Economic unit 2 sac 1

Macroeconomics

studies economy-wide issues in terms of aggregates or totals including issues such as unemployment, inflation, economic growth and commodity prices.

Aggregate

• is a term used to describe looking at a whole rather than individual parts. It can also mean ‘added all together’. 

• Rather than looking at individual markets, we are now looking at the economy as a whole

This is referred to as AGGREGATE SUPPLY & AGGREGATE DEMAND (AD/AS)

Instead of analysing price in one particular market,

we look at price changes in the whole economy using the term INFLATION

Instead of analysing quantity in one particular market,

we analyse quantity changes overall in terms of GDP -Gross Domestic Product

In macroeconomics, what is economic activity?

•  the total expenditure, volume of production or income generated from the goods and services produced in an economy over a period of time. 

ALWAYS USE THE UNDERLINED TERMS WHEN DISCUSSING ECONOMIC ACTIVITY

Leakages

money that is diverted away from consumption in the circular flow model

injections

money that flows into the economy in relation to the circular flow model

what does Leakages and Injections do in the Circular Flow model?

Leakages and Injections account for the imperfections of the Circular Flow model

examples of Leakages

savings

taxes

import

money that leaves the Economy

examples of Injections

investment

government spending and exports

money that goes into the Economy

circular flow model

this is a model used to show the flow of money, resources, goods & services in a Economy

It is a simplified way of showing how the macroeconomy operates

5 sectors in an economy

• households

• businesses

• government

• financial sector (like banks)

• External/overseas sector

what is economic activity?

The production, income and expenditure that takes place across the whole economy

production

total value of goods and services that are made in an economy

Income

total wages earned by people who contribute to production of goods and services

expenditure

the total spending for goods and services to be made