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Explain how economists model how an increase in government expenditure can lead to a greater increase in national income.
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Explain how economists model how an increase in government expenditure can lead to a greater increase in national income. Ans. National income is the total amount of wealth that accrues to the permanent residents of a country as a result of the production of goods and services within a country during the course of a year. It is important to measure national income because it shows whether the standard of living in a country is rising or falling and it can be used as a means of comparison between other countries. It is also useful to measure income against past income in the same country to see whether the economy is growing or declining. An increase in government expenditure is an injection in the circular flow on income. An injection is an addition to the circular flow of income. The diagram above illustrates some of the injections...
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