Chapter 11: National Income
Explainer, notes, worksheet and data.
Explainer
What you'll learn in this chapter
- build and interpret the circular flow of income (leakages & injections)
- distinguish GDP, GNP, GNI and GNDI and judge which best reflects Ireland’s performance/welfare
- critique the limits of national income measures (inflation, population, hidden costs, etc.)
- debate the hidden economy and its economic/social impacts
- explain and apply the multiplier (open vs closed economy)
- interpret Irish macro data over time and connect it to phases of the business cycle
Core ideas
This chapter links the whole economy together. You’ll treat spending as a flow and explain how changes in injections (I, G, X) or leakages (S, T, M) can expand or shrink national income via the multiplier.
You’ll also learn why Ireland’s headline GDP can be misleading, and why alternative measures may better reflect living standards and economic welfare.
Exam focus
- circular flow diagrams + identify leakages/injections and predict the effect on income
- short calculations: multiplier questions and interpretation
- evaluation: why GDP can overstate welfare; include limitations and Irish context
Interactive: Circular Flow of Income
The circular flow model shows how money moves between households and firms in an economy, with injections (I, G, X) adding to the flow and leakages (S, T, M) withdrawing from it.
The circular flow of income shows money moving between households and firms, with the financial, government and overseas sectors acting as conduits for leakages and injections. Hover over any sector to highlight its connections.