经济学3

Q1.The households has lots of factors of produce which are land, labor,capital and so on. So the household could transfer it in factor market. Then the firms can purchase those factor, but this is important that the salary, interest and rent are improved by firms to transferring in factor market. Therefore, as for households, the salary, interest and rent become a income. And when firms has factor of product, can product of goods and labor. Then the firms could use it to transferring in product market and customer could purchase it. Due to attaining product and labor, customer need to pay money in product markets. And as for firms, the money become a profit.Money entering the flow is known as an injection.（）Money leaving the flow is known as a withdrawal.（）Injections Withdrawals1 Investment by firms I Savings by household S2 Government spending G Tax paid to the government T3 Exports E imports MWhen injection is greater than savings then aggregate demand will exceed the value of current output. Stocks will decrease, firms will increase production which will lead to an increase in employment and therefore National Income.When withdrawal is greater than investment aggregate demand will fall below the value of current output, stocks will rise, production will fall and therefore employment levels and National Income will fall.When injection is same than withdrawal, all of National Income is equilibrium.Q2.And the injections include investment, government spending and taxation and export1.Investment means that savings can be injected back into the circular flow in the form of investment, building societies insurance companies.ernment spending and taxation means that the Government has a great effect on the circular flow of income. It withdraws part of our income from the flow in the form of taxation. This can be in the form of direct tax on our income or indirect tax on purchases, for example V AT. The Government “injection”this into the circular flow in the form of Government Spending. For example. Investment in nationalized industries.3.Exports means that these are goods and services that are sold abroad. For example the teas of China production are sold to USA.Withdrawal include saving, taxation and import.1.Saving means that the part of our income we choose not to spend is known as savings. Our savings are therefore withdrawn from the circular flow of income. For example, put the money in the bank.2.Tax means that the Government has a great effect on the circular flow of income. It withdraws part of our income from the flow in the form of taxation. This can be in the form of direct tax on our income or indirect tax on purchases, for example V A T.3.Imports means that if we buy foreign goods and services made abroad, then this money leaves the circular flow and will make its way into the flow of income of another country. For example if someone in China buys a Australia milk powder.Q3. Multiplier means that any change in the level of injections or withdrawals will bring about a change in the level of National Income. However, the change in National Income will be relatively greater than the initial change, this is known as the “Multiplier” effect.For example, suppose a Australia firm decides to set up food company in Beijing. The effects on the China will be many and varied and not just limited to the food industry. Incomes earned will be spent on many good and services and the “knock-on” effect will continue. Therefore, the initial injection of investment by the food industry would create a flow of income and ultimately national income will rise.Out of any income received some will be spent and some will be saved, depending on the value of the MPC and the MPS. The amount spent will be received by others who in turn will spend a proportion and save the remainder and this will continue to happen with the amounts becoming smaller and smaller each time. This value of the multiplier is calculated:A change in an injection can have a multiplier effect, for example in an economy where the MPC=0.5 and the MPS=0.5, and there is an increase in investment of £2,000,000, the value of the multiplier will be:K=This means that the increase in investment of £2,000,000will increase national income by 2 times, therefore national income will increase by £4,000,000.Income and employment is generated, output rises, and some of money disappears as a leakage. The remaining money goes round the system again, generating more income, employment and output. Again, some more money leaks out.This process continues with income and employment being generated and output increasing. The amounts going round the system get smaller and smaller.Looking back at the example, an initial injection of investment of £2,000,000 generated an increase in national income of £4,000,000 because the multiplier was 2. An MPC of 0.8 (MPS 0.2)means that 80% of the injection is spent, generating income and employment and a rise in output. The remaining money goes round the system again -20% leaks out and 80% is spent. Income and employment rise and the process continues.If the MPC=0, there will be no multiplier effect at all. All of the increase in income generated will be saved that is withdrawn fro the system and not passed on to generate more income. The multiplier can be found by the reciprocal of the PS:If the MPS= ---- the multiplier will be 5If the MPS= --- the multiplier will beHere we have a high MPS and so a low multiplier effect. National Income can also decrease if for example there is a decrease in investment.Q41.Production not in money term.WI does not contain the goods and service provided by yourself. For example, a shopper could sell object to customer, the object is calculated in WI . But if the object are used by shopper, the object are not calculated in WI.2.Value of services rendered by consumer durable goodsIt is difficult to calculate the yearly value of the durable goods. For example, the car will lost by law of diminishing preliminary3.Problem of double countingThe income and output arise through the inflation. When inflation occurs, the value of stocks of raw materials and goods rises. While this adds to the profits of firms holding such stocks it represents no increase in real output. Such gains therefore ,must be deducted from the income and output figures.4.The black economyThe size of the black economy can be difficult to estimate but certainly causes distortion. National Income figures for certain industries, for example, building industries have many workers who are self-employed and are paid in cash, tax revenue is lost and welfare benefits are claimed unnecessarily。