National Accounting - Consumption and Investment
Over the course of a year, a quarter, or a month, we can look at the debits and credits that build up the entirety of an economy. National accounts looks at these debits and credits and record the transactions While it can be the case we make more than we spend as individuals, this cannot be the case for entire economies. This is the old adage that every sale is something bought. In the context of macroeconomics we say that income over a period of time should be equal to expenditures over that period of time: Expenditures = Income For the case of this post, we will assume a hypothetical economy which only consists of domestic investment and consumption as transactions. We can define the two as follows: Consumption : Transactions that are associated with the destruction of asset values. Investment : Transactions that are associated with increasing assets values. To understand these definitions, we will look at two sets of debit and credit charts to show how these transactions are ...
Comments
Post a Comment