National Income Closed Economy

This is an important lesson as it discusses the role of policymakers in the economy. This module defines the structure of the educative material ahead. The series on national income covers Nation Income, Savings, and the relationship between the two. Learn how demand and supply come into equilibrium, demand, and supply for loanable funds, fiscal policy determinants, and their social impact. Policymakers play a pivotal role in driving the Gross Domestic Product, Inflation and Unemployment Rate in an economy. The role of central banks and important concepts example Taylor’s Rule and Phillips Curve are covered under Applied Learning Section especially under Stabilization series.

Long Run Vs Short Run Determinants of GDP

In the Long Run GDP depends on the supply of goods & services.
In the short run GDP depends on aggregate demand AD.
In the long run monetary (refer to the module on central banks) and fiscal policies impact the economy. Demand and supply shocks are covered under economic fluctuations.

YouTube: The middle Road 

Understand determinants of total production of goods & services, factor prices, and factors of production in a closed economy. The lesson introduces the fisher equation, the concept of the consumption function, marginal propensity to consume, and derives public and private savings.

Key Takeaways 

The quantity of investment goods demanded depends on the interest rate, which measures the cost of the funds used to finance investment. Interest Rates measures the cost of funds used to finance investment.

Real Interest Rate: Nominal Interest Rate – Inflation Rate