Econ Unit 3: The National & International Economy

3 Macro Goals of Every Country:

1. Promote Economic Growth

2. Limit Unemployment

3. Keep Prices Stable

2 Markets of the Circular Flow Model

1. Product Market: Goods and services are sold to consumers

2. Factor Market: Resources are bought

2 Economic Actors of the Circular Flow Model

1. Businesses

2. Households

Main Flow of the Circular Flow Model

Resources flow from households to businesses, products flow from businesses to households.

Leakage

Money leaves the Circular Flow Model

Injection

Money enters the Circular Flow Model

Goal #1: How does a country promote economic growth?

Measuring economic indicators like GDP

GDP (Gross Domestic Product)

Total value of all final goods and services produced within a country in a given year

Formula for GDP

C (consumer purchases) + I (Gross investment/purchases of tools and homes) + G (Government Purchases) + Xn (Net Imports: exports - imports)

3 Limitations of GDP:

1. Informal economy

2. Negative externalities

3. Quality of life