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    Relationship Between BOP and National Income

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    itisha
    National income represents the total amount earned by factors of production in a year, including wages, rents, profits, and interest. It is calculated as personal consumption + private investment + government spending + exports - imports. A country's balance of payments accounts track international transactions, including the current account, capital account, and reserves account. A negative balance of trade means exports are less than imports, while a positive balance of trade means exports are greater than imports. National income is affected if imports increase while domestic output decreases, as that would mean more leakage from the economy through foreign spending.

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    Relationship Between BOP and National Income

    Uploaded by

    itisha
    7 views8 pages
    National income represents the total amount earned by factors of production in a year, including wages, rents, profits, and interest. It is calculated as personal consumption + private investment + government spending + exports - imports. A country's balance of payments accounts track international transactions, including the current account, capital account, and reserves account. A negative balance of trade means exports are less than imports, while a positive balance of trade means exports are greater than imports. National income is affected if imports increase while domestic output decreases, as that would mean more leakage from the economy through foreign spending.

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    National income represents the total amount earned by factors of production in a year, including wages, rents, profits, and interest. It is calculated as personal consumption + private investment + government spending + exports - imports. A country's balance of payments accounts track international transactions, including the current account, capital account, and reserves account. A negative balance of trade means exports are less than imports, while a positive balance of trade means exports are greater than imports. National income is affected if imports increase while domestic output decreases, as that would mean more leakage from the economy through foreign spending.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    7 views8 pages

    Relationship Between BOP and National Income

    Uploaded by

    itisha
    National income represents the total amount earned by factors of production in a year, including wages, rents, profits, and interest. It is calculated as personal consumption + private investment + government spending + exports - imports. A country's balance of payments accounts track international transactions, including the current account, capital account, and reserves account. A negative balance of trade means exports are less than imports, while a positive balance of trade means exports are greater than imports. National income is affected if imports increase while domestic output decreases, as that would mean more leakage from the economy through foreign spending.

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    of 8

    z

    Relationship between BOP and National Income


    National Income and Product Accounts (NIPA)

    • National income represents the total amount of money


    that factors of production earn during the course of a year.
    z This mainly includes payments of wages, rents, profits,
    and interest to workers and owners of capital and
    property.
    •  The national product refers to the value of output
    produced by an economy during the course of a year. 
    National Income or Product Identity 

    Y = C + I + G + EX − IM
    C- personal consumption expenditures, 
    I-  private investment expenditures, 
    G-government consumption expenditures 
    EX-expenditures on exports  
    IM- expenditures on imports 
    z
     Relationship between National
    Income and BOP
    Balance of
    payment

    Current Capital Reserves


    account account account

    Balance of Factor Cash


    trade income transfers
    If Net exports are negative If Net exports are positive

    X slightly greater then M is better or M slightly greater than X is


    better
    z
    • Relationship between Y AND IMPORTS
    Y IS DECRESING AND IMPORTS IS INCREASING???
    IF THERE IS GOV SPENDING LEAKAGES THEN Y WILL BE
    AFFECTED.
    z

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