Circular Flow of Payments and National Income

To have a glimpse in the working of the economy as a whole may be of use to a student of economics.

In every economy there are lots of households to supply labour and capital to firms that use them to produce goods and services. Firms provide incomes for households, who in turn¹ use this money to purchase the goods and ser­vices produced by firms. This process is called the circular flow of payments².

The gross domestic product (GDP) is the total money value of all final goods produced in the domestic economy over a one-year period. The GDP can be measured in three ways: (a) the sum of the value added³ in the pro­duction within a year, (b) the sum of incomes received from producing the year's output, (c) the sum to spend on the year's domestic output of goods and services.

The total money value of all final goods and services in an economy over a one-year period, that is the GDP, plus property income from abroad (inter­est, rent, dividends and profits) make the gross national product (GNP). The GNP is an important measure of a country's economic well-being, while the GNP per head provides a measure of the average standard of living of the country's people. However, this is only an average measure of what people get. The goods and services available to particular individuals depend on the income distribution within the economy.

We now recognize that assets wear out in the production process either physically or become obsolete. This process is known as depreciation. There has to be part of the economy's gross output to replace existing capital, and this part of gross output is not available for consumption, investment, govern­ment spending, or exports. So we subtract depreciation from the GNP to arrive at national income.

National income measures the amount of money the economy has avail­able for spending on goods and services after setting aside enough money⁴ to replace resources used up in the production process.

Since output is determined by demand, the aggregate demand or spend­ing plans of households and firms determine the level of the output pro­duced, which in turn makes up the income available to households and firms. Aggregate demand is the amount to be spent by firms and house­holds on goods and services.

Governments also intervene in the circular flow of income and payments. They buy a considerable part of the total output of goods and services in an economy adding their demand to the demand of the private sector. Since gov­ernment spending is a large component of aggregate demand, and since taxes affect the amount households and companies have for spending, government spending and taxation decisions, which are referred to as⁵ fiscal policy, have major effects on aggregate demand and output.

Задание 2. Выпишите из каждого предложения текста грамматическую основу (подлежащее+ сказуемое), определите видовременную форму глагола и залог, определите начальную форму глагола.

Задание 3. Задайте вопросы к первому предложению:

· общий

· специальный

· к подлежащему

· альтернативный

разделительный

Задание 4. Выберите подходящее по смыслу слово из предлагаемых в скобках вариантов и переведите пред­ложения на русский язык.

1. The (measure/ way) in which the European Union's statistical system is adapting to requirements of the 21st century is of importance both inside and outside the European Union.

2. The marginal product of labour is how much each extra worker (adds to / makes up) total output.

3. In a dynamic political society old statistic systems have to be (replaced/determined) by new ones.

4. If a person can do what he wishes with his own (property / output), time, and energy, then economists say that he is economically free.

5. The price of a good in a market is (determined / measured) by the law of demand and supply.

6. (Gross / aggregate) demand is the total amount of (spending/deprecia­tion) on (final/domestic) goods and services.

Задание 5. Найдите в тексте неличные формы глаголов (герундий, причастие настоящего времени, причастие прошедшего времени, отглагольное существительное, инфинитив, сложное подлежащее, сложное дополнение) и выпишите их.

ВАРИАНТ 8

1. Прочитайте и переведите письменно текст на русский язык.