4.1 National Income

Need to Know

At the end of this section the student should be able to:

construct and interpret the circular flow of income model; examine the effects of leakages and injections on the circular flow of income in the macroeconomy
differentiate between GDP, GNP, GNI and GNDI as measures of national income; analyse which measure is a more accurate indicator of Ireland’s economic performance and economic welfare
critique the limitations of these measures of economic performance
debate the economic and social impact of economic activities in the hidden economies
explain the multiplier effect; apply the multiplier formulae to calculate and evaluate changes to national income in an open and closed economy
investigate data patterns in Ireland’s national income, price level, unemployment rate, government expenditure and national debt over a period of time; identify the different phases of business cycles and critically examine the main factors that led to the fluctuations in output