Question:

Explain why an economy's income must equal its expenditures?

Answer:

The income should equal the expenditure so you are not spending more than you have coming in

More Info:

Macroeconomics

National accounts or national account systems (NAS) are the implementation of complete and consistent accounting techniques for measuring the economic activity of a nation. These include detailed underlying measures that rely on double-entry accounting. By design, such accounting makes the totals on both sides of an account equal even though they each measure different characteristics, for example production and the income from it. As a method, the subject is termed national accounting or, more generally, social accounting. Stated otherwise, national accounts as systems may be distinguished from the economic data associated with those systems. While sharing many common principles with business accounting, national accounts are based on economic concepts. One conceptual construct for representing flows of all economic transactions that take place in an economy is a social accounting matrix with accounts in each respective row-column entry.

National accounting has developed in tandem with macroeconomics from the 1930s with its relation of aggregate demand to total output through interaction of such broad expenditure categories as consumption and investment. Economic data from national accounts are also used for empirical analysis of economic growth and development.

The United States of America is a federal republic with autonomous state and local governments. Taxes are imposed in the United States at each of these levels. These include taxes on income, payroll, property, sales, imports, estates and gifts, as well as various fees. In 2010 taxes collected by federal, state and municipal governments amounted to 24.8% of GDP. In the OECD, only Chile and Mexico taxed less as a share of GDP. The United States also has one of the most progressive tax systems in the industrialized world.

Taxes are imposed on net income of individuals and corporations by the federal, most state, and some local governments. Citizens and residents are taxed on worldwide income and allowed a credit for foreign taxes. Income subject to tax is determined under tax accounting rules, not financial accounting principles, and includes almost all income from whatever source. Most business expenses reduce taxable income, though limits apply to a few expenses. Individuals are permitted to reduce taxable income by personal allowances and certain nonbusiness expenses, including home mortgage interest, state and local taxes, charitable contributions, and medical and certain other expenses incurred above certain percentages of income. State rules for determining taxable income often differ from federal rules. Federal tax rates vary from 10% to 39.6% of taxable income. State and local tax rates vary widely by jurisdiction, from 0% to 13.30%, and many are graduated. State taxes are generally treated as a deductible expense for federal tax computation. In 2013, the top marginal tax rate for a high-income California resident would be 52.9%. Certain alternative taxes may apply.

Economics

farming, forestry, and fishing: 0.7% manufacturing, extraction, transportation, and crafts: 20% managerial, professional, and technical]disambiguation needed[: 37% sales and office: 24% other services: 18% (2009)

Main data source: CIA World Fact Book

The ability of the government to tax and spend in specific regions has large implications to economic activity and performance. Taxes are highly indexed to wages and profits and therefore places of high taxation are geographically found in areas with higher per capita income and more economic activity.

Spending is largely focused on areas of poverty, the elderly, and centers of federal employment such as military bases.

A variety of measures of national income and output are used in economics to estimate total economic activity in a country or region, including gross domestic product (GDP), gross national product (GNP), net national income (NNI), and adjusted national income (NNI* adjusted for natural resource depletion). All are specially concerned with counting the total amount of goods and services produced within some "boundary". The boundary is usually defined by geography or citizenship, and may also restrict the goods and services that are counted. For instance, some measures count only goods and services that are exchanged for money, excluding bartered goods, while other measures may attempt to include bartered goods by imputing monetary values to them.

Business Finance Health Medical Pharma Social Issues Politics

News:


Related Websites:


Terms of service | About
5