income
Disposable income (DI)
Investment spending (I)
Net taxes (NT)
Net exports (X - IM)
Consumption (C)
Government purchases (G)
O oo

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