Macroeconomics The Study Of Economic Activity In The Whole Economy
Macroeconomics – the study of economic activity in the whole economy. It includes the study of:
Economic growth – a steady rate of increase of national output
Employment – a low level of unemployment
Price stability – a low and stable rate of inflation
External stability – a favorable balance of payments position
Income distribution – an equitable distribution of income Circular flow of income model – the movement of spending and income through the economy.
In a macroeconomics equilibrium, national expenditure, national output and national income are all equal.
Measure of national output/national income/ national expenditure
1. Gross domestic product (GDP) is the total output of goods and services produced in a country in a given time period.
2. Gross national income (GNP/GNI) is the total income earned by a country’s factors of production in a given period of time.
3. Net national income (NNI) is the gross national income adjusted for depreciation (the amount of capital that wears out in a period of time)
4. GDP per capita: GDP divided by the population, a measure of the average standard of living in a country.
Circular flow of income
In addition to the basic model there are leakages and injections
Leakages: withdrawals of possible spending from the circular flow (saving (pension, banks investments), taxes, imports(tourism))
Injections: additions of spending to the circular flow (investments(spending by firms on capital goods), govern. spending, exports(spending by foreign households/firms/governments on domestically produced products).
in a macroeconomic equilibrium, total leakages are equal to total injections and national income is constant.
Aggregate demand (a measure of spending)
Is the total spending on goods and services in a country in a given period of time at a given price level.
1. Consumption(consumer expenditure) – total spending by households on consumer goods and services.
2. investment – total spending by firms on
Economic growth – a steady rate of increase of national output
Employment – a low level of unemployment
Price stability – a low and stable rate of inflation
External stability – a favorable balance of payments position
Income distribution – an equitable distribution of income Circular flow of income model – the movement of spending and income through the economy.
In a macroeconomics equilibrium, national expenditure, national output and national income are all equal.
Measure of national output/national income/ national expenditure
1. Gross domestic product (GDP) is the total output of goods and services produced in a country in a given time period.
2. Gross national income (GNP/GNI) is the total income earned by a country’s factors of production in a given period of time.
3. Net national income (NNI) is the gross national income adjusted for depreciation (the amount of capital that wears out in a period of time)
4. GDP per capita: GDP divided by the population, a measure of the average standard of living in a country.
Circular flow of income
In addition to the basic model there are leakages and injections
Leakages: withdrawals of possible spending from the circular flow (saving (pension, banks investments), taxes, imports(tourism))
Injections: additions of spending to the circular flow (investments(spending by firms on capital goods), govern. spending, exports(spending by foreign households/firms/governments on domestically produced products).
in a macroeconomic equilibrium, total leakages are equal to total injections and national income is constant.
Aggregate demand (a measure of spending)
Is the total spending on goods and services in a country in a given period of time at a given price level.
1. Consumption(consumer expenditure) – total spending by households on consumer goods and services.
2. investment – total spending by firms on