2.4.1: National Income

• National income: The value of output produced in an economy over time
• Households: People who own the productive resources of the nation, which are exchanged for rent, wages, interest and profit. The income they earn is used to buy goods and services
• Firms: Those who hire the resources and use them to produce goods and services, which are then sold to households
• National income = National expenditure = National output
• Injection: Any money which is added into the circular flow of income, being Investment, Government expenditure and Exports
• Withdrawal: Any money which is taken out of the circular flow of income, being Savings, tax and imports
• National income equilibrium: Where planned injections are equal to planned withdrawals: G + I + X = S + T + M
• The other agents which cause injections and withdrawals are the Financial, Government and Foreign sectors
• Wealth is the value of assets held, such as the value of a car or house
• Income is a flow of money going to factors of production, such as wages