{"id":3417,"date":"2023-10-05T09:00:11","date_gmt":"2023-10-05T09:00:11","guid":{"rendered":"http:\/\/localhost\/ecole9ja\/?p=3417"},"modified":"2023-10-05T09:05:02","modified_gmt":"2023-10-05T09:05:02","slug":"week-9-ss2-third-term-economics-notes","status":"publish","type":"post","link":"https:\/\/ecolebooks.com\/nigeria\/posts\/week-9-ss2-third-term-economics-notes\/","title":{"rendered":"Week 9 – SS2 Third Term Economics Notes"},"content":{"rendered":"

WEEK NINE
\n<\/strong>THEORY OF INCOME DETERMINATION
\n<\/strong>CONTENT
\n<\/strong><\/p>\n

    \n
  1. Circular Flow of Income\n<\/li>\n
  2. Concept of Saving\n<\/li>\n
  3. Concept of Investment\n<\/li>\n
  4. \n
    Concept of Consumption\n<\/div>\n

    \u00a0CIRCULAR FLOW OF INCOME
    \n<\/strong>Circular flow of income shows the independence or relationship between households and business enterprise
    \n\"\"\/\"\"\/\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Supply of Goods and Service\"\"\/\"\"\/\"\"\/\"\"\/<\/p>\n

    \u00a0
    \n\u00a0\"\"\/\"\"\/\"\"\/\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Payment for goods and services\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0
    \n\"\"\/\"\"\/\"\"\/<\/p>\n

    \u00a0\"\"\/
    \n\t\t\t\"\"\/\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/p>\n

    \u00a0
    \n\u00a0
    \n\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0
    \n\"\"\/\"\"\/\"\"\/\"\"\/\"\"\/\"\"\/<\/p>\n

    \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Wages, Interest, Rent and Profits
    \n\"\"\/\"\"\/\"\"\/\"\"\/<\/p>\n

    \u00a0
    \n\u00a0
    \n\u00a0
    \n\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Productive Services or Resources
    \n\"\"\/\"\"\/<\/p>\n

    \u00a0Commodity and money flows between households and firms. It shows the flow of payments from business sector to households in exchange for labour and other productive services and the return flow of payments from households to business sector in exchange for goods and services.<\/p>\n

    \u00a0The household or the personal sector offers its labour services to the business sector or firms in the production of goods and services. The household is rewarded in form of wages, interest and rent which it spends on the consumption of goods and services produced in the economy.<\/p>\n

    \u00a0FACTORS THAT BRINGS ABOUT CHANGES IN THE CIRCULAR FLOW OF INCOME
    \n<\/strong>1.\u00a0\u00a0\u00a0\u00a0Withdrawal<\/strong>: This part of all the income that is not all owed to pass through the normal channel of circular flow of income.
    \n2.\u00a0\u00a0\u00a0\u00a0Injection<\/strong>: This forms an increase in the income of households, producers outside their normal processes of selling productive resources and manufactured goods.
    \n3.\u00a0\u00a0\u00a0\u00a0Savings<\/strong>: These are part of income which are not consumed immediately and they reduce households and producers expenditures.
    \n4.\u00a0\u00a0\u00a0\u00a0Investment<\/strong>: This reduces and creates additional income either immediately or in future.
    \n5.\u00a0\u00a0\u00a0\u00a0Gifts and grants<\/strong>: They may come from governments to households and firms and help increasing their incomes
    \n6.\u00a0\u00a0\u00a0\u00a0Taxes<\/strong>: They reduce the expenditures of households and firms on goods and factor services.
    \n7.\u00a0\u00a0\u00a0\u00a0Imports<\/strong>: They involve expenditure on foreign made goods and services and constitute withdrawals from the circular flow of income.
    \n8.\u00a0\u00a0\u00a0\u00a0Export<\/strong>: They Provide money from other countries and act as injection into the domestic circular flow of income. <\/p>\n

    \u00a0EVALUATION<\/strong>
    \n\t\t\t1.\u00a0\u00a0\u00a0\u00a0Explain the following terms:
    \n\u00a0\u00a0\u00a0\u00a0i. Withdrawal\u00a0\u00a0\u00a0\u00a0ii. Savings\u00a0\u00a0\u00a0\u00a0iii. Injection.\u00a0\u00a0\u00a0\u00a0Iv. Import and Export<\/p>\n

    \u00a0CONCEPTS OF SAVINGS, INVESTMENT AND CONSUMPTION
    \n<\/strong>SAVINGS
    \n<\/strong>Savings <\/strong>are made up of disposable income which is not spent on consumer goods and services. Saving involves forgoing some present consumption.<\/p>\n

    \u00a0Individuals save for the following reasons:
    \n<\/strong>1.\u00a0\u00a0\u00a0\u00a0To raise capital
    \n2.\u00a0\u00a0\u00a0\u00a0For unforeseen contingencies
    \n3.\u00a0\u00a0\u00a0\u00a0For speculation
    \n4.\u00a0\u00a0\u00a0\u00a0To acquire assets
    \n5.\u00a0\u00a0\u00a0\u00a0For future purposes
    \n6.\u00a0\u00a0\u00a0\u00a0To raise social status<\/p>\n

    \u00a0Factors that affect savings
    \n<\/strong><\/p>\n

      \n
    1. The size of income\n<\/li>\n
    2. The rate of interest\n<\/li>\n
    3. Cultural attitude\n<\/li>\n
    4. Government polices\n<\/li>\n
    5. Availability of financial institutions.\n<\/li>\n<\/ol>\n

      \u00a0EVALUATION
      \n<\/strong>1. Give four reasons why individual saves.
      \n2. List and discuss three factors affecting savings. <\/p>\n

      \u00a0INVESTMENTS
      \n<\/strong>Investment <\/strong>may be defined as expenditure on physical assets which are not for immediate consumption but for production of consumer and capital goods and services.
      \nTypes of Investment
      \n<\/strong>1.\u00a0\u00a0\u00a0\u00a0Individual investment:<\/strong> This may be on building, motor vehicles and other assets the individual hopes may increase his income and standard of living.
      \n2.\u00a0\u00a0\u00a0\u00a0Investment by firms:<\/strong> This can be on buildings machines, furniture, raw materials, semi finished and finished goods.
      \n3.\u00a0\u00a0\u00a0\u00a0Government investment in social capital;<\/strong> These are in the areas of roads, electricity, pipe borne water, hospitals schools.
      \nPurpose: to improve the living condition of the citizen.\n<\/li>\n

    6. \n
      Government investment in public corporations:<\/strong> To render essential services create more employment opportunities among others, are sure of the reasons why government invest.\n<\/div>\n

      \u00a0Factors that determine investment
      \n<\/strong>1.\u00a0\u00a0\u00a0\u00a0The amount of income earned.
      \n2.\u00a0\u00a0\u00a0\u00a0Savings
      \n3.\u00a0\u00a0\u00a0\u00a0Profit
      \n4.\u00a0\u00a0\u00a0\u00a0The amount paid as tax
      \n5.\u00a0\u00a0\u00a0\u00a0The rate of interest
      \n6.\u00a0\u00a0\u00a0\u00a0Expectation
      \n7.\u00a0\u00a0\u00a0\u00a0Business atmosphere
      \n8.\u00a0\u00a0\u00a0\u00a0Political factor<\/p>\n

      \u00a0CONSUMPTION
      \n<\/strong>Consumption<\/strong> is the sum of current expenditure on goods and services by individuals, firms and government. It is also mean part of income not saved or invested. The level of consumption of an individual depends largely on his level of current income.<\/p>\n

      \u00a0Factors that determine the level of consumption
      \n<\/strong>1.\u00a0\u00a0\u00a0\u00a0The level of income
      \n2.\u00a0\u00a0\u00a0\u00a0Savings
      \n3.\u00a0\u00a0\u00a0\u00a0Expectation of price changes
      \n4.\u00a0\u00a0\u00a0\u00a0The rate of taxes paid
      \n5.\u00a0\u00a0\u00a0\u00a0The influence of other households
      \n6.\u00a0\u00a0\u00a0\u00a0Assets owned
      \n7.\u00a0\u00a0\u00a0\u00a0The rate of interest received
      \n8.\u00a0\u00a0\u00a0\u00a0Business profit<\/p>\n

      \u00a0EVALUATION
      \n<\/strong>1.\u00a0\u00a0\u00a0\u00a0Give five factors that determines the level of consumptions.
      \n2.\u00a0\u00a0\u00a0\u00a0What is Investments?<\/p>\n

      \u00a0
      \n\u00a0The Relationship Between Income, Consumption, Savings And Investment
      \n<\/strong>Income, consumption and savings are related. The amount of income earned (household) determines to a large extent the level of consumption of an individual as well as the amount which can be saved. This is represented by the formula. Y = C+S, where Y = Income, C = Consumption expenditure and S = Savings<\/p>\n

      \u00a0Also, income, consumption and investment are related. The amount of income earned (business sector) determines to a large extent the level of spending on the running overhead cost (consumption) as well as the amount spent on further investment. This is represented by the formula: Y = C + I , where Y = Income , C = Consumption expenditure , I = Investment Expenditures<\/p>\n

      \u00a0In forming an equation with household income and the business sector’s income, we have:
      \n C + S = C + I
      \n S = I
      \nConsumption influences the level of national income. If people consume more, it encourages further production. Economy is at equilibrium when aggregate saving equals aggregate investment and full employment is achieved at this level. We save in order to accumulate capital for investment and for many other personal reasons. There will be no investment without saving. Investment, in turn, creates employment and income for people. Without income, we shall have nothing to save and nothing to spend on consumption of goods and services.<\/p>\n

      \u00a0EVALUATION
      \n<\/strong><\/p>\n

        \n
      1. How is the national income of a country determined?\n<\/li>\n<\/ol>\n<\/li>\n
      2. \n
        Explain two ways by which members of household dispose their income\n<\/div>\n

        \u00a0READING ASSIGNMENT
        \n<\/strong><\/p>\n

          \n
        1. Amplified and simplified Economics for SSS by Femi Alonge Chapter 31 page 413 \u2013 425\n<\/li>\n
        2. Fundamentals of Economics for the SSS by R.A.I Anyanwuocha Chapter 32 page 254 \u2013 258\n<\/li>\n
        3. Mathematical Approach to Economics for sss by Kunle A. Nosiru page 177-182\n<\/li>\n<\/ol>\n

          \u00a0GENERAL REVISION QUESTIONS
          \n<\/strong><\/p>\n

            \n
          1. \n
            Give five reasons why Government participates in business enterprises.\n<\/div>\n<\/li>\n
          2. \n
            Define ageing population.\n<\/div>\n<\/li>\n
          3. \n
            Explain the sources of finance available to a public limited liability business.\n<\/div>\n<\/li>\n
          4. \n
            Explain any three weapons that can be used by a trade union during trade dispute.\n<\/div>\n<\/li>\n
          5. \n
            What is occupational mobility?\n<\/div>\n<\/li>\n<\/ol>\n

            \u00a0WEEKEND ASSIGNMENT
            \n<\/strong><\/li>\n

          6. \n
            The part of income that is not spent is known as ____ (a) multiplier (b) saving\n<\/div>\n

            \u00a0\u00a0\u00a0\u00a0(c) expenditure (d) depreciation<\/p>\n

              \n
            1. All these factors tend to reduce the amount of funds in the circular flow of income except………………. (a) savings (b) grants (c) imports (d) taxes\n<\/li>\n
            2. \n
              The real capital investment of a country is a reflection of it’s…………… (a) total debts\n<\/div>\n

              (b) total goods (c) total income (d) total reserve\n<\/li>\n

            3. An expenditure on physical assets which are not for immediate consumption is known as…………… (a) a consumption (b) an investment (c) a liability (d) a saving\n<\/li>\n
            4. ………………is the major determinant in the concepts of saving, investment and consumption. (a) cost of living (b) multiplier (c) standard of living (d) income.\n<\/li>\n<\/ol>\n

              \u00a0THEORY
              \n<\/strong><\/li>\n

            5. Identify and explain briefly the two major factors affecting the circular flow of income.\n<\/li>\n
            6. \n
              Simply explain the concept of income in relation to saving, investment and consumption.\n<\/div>\n

              \u00a0EQUATION AND CALCULATION OF INCOME DETERMINATION
              \n<\/strong>CONTENTS
              \n<\/strong><\/li>\n

            7. Y = C + I + a + (x \u2013 m)\n<\/li>\n
            8. Calculation of APS\n<\/li>\n
            9. Calculation of APC\n<\/li>\n
            10. Calculation of MPS\n<\/li>\n
            11. \n
              Calculation of MPC\n<\/div>\n

              \u00a0NATIONAL INCOME AND ITS CALCULATION<\/strong>
              \n\t\t\tIn calculating the National Income for an open economy where import and export are involved (International Trade). A function such as:
              \nY = c + 1 + a + (x-m) could be used in arriving at the aggregate income in this function.
              \nY = The value of national income
              \nC = Aggregate Investment expenditure (consumption)
              \nI = Private Investment expenditure
              \nX = Export expenditure
              \nM = Import expenditure
              \nXn = Net exports (Xn >0)<\/p>\n

              \u00a0Example 1
              \n<\/strong>Below is information concerning the gross national product for a country in 1994 (in billions of naira) by sectors that buy the GNP.
              \n\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Heading\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Amount
              \n<\/strong>Personal Consumption expenditures\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0637.3
              \nGross Private domestic investment\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0452.2
              \nGovernment purchase of goods and services\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0105.3
              \nExports of goods and services\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 1001.
              \nImports\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a050.3\n<\/li>\n<\/ol>\n

                \n
              • What method of national income is used for the above table?\n<\/li>\n
              • \n
                Calculate the national income of the solution.\n<\/div>\n

                \u00a0Solution
                \n<\/strong><\/li>\n<\/ul>\n

                  \n
                1. The method used is the expenditure method.\n<\/li>\n
                2. \n
                  Since we are concerned with the expenditure method we have.\n<\/div>\n

                  GNP = C + I + G + (x \u2013 m)
                  \nSubstituting GNP = N637. 3 + N453.2 + N105.3 + (N100.1 \u2013 N50.3) = N1,245.66<\/p>\n

                  \u00a0Example II
                  \n<\/strong>The national income equation of a hypothetical country is expressed as:
                  \nY = C + I + G
                  \nWhere:
                  \nC = a + by
                  \n N100m + 3<\/sup>\/4Y<\/sub>
                  \n\t\t\t I = N20m
                  \n G = N40m
                  \nWhere C, I and G are consumption, investment and government expenditure respectively. Calculate the equilibrium level of national income.
                  \nSolution:
                  \n<\/strong>Y = C + I + G
                  \nY = a + by + I + G
                  \nSubstituting into the equation above
                  \nY = N100m + 3<\/sup>\/4Y<\/sub> + N40m
                  \nCollecting like terms
                  \n(Y \u2013 3<\/sup>\/4Y<\/sub>) = 100 + 20m + N40
                  \nFactorise the RHS
                  \nY(1 \u2013 \u00be)
                  \nY ( \u00bc ) = N160m
                  \nDivide both sides by \u00bc
                  \nY \/ \u00bc 160
                  \n\u00bc = \u00bc
                  \nY = 160 x 4<\/sup>\/1<\/sub> = N640m<\/p>\n

                  \u00a0PROPENSITIES TO CONSUME
                  \n<\/strong>1. Average propensity to consume (APC)
                  \n<\/strong>This is the ratio of consumption to income. Also, it is the fraction of the national income
                  \nconsumed. That is,
                  \n\u00a0\u00a0\u00a0\u00a0APC = Total National Consumption = C
                  \n\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Total National Income\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Y
                  \nAlgebraically
                  \nAPC = 1 (as c = y)
                  \nC = Y X APC
                  \nAPC >1 as C >Y
                  \nY = C<\/sup>\/APC<\/sub>
                  \n\t\t\tAll things being equal, the average propensity to consume falls between zero and unitary.<\/p>\n

                  \u00a0Example 1
                  \n<\/strong>Calculate the average propensity to consume. If the national income is N20m and the total National Consumption is N15m
                  \nSolution
                  \n<\/strong>APC = C<\/sup>\/Y<\/sub>
                  \n\t\t\tSubstituting into the formula above
                  \nAPC = N15M
                  \n\u00a0\u00a0\u00a0\u00a0N20m = 0.75<\/p>\n

                  \u00a0Example II<\/strong>
                  \n\t\t\tIf the national income is N150m and the average propensity to consume is 0.2. Calculate the total national consumptions.<\/p>\n

                  \u00a0Solution:
                  \n<\/strong>Applying
                  \nC = Y x APC
                  \n = N150m x 0.2
                  \n = N30m<\/p>\n

                  \u00a0EVALUATION
                  \n<\/strong>A.\u00a0\u00a0\u00a0\u00a0Find the national income when the total consumption is N600m and the average propensity to consume is 0.4.
                  \nB.\u00a0\u00a0\u00a0\u00a0Calculate the average propensity to consume if the national income is N40m and the total National Consumption is N30m.<\/p>\n

                  \u00a02. Marginal Propensity To Consume (MPC)
                  \n<\/strong>Marginal Propensity to Consume (MPC). This can be defined as the ration of the change in consumption to the change in income that necessitated it. That is,<\/p>\n

                  \u00a0MPC = Change in Consumption\u00a0\u00a0\u00a0\u00a0 = \u2206C
                  \n\"\"\/\"\"\/\u00a0\u00a0\u00a0\u00a0Change in income\u00a0\u00a0\u00a0\u00a0 \u00a0\u00a0\u00a0\u00a0 \u2206Y
                  \n OR<\/p>\n

                  \u00a0MPC = \u2206C (Infinitesimal Change) \u2013 A very Small Change
                  \n\u00a0\u00a0\u00a0\u00a0\u2206Y
                  \nO < MPC < 1
                  \nMPC falls between Zero and one
                  \nAlgebraically
                  \n \u2206C = MPC x \u2206Y and
                  \n\"\"\/ \u2206Y = \u2206C
                  \n\u00a0\u00a0\u00a0\u00a0MPC<\/p>\n

                  \u00a0Example 1
                  \n<\/strong>If total national income increases from N1,500m to N1,800m and the total national consumption increases from N500m to N650m. What is the MPC.
                  \nSolution:
                  \n<\/strong>MPC = \u2206C
                  \n\u00a0\u00a0\u00a0\u00a0 \u2206Y
                  \nSubstituting
                  \nMPC = (650 \u2013 500)m
                  \n\u00a0\u00a0\u00a0\u00a0 1,800 \u2013 1,500
                  \nMPC = N150m = 0.5
                  \n\u00a0\u00a0\u00a0\u00a0 N300<\/p>\n

                  \u00a0Example 2
                  \n<\/strong>Given that the total national income increases from N750m to N1000m and the MPC is 0.7, find the change in consumption.
                  \nSolution.
                  \n<\/strong>\u2206C = MPC x \u2206Y
                  \n\u2206Y = N1000m \u2013 N750m
                  \n\u00a0\u00a0\u00a0\u00a0 = N250m
                  \nSubstituting
                  \n<\/strong>\u2206C = 0.7 x N250m
                  \n = N175m
                  \nExample 3
                  \n<\/strong>Determine the change in the total income if the change in the total national consumption is N300m and the MPC is 0.4.
                  \nSolution
                  \n<\/strong>Applying
                  \n\u2206Y = \u2206C = N300m = N750m
                  \n\"\"\/\"\"\/\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0MPC\u00a0\u00a0\u00a0\u00a0 0.4<\/p>\n

                  \u00a0EVALUATION
                  \n<\/strong>A.\u00a0\u00a0\u00a0\u00a0If total national income increases from N2,500m to N2.800m and the total national consumption increases from N700 to N950m. What is the mpc.
                  \nB.\u00a0\u00a0\u00a0\u00a0Determine the change in the total national income if the change in the total nation consumption is N600m and the mpc is 0.8<\/p>\n

                  \u00a0PROPENSITIES TO SAVE
                  \n<\/strong>1. Average Propensity To Save (APS<\/strong>)
                  \nThis is defined as the ratio of savings to income. That is, the ratio of income saved (nationally) to the national income. It is denoted thus:
                  \n\u00a0\u00a0\u00a0\u00a0AP = Total National Savings = S
                  \n\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Total National Income\u00a0\u00a0\u00a0\u00a0 Y
                  \n\u00a0\u00a0\u00a0\u00a0O < APS < 1 (provided O < S < Y)
                  \n\u00a0\u00a0\u00a0\u00a0APS = 1(as S = Y)
                  \n\u00a0\u00a0\u00a0\u00a0APS = O (as S = O) Zero savings<\/p>\n

                  \t\t\t\tAlgebraically
                  \n<\/strong> S = APS x Y and
                  \n\"\"\/ Y = S
                  \n APS
                  \nExample 1
                  \n<\/strong>If total national savings is N50m and the total national income is N500m, then the APS will be thus:
                  \nSolution:
                  \nApplying
                  \nAPS = S
                  \n\u00a0\u00a0\u00a0\u00a0Y
                  \nSubstituting
                  \n\"\"\/APS = N50
                  \n\u00a0\u00a0\u00a0\u00a0N500
                  \nAPS = 0.1
                  \nExample 2<\/strong>
                  \n\t\t\tCalculate the total national income if the total national savings is 250m and the APS is 0.2.<\/p>\n

                  \u00a0Solution:
                  \n<\/strong>Applying
                  \n\"\"\/Y = S
                  \n APS
                  \nSubstituting
                  \n<\/strong>APS = N250
                  \n\u00a0\u00a0\u00a0\u00a0 0.2
                  \nAPS = N1,250m<\/p>\n

                  \u00a02. Marginal Propensity To Save (MPS)
                  \n<\/strong>This is defined as the ratio of the change is savings to the change in income that necessitated it. It is denoted thus:
                  \nMPS = Change in Savings \u2206S
                  \n\u00a0\u00a0\u00a0\u00a0 Change in income \u2206Y<\/p>\n

                  \u00a0OR
                  \nMPS = \u2206S (infinitesimal change) – A very small change 0 < MPS < 1
                  \nMPS falls between zero and one
                  \nAlgebraically,
                  \n\u2206S = MPC x \u2206Y and \u2206S
                  \n\u2206Y MPS
                  \nNote<\/strong>: MPS + MPC = 1
                  \n\u00a0\u00a0\u00a0\u00a0MPS = 1 \u2013 MPC<\/p>\n

                  \u00a0Example 1
                  \n<\/strong>What is the MPS if the total national income increase from N375 to 450m and the total national savings increases from N85m to N100m
                  \nMPS = \u2206S
                  \n \u2206Y<\/p>\n

                  \u00a0Substituting
                  \n<\/strong>MPS = (100 \u2013 85)
                  \n\u00a0\u00a0\u00a0\u00a0 450 \u2013 375
                  \nMPS = N15m = 0.2
                  \n\"\"\/\u00a0\u00a0\u00a0\u00a0 N75m <\/p>\n

                  \u00a0Example II
                  \n<\/strong>If the change in the total national income is N300 and the mps is 0.6, what will be the total national savings.
                  \nSolution:
                  \n<\/strong>\u2206S = MPS x \u2206Y
                  \n = 3000 x 0.6 = N180m<\/p>\n

                  \u00a0Example III<\/strong>
                  \n\t\t\tGiven the change in the total national savings is N120mand the MPS is 0.3 calculate the total national income.
                  \nSolution
                  \n<\/strong>Applying
                  \n\u2206Y = \u2206S
                  \n\u00a0\u00a0\u00a0\u00a0 MPS
                  \n = N120m = N400m
                  \n\u00a0\u00a0\u00a0\u00a0 0.2
                  \nExample IV
                  \n<\/strong>Find the mps when the mpc is 0.6
                  \nSolution
                  \n<\/strong>mpc + mps = 1
                  \ntherefore mps = mpc \u2013 1\n<\/li>\n<\/ol>\n

                    \n
                  • mps = 0.6 \u2013 1\n<\/li>\n
                  • \n
                    mps = -0.4\n<\/div>\n

                    mps = 0.4<\/p>\n

                    \u00a0READING ASSIGNMENT
                    \n<\/strong>Amplified and Simplified Economics for SSS by Femi Alonge , Chapter 31 page 413 \u2013 425
                    \nFundamentals of Economics for the SSS by R.A.I Anyanwuocha Chapter 32 page 254 \u2013 258
                    \nMathematical Approach to Economics for sss by Kunle A. Nosiru page 177-182<\/p>\n

                    \u00a0WEEKEND ASSIGNMENT
                    \n<\/strong>1.\u00a0\u00a0\u00a0\u00a0The disposable income of Ade increases by #10 million and her marginal propensity to consume also goes up to #0.6 , how much of the additional will she save? (a) #40,000 ( b) #400,000 ( c) #600,000 (d) #4,000,000
                    \n2.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Given the investment and consumption function of a two sector economy as
                    \nC = 25 + 0.30 y and I = 10 million . What is the equilibrium level of income?
                    \n(a) #50m (b) #500m ( c) #5000m ( d) #5.500m (e ) #5.550m
                    \n3.\u00a0\u00a0\u00a0\u00a0If the national income is N150m and the average propensity to consume is 0.2 calculate the total national consumption. (a) N30m (b) N40m (c) 15m (d) 10m
                    \n4.\u00a0\u00a0\u00a0\u00a0Calculate the average propensity to consume if the national income is N20m and the total national consumption is N15m. (a) 0.25 (b) 0.17 (c) 0.75 (d) 0.1
                    \n5.\u00a0\u00a0\u00a0\u00a0Determine the change in the total national income if the change in the total national consumption is N300m and the MPC is 0.4 (a) N750m (b) N400m (c) N500 (d) N400m<\/p>\n

                    \u00a0THEORY
                    \n<\/strong>1.\u00a0\u00a0\u00a0\u00a0Explain the term propensity to consume and its effects on the economy
                    \n2.\u00a0\u00a0\u00a0\u00a0State the two attributes of propensity to save.<\/p>\n

                    \u00a0
                    \n\u00a0<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"

                    WEEK NINE THEORY OF INCOME DETERMINATION CONTENT Circular Flow of Income Concept of Saving Concept…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,272],"tags":[],"class_list":["post-3417","post","type-post","status-publish","format-standard","hentry","category-posts","category-third-term-ss2-economics"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/posts\/3417","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/comments?post=3417"}],"version-history":[{"count":1,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/posts\/3417\/revisions"}],"predecessor-version":[{"id":3418,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/posts\/3417\/revisions\/3418"}],"wp:attachment":[{"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/media?parent=3417"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/categories?post=3417"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ecolebooks.com\/nigeria\/wp-json\/wp\/v2\/tags?post=3417"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}