come is the total value of all factor payments during a period of time. Thenational income is a measure of the total economic flow through the factor marker. Gross national product should equal the national income. GDP is the total market value of all final goods and services produced during a given period and time within the nations borders. Gross domestic product is the most common measure of the level of economic activity at the national level.Households own the economy's resources ( Factors of production; land, labor, and capital) whose services they rent or sell to firms or businesses through factor markets in exchange for factor payments (rental payments, wage payments, interest, and profits). Households use their factor income to purchase goods and services, capital goods. Households also use part of their factor income to pay government taxes.75% of national income is received as wages and salaries. Part of the income goes to the government as personal taxes, and the rest is divided between personal consumption expenditures and personal saving. Economists define saving as " the part of after-tax income which is not consumed." Households have two choices with their income after taxes, to consume or save. The desire or willingness to save depends on the size of your income, if your income is low, you may dissave. Saving and consumption vary directly with income, as the households get more income, they divide it between saving and consumption.Households offer labor service as a factor of production and businesses repay them with income or salaries. The fact that households consume a certain portion of total income, does not guarantee they will consume the proportion of any change in income they might receive. The proportion or fraction, of any change in income consumed is called the marginal propensity to consume. MPC is the change in consumption divided by the change in income. The marginal propensity to save, MPS is the ratio of ...
