![]() On the PPF curve, it is impossible to increase one choice, without causing less production of the other. Pareto efficiency is any point on the PPF curve.At point D, we can increase both goods and services without any opportunity cost. At point D, the economy is inefficient.But, the opportunity cost is that output of goods falls from 22 to 18. Moving from Point A to B will lead to an increase in services (21-27).Diagram of Production Possibility Frontier National Accounts also shows Secondary Income, where the income flows next.A production possibility frontier shows how much an economy can produce given existing resources.Ī production possibility can show the different choices that an economy faces.įor example, when an economy produces on the PPF curve, increasing the output of goods will have an opportunity cost of fewer services. Minus Taxes on Products and Production paid.Plus Subsidies on Products and Production received.Most Household Primary Income comes from Compensation of Employees, most Government Primary Income comes from Taxes on Products (VAT), most Corporation Primary Income is negative as Gross Operating Surplus is distributed to the other factors of production.įor the country as a whole, after Net Factor Income and the Subsidies received from the rest of the world have been added, and the Taxes paid have been deducted from Gross National Product, the remainder is Gross National Income. Minus Subsidies on Products and Production paid.Plus Taxes on Products and Production received.For National Accounts, we also include in Primary Income the Government’s direct input into production (Subsidies paid) and its income from the production process (Taxes on Products and Production received). This makes our Net Factor Income negative, and our GNP is, therefore, less than our GDP.Īll Factor Income is also Primary Income. In Ireland's case, for many years past, the amount belonging to persons abroad has been much greater than the amount received from abroad, due mainly to the profits of foreign-owned companies. In most countries, the amounts flowing in and flowing out are more or less equal, so GNP and GDP are quite close in value. After these inflows and outflows have been counted, the total income remaining with Irish households, corporations and government is the Gross National Product (GNP). ![]() The many large investment funds among Ireland’s Financial Corporations have large inflows, but equally large outflows, and these greatly inflate the factor flows while having little net effect. ![]() There are also successful Irish companies with subsidiaries abroad, and these companies receive inflows into Ireland. ![]() If foreign institutions have lent money to the Irish Government, the interest on that national debt is also part of the outflow which leaves the country. Even if these companies do not pay a dividend, the National Accounts treat it as if it is paid abroad (see Reinvested Earnings). The outflows from Ireland are mostly net profits that are made by Foreign-Owned Corporations in Ireland which are paid to their owners abroad. In Ireland in the twenty-first century the largest part of Net Factor Income are the inflows and outflows on capital. This exchange with the rest of the world is the Net Factor Income for the total economy. The net is the total inflows less the total outflows. The income on the first three factors of production (Compensation of Employees, Rent and Investment Income) flow into and out of a country. The workers receive their wages ( Compensation of Employees), the landlord receives Rent on land, the owner of capital (shareholder or lender) receives dividends or interest ( Investment Income) and the remainder goes to the enterprise. Each of these factors gets a return for their input into production and this is called Factor Income. In economic theory the four factors of production are labour, land, capital and enterprise.
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