For an economy as a whole,

Question

Quizplus · Accepted Answer

In macroeconomics, the economy is viewed as a circular flow of income and expenditure. This means that every dollar of expenditure by one person is someone else's income. Therefore, for the economy as a whole, income must equal expenditure. This is also known as the national income identity. Wages do not necessarily equal profit, as profit is the difference between revenue and costs, whereas wages are a cost to firms. Consumption and saving do not have to be equal, as individuals can borrow or lend to maintain their desired level of consumption. Household spending on goods does not have to equal spending on services, as households have different preferences and spending habits.

For an Economy as a Whole