Equilibrium income, Managerial Economics

Assignment Help:

Equilibrium Income

In this model, aggregate desired expenditure has three components:  Consumption, Investment and Government Expenditure:

                                         E  = C + I + G

However, in the Governed Economy, taxes levied by the government are a second withdrawal.  If the government taxes firms, some of what firms earn is not available to be passed on to households.  If the government taxes households, some of what households earn is not available to be passed on firms.  Whatever subsequently happens to money raised, taxes withdraw expenditure from the circular flow.

In the Governed Economy, however, government expenditure is a second injection.  Such expenditure creates income for firms that does not arise from the spending of households, and it creates income for households that does not arise from the spending of firms.  Whatever the source of funds, government spending injects expenditure into the circular flow.

Letting G stand for Government Expenditure, T for Taxes, J for injections and W for withdrawals, we can say the National Income is in equilibrium when total withdrawals, savings plus taxes, is equal to total injections, investment plus government expenditure.  The equilibrium condition for national income can thus be written as:

                                                   W = J, or S + T = G + I

1138_equilibrium income.png


Related Discussions:- Equilibrium income

What is decreasing marginal cost, What is decreasing marginal cost? All...

What is decreasing marginal cost? All additional lawn mowed generates less benefit than the earlier lawn à along with decreasing marginal benefit; every additional unit generat

Cross-elasticity of demand, Cross-elasticity is the measure of responsivene...

Cross-elasticity is the measure of responsiveness of demand for a commodity to the changes in price of its substitutes and complementary goods. For example, cross-elasticity of dem

International trade, INTERNATIONAL TRADE Definition It is the exc...

INTERNATIONAL TRADE Definition It is the exchange of goods and services between one country and another.  International Trade can be in goods, termed visibles or in servi

Describe models of oligopoly, Question 1: (a) Describe the argument tha...

Question 1: (a) Describe the argument that market entry erodes profits in the long run. (b) Give some reasons and discuss possible strategies used for profits to persist eve

#sales maximisation theory, how realistic is the sales maximization model f...

how realistic is the sales maximization model from experience with business objectives as pursued by Zimbabwean firms

Structural unemployment, Structural unemployment    Caused by structura...

Structural unemployment    Caused by structural changes such that there exist: Cyclical unemployment : During depression, prices are too low and profit margins remain d

Define the term understanding oligopoly, Define the term understanding olig...

Define the term understanding oligopoly. Understanding Oligopoly; One possibility when the two companies will engage into collusion, Sellers engage into collusion while t

New commission structure motive salespeople, A medical insurance company of...

A medical insurance company offers its salespeople the following compensation scheme: each worker takes a fixed salary  and, in addition to that, a commission depending on the volu

Profession, list all profession which generate personal income

list all profession which generate personal income

Mankiw model of nominal rigidities, Mankiw Model of Nominal Rigidities   ...

Mankiw Model of Nominal Rigidities   There are two related reasons for which  firms do not  frequently change prices. First, as we saw in the discussion on menu costs, the cost

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd