UNIT 19 Economic Indicators and Sustainability 5 National Income
The national income refers to the total income earned by residents of a country during a given period. This includes the production of goods and services.
Know It!
1. Definition 2. Formula (if appropriate)
3. Impact on individuals, businesses and the government
4. Reading from a graph (trends)
Just like individuals and businesses, the government has to budget and be aware of its income and expenditure. The government lists all its incomes before deciding how to spend this money, ensuring that all citizens will benefit.
There are three ways of calculating national income: 1. Income method 2. Output method 3. Expenditure method
KOCOONO IS AN IRISH BUSINESS THAT MAKES WEIGHTED BLANKETS WHICH REDUCE STRESS AND ANXIETY TO HELP PEOPLE RELAX AND FALL ASLEEP.
Emer Flannery, the entrepreneur behind Kocoono, makes the blankets herself and sells them for €275.
1. The income method: The money Emer receives from the consumer: €275 2. The output method: The value of the output (the blankets): €275 3. The expenditure method: The spending by the consumer who buys the blanket: €275
Impact of a High National Income
Be an individual (household)
Employment:
People are earning more and so are spending more. There is a high standard of living.
Employment: With increased demand for goods and services, more people will be employed.
Be a business (organisation)
Increased sales: Increased demand for goods and services will lead to more sales and thus, bigger profits for the business.
Be the economy (government)
Government revenue (income): The government will have increased revenue from indirect taxes such as VAT and direct taxes such as income tax.
Government expenditure: The government will spend less money on social protection due to increased employment.
Decrease in national debt: With more money available, the government can put more towards servicing the national debt.
EXAM PREPARATION!
State ‘national income’. Explain briefly what it means and give an example. Apply it to the individual, business and the economy.