National income - 2a
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7 Terms
1
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What determines the total production of goods and services
The production function
2
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What is the production function
Y = F(K,L)
Where K is capital
L is labour
3
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What are the components of output in a closed economy
C I G
4
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What is the formula of real interest rate
Nominal interest rate - inflation
5
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In the equation for output what is the only variable undetermined
Interest rates - I(r)
6
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Prove saving equals investment
Y = C + I + G in a closed economy so
I = Y - C - G
So I = output once expenditure and government spending have been subtracted leaving saving
So S = i
7
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Draw a diagram of supply and demand for loanable funds
