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

Measures of economic activity - National Income (GDP/GNP) measures

Remember               Y=E=Q (in fact these are identities because they measure the same thing)

Therfore we can measure national income (GDP/GNP) in three different ways.

We could look at the total level of expenditure on goods and services. This would include consumer expenditure (C), investment expenditure (I), government expenditure (G) and net export spending (X-M) i.e. C + I + G + (X-M).

Alternatively, we could look at the total level of income generated. This would include all factor incomes - wages, profit, rent and interest.

A final possibility is to measure the total level of output produced by firms.

All three of these are methods of calculating national income:

• Total expenditure
• Total income and
• Total output

Each should give the same result, because each is measuring essentially the same thing; i.e. a flow of income over a period of time. The logic of this is that, for the economy as a whole, the value of all output equals what is spent on the output, and what is spent on the output becomes income to those who have produced the output.