National income measures the income generated by a country through the production activities that are carried out within a country during a specific period of time. A circular flow of income and expenditure exists within an economy, where factor income is earned from the production of goods and services, and the income is spent on … Read more
Meaning of Stagflation Stagflation is an economic cycle in which there is high rate of inflation and stagnation. Inflation is when prices of commodities are at an increasing state. Stagnation occurs when an economy faces slow economic growth rate (decline in production). An economy going through stagflation faces high rates of unemployment during . Simply, … Read more
Changes in fiscal policy are the main reasons for the shift in IS curve. A number of factors can be responsible for the shift in aggregate demand. This shift consequently leads to change in the level of equilibrium output. According to the Keynesian theory, for a given rate of interest, changes that occur in consumption … Read more
The second fiscal model differs from the first model in that it takes into consideration the transfer payments made by the government to individuals. Although the second model assumes that government makes transfer payments, they are assumed to be autonomous, which means they are not affected by the individual’s level of income. Thus, the assumption … Read more
Meaning Saving is defined as the excess of income over consumption expenditure. The concept of saving is closely related to the concept of consumption. Saving is the part of income that is not consumed. Generally, as the level of income increase, saving also increases and vice versa. Saving Function Saving function or the propensity to … Read more
Introduction The principle of acceleration coefficient shows the relationship between the demand for consumer goods and the demand for capital goods i.e. capital investment. The relationship between the two was first stated by the American economics professor T.N. Carver in 1903. However, the term ‘acceleration principle’ was introduced in economics only in 1917 by J.M. … Read more
Paradox of Thrift is a concept that was first presented by Bernard Mandeville in 1714. It was later popularized by John Maynard Keynes as one of the essential concepts in the study of macroeconomic theories. The classical economists regarded saving as a virtue. They believed that saving led to good management of economy and hence … Read more
Meaning of National Income National income is defined as the total annual value of all the goods and services produced by a country, measured in terms of money. National income data provides a summary statement of a country’s aggregate economic activities. It not only helps to measure the size and health of an economy but … Read more
Inflation is measured in percentage which is obtained by calculating the change in percentage of current price index over the previous one. The price index is developed by carrying out a survey on costs of a number of goods and services that comprise the economy. These goods and services are put together into what is … Read more
A number of difficulties arise in measuring the national income accurately. National income accounting involves both conceptual as well as statistical difficulties. A. Conceptual Difficulties The conceptual difficulties in measuring national income include: Problem of Definition The major problem arises when defining the composition of national income. Ideally, national income includes all the goods and … Read more