National Income Determination Using Ad And Income Approach With The Multiplier Process
Economics notes
National Income Determination Using Ad And Income Approach With The Multiplier Process
➡️ Average rate of tax (ART) is the total amount of tax paid divided by the total taxable income. It is the average amount of tax paid on each dollar of income.
➡️ Marginal rate of tax (MRT) is the rate of tax paid on the last dollar of income earned. It is the rate of tax paid on the next dollar of income earned.
➡️ ART and MRT are important concepts in economics as they can affect the incentives to work, save, and invest. They can also influence the distribution of income and wealth in an economy.
How does the multiplier process affect national income determination?
The multiplier process is an economic concept that explains how an initial injection of spending into an economy can lead to a larger increase in national income. This occurs because the initial injection of spending leads to a chain reaction of increased spending and income throughout the economy. This increased spending and income is multiplied by the multiplier, which is the ratio of the change in national income to the initial injection of spending. This multiplier effect is an important factor in national income determination using the AD and income approaches.
What is the difference between the AD and income approaches to national income determination?
The AD approach to national income determination looks at the total spending in an economy, while the income approach looks at the total income earned in an economy. The AD approach focuses on the total amount of spending in an economy, while the income approach focuses on the total amount of income earned in an economy. The AD approach is based on the idea that total spending in an economy is equal to total income, while the income approach is based on the idea that total income is equal to total spending. Both approaches are used to determine national income, but the AD approach is more commonly used.
How does the multiplier process work in national income determination?
The multiplier process is an economic concept that explains how an initial injection of spending into an economy can lead to a larger increase in national income. This occurs because the initial injection of spending leads to a chain reaction of increased spending and income throughout the economy. This increased spending and income is multiplied by the multiplier, which is the ratio of the change in national income to the initial injection of spending. This multiplier effect is an important factor in national income determination using the AD and income approaches.