The question (15 marks)
Explain the circular flow of income and, on the basis of it, set out the aggregates by which national income is measured. What does each aggregate leave out? (15 marks)
Standing MU question on Module 1 heads 4 and 5. Built from chapter 04 and worked examples 6 and 7.
Plan your answer on paper before you look at the authorities — issue first, then the rule, then apply it to these facts.
It tests Unit 1 · Foundation of Economics of Economics.
Authorities you will need
- National income identity: Y = C + I + G + (X − M)
- Marshall, Pigou and Fisher on the definition of national income
- Ministry of Statistics and Programme Implementation on Gross Value Added
- The Expert Group framework on green national accounting in India
How an answer is marked
A full-marks answer names the issue in one line, states the rule with its section, cites the authority, applies it to these facts and concludes — in that order. The app's model answer for this question is written in exactly that shape, with a checklist to mark your own attempt against.