Answer to Question #154992 in Macroeconomics for joy

Question

What do you understand about national income? How would you like to summarize about approaches for the monetary analysis?

Answer 1

National income

National income is the total value of goods and services produced in a financial year. It is used to measure monetary value of output flow of good and services in an economy. National income is based on estimating economic activity in a region or country. It includes the payments that have been made to all products in form of rent, wages, profit and interest. Generally, the progress of a nation may be determined through national income.

Approaches of monetary analysis

Monetary analysis involves a clear analysis of credit and monetary development with the aim of determining economic growth, and future inflation implication. It consists of 3 main approaches including; quantity velocity, cash Balances and income-expenditure approach. Cash balance and quantity velocity approach are grouped based on the quantity theories of money. Contrary, income-expenditure approach is said to be the modern theory of money. Cash balance approach considers liquidity concept as it is based on national income approach. In cash balance approach, money value is based on cash balances in the respective period. According to income-expenditure approach, price changes are as a result of national income changes. In quantity-velocity approach price level and money quantity tend to be directly proportional to one another.