Macroeconomics

Table of Contents

1. Topic pack - Macroeconomics - introduction
2. 2.1 The level of overall economic activity (notes)
   1. Overall economic activity - introduction
   2. The circular flow of income model (1)
   3. Circular flow - two sector closed
   4. Circular flow - two sector open
   5. Circular flow - three sector open
   6. Circular flow - government
   7. The circular flow of income model (2)
   8. Circular flow - a summary
   9. Some mathematics
   10. Measures of economic activity
   11. Examining the three methods of calculating national income
   12. What is GDP? (video)
   13. Different national income measures
   14. Real v money data
   15. Current and constant prices
   16. Using index numbers
   17. Total and per capita
   18. Case study - rapid economic growth
   19. Using national income data
   20. Purchasing power of GDP
   21. Alternative measures of GDP
   22. Case Study
   23. Short term fluctuations and long term trends
   24. The business cycle in history
3. 2.1 The level of overall economic activity (questions)
4. Section 2.2 Aggregate demand and supply (notes)
5. Section 2.2 Aggregate demand and supply (simulations and activities)
6. 2.2 Aggregate Demand and Aggregate Supply (questions)
7. 2.3 Macroeconomic objectives (notes)
8. Low Unemployment
9. 2.3 Macroeconomic objectives (questions)
10. 2.4 Fiscal policy (notes)
11. 2.4 Fiscal policy (questions)
12. 2.5 Monetary policy (notes)
13. 2.5 Monetary Policy (questions)
14. Section 2.6 Supply-side policies (notes)
15. 2.6 Supply-side policies (questions)
16. Print View

Circular flow - a summary

The leakages (W) from the circular flow are:

• Savings  (S) - this is households not spending some of their income
  
• Taxation (T) - this is the tax revenue collected by government
  
• Imports  (M) - This is the flow of spending outwards not the goods and services inwards

The injections (J) are

• Investment  (I) - expenditure on capital goods
• Government (G) - spending on all kinds of things (Education, health, Defence and so on)
  
• Exports       (X) - This is the flow of spending outwards not the goods and services inwards

An economy is in equilibrium when total injections (J) equal total leakages (W).

The standard codes used in this model, and in macroeconomics in general, are:

Y = National Income
C = Domestic Consumption
S = Savings
M = Imports
T = Taxation
I = Investment
X = Exports
G = Government Spending

The circular flow model of an economy is very useful within the study of economics. We will be looking at the actions and behaviour of firms and households, and how governments interact with them. We will also look at how changes in the leakages and injections affect the stability of an economy.