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NET NATIONAL PRODUCT: The total market value of all final goods and services produced by citizens of an economy during a given period of time, usually a year, after adjusting for the depreciation of capital. Net national product, abbreviated NNP, has the same relation to net domestic product (NDP) as gross national product (GNP) has to gross domestic product (GDP). Net national product also has the same relation to gross national product that net domestic product has to gross domestic product. Like NDP, NNP is a measure of the net production in the economy.

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Lesson 11: Circular Flow | Unit 3: Government Page: 15 of 22

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  • The role the government sector plays in the economy and the circular flow through taxes and spending.
  • How taxes divert household sector income to the government sector to pay for government purchases.
  • That with the government sector included, the circular flow highlights the three basic uses of national income: consumption, saving, and taxes.
  • Why government spending is divided into government purchases of GDP and transfer payments.
  • Why the circular flow is interested in the net tax flow (taxes minus transfer payments) from households to government.
  • When government does not collect enough taxes to pay for purchases, it can borrow through the financial markets.
  • The Federal deficit, which is the borrowing by the federal government to make up the difference between taxes and spending.
  • That federal borrowing is combined with state and local borrowing (or saving) for total government borrowing.
  • Why the government sector diverts part of the circular flow, but does not necessarily change the total amount of GDP.

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AGGREGATE DEMAND INCREASE, LONG-RUN AGGREGATE MARKET

A shock to the long-run aggregate market caused by an increase in aggregate demand resulting in and illustrated by a rightward shift of the aggregate demand curve. An increase in aggregate demand in the long-run aggregate market results in an increase in the price level but no change in real production. The level of real production resulting from the aggregate demand shock is full-employment real production.

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Today, you are likely to spend a great deal of time wandering around the downtown area looking to buy either a 50 foot extension cord or a combination CD player, clock radio, and telephone (with answering machine). Be on the lookout for high interest rates.
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In 1914, Ford paid workers who were age 22 or older $5 per day -- double the average wage offered by other car factories.
"The majority of men meet with failure because of their lack of persistence in creating new plans to take the place of those that fail. "

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