National Income can be defined as revenue earned by the nation’s companies that is measured by the United States Commerce Department and is organized and published by the Bureau of Economic Analysis. National Income relates closely to Gross Domestic Product, or GDP, which is the market value of legal goods and services produced in an economy in a year. Overall, there are two ways that the Bureau of Economic Analysis calculates the GDP; there’s the expenditure approach which uses the formula GDP=C+I+G(X-M). This formula adds together the largest spending sectors, or the sector that consumes the most production. The largest spending sector is described as the household sector who consumes over 2/3 of the production followed by all levels of government
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Keep in mind that not everyone in the country falls under the employed or unemployed categories. Various factors such as institutionalization, people under the age of 16, or retired and military personal are not calculated into the work force. The formula for unemployment is can be illustrated as: Unemployment Rate = Number of Unemployed / Total Labor Force. The United States currently has 154.8 million people in the work force with 11.3 million unemployed. This yields a rate of 7.3% of people being unemployed. This percentage of unemployed people can be seen as a good thing so long as there is no cyclical unemployment which is the unemployment caused by a downturn in the business cycle. Other types of unemployment include seasonal unemployment, frictional unemployment, and structural unemployment. These types of unemployment are caused by different factors; seasonal unemployment is when employment only becomes available during the holiday seasons and/or specific times of the year. An example would be someone like a snowplow driver who makes their living during the winter months finding it difficult to seek employment in that business during the …show more content…
When national income is high then the rate of unemployment will be somewhere of about 5% without any cyclical unemployment while the rate of inflation is maintained at a constant level. Vice versa. Using the formula for determine national income economist are able to predict future spending and the rise or fall of national income. Another influential factor that relates to national income is unemployment there are various different types of unemployment and while not all unemployment is bad for say cyclical unemployment is not wanted because this means that the economy is going through a recession or downfall, which has the potential to affect national income because with households being the largest spending sector, if households are not spending as much because they are unemployed this leads to a drop in national income. This creates a domino effect because when the public does not spend this causes government spending to focus on helping provide support for those who cannot afford essential goods. Another factor is inflation when people are facing unemployment and not having money to buy things over a period of time this leads to deflation. When employment rises spending increases and more people are able to buy goods. This raises household spending causing national income to rise and creates inflation. Inflation happens because over a period
Keep in mind that not everyone in the country falls under the employed or unemployed categories. Various factors such as institutionalization, people under the age of 16, or retired and military personal are not calculated into the work force. The formula for unemployment is can be illustrated as: Unemployment Rate = Number of Unemployed / Total Labor Force. The United States currently has 154.8 million people in the work force with 11.3 million unemployed. This yields a rate of 7.3% of people being unemployed. This percentage of unemployed people can be seen as a good thing so long as there is no cyclical unemployment which is the unemployment caused by a downturn in the business cycle. Other types of unemployment include seasonal unemployment, frictional unemployment, and structural unemployment. These types of unemployment are caused by different factors; seasonal unemployment is when employment only becomes available during the holiday seasons and/or specific times of the year. An example would be someone like a snowplow driver who makes their living during the winter months finding it difficult to seek employment in that business during the …show more content…
When national income is high then the rate of unemployment will be somewhere of about 5% without any cyclical unemployment while the rate of inflation is maintained at a constant level. Vice versa. Using the formula for determine national income economist are able to predict future spending and the rise or fall of national income. Another influential factor that relates to national income is unemployment there are various different types of unemployment and while not all unemployment is bad for say cyclical unemployment is not wanted because this means that the economy is going through a recession or downfall, which has the potential to affect national income because with households being the largest spending sector, if households are not spending as much because they are unemployed this leads to a drop in national income. This creates a domino effect because when the public does not spend this causes government spending to focus on helping provide support for those who cannot afford essential goods. Another factor is inflation when people are facing unemployment and not having money to buy things over a period of time this leads to deflation. When employment rises spending increases and more people are able to buy goods. This raises household spending causing national income to rise and creates inflation. Inflation happens because over a period