Principles of Economics, 7th Edition (MindTap Course List)
Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
Question
Book Icon
Chapter 23, Problem 1QR
To determine

Why an economy’s income must equal its expenditure.

Expert Solution & Answer
Check Mark

Explanation of Solution

The economy transacts the goods and services for getting the money in return. This means that the money acts as a medium between the buyers and sellers. When the buyers give money, it is the consumption expenditure of the consumers or the buyers. When the sellers receive money in return for the goods and services that they rendered to the consumers, it becomes their income. Thus, every transaction in the economy has a buyer and a seller, and every expenditure by the buyers turns out to be income of the seller. Therefore, it can be said that an economy’s income must equal its expenditures.

Economics Concept Introduction

Concept introduction:

Expenditure: Total expenditure refers to the total amount of money spent by the firm, individual, or government on a product in a given period of time.

National income: National income refers to the sum of all the income received within a given period of time.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Knowledge Booster
Background pattern image
Recommended textbooks for you
Text book image
Essentials of Economics (MindTap Course List)
Economics
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Text book image
Brief Principles of Macroeconomics (MindTap Cours...
Economics
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Text book image
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning
Text book image
Macroeconomics
Economics
ISBN:9781337617390
Author:Roger A. Arnold
Publisher:Cengage Learning
Text book image
Economics:
Economics
ISBN:9781285859460
Author:BOYES, William
Publisher:Cengage Learning
Text book image
Economics Today and Tomorrow, Student Edition
Economics
ISBN:9780078747663
Author:McGraw-Hill
Publisher:Glencoe/McGraw-Hill School Pub Co