1. MACRO Economics Unit 2 Macro & Circular Flow
Created: Aug 2012 by Jim Luke, jimluke.com This work is licensed under the Creative Commons Attribution-NonCommercial License

2. Society's Macro Policy Goals
Growth

3. Society's Macro Policy Goals
Growth
Stability

4. Society's Macro Policy Goals
Growth
Stability
Full Employment

5. Society's Macro Policy Goals
Growth
Stability
Full Employment
Stable value of money

6. What Are You Measuring?
Stocks vs. Flows

7. Money Isn’t Real: Nominal vs. Real

8. Adam Smith, 1776
Adam Smith, 1776
How Does a Society, as a Group, Solve the Economic Problem of Unlimited Wants but Only Scarce Resources?
“No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.”

9. The Product of a Nation Measure the Economy? Francois Quesnay (1758)
economic activity as flow
circular flow of output and income
National income accounting system (~1920)

10. The Money Goes Round: The Circular Flow

11. The Macro Economy: Key Concepts
Stocks and Flows
Circular Flow
Money Measures Value
Equilibrium when:
Income = Product
Market Outflows = Inflows
Expected = Actual

12. Circular Flow of Economy

13. Starting Point: 4 Agents

14. Next: Markets - Places to Buy and Sell

15. Agents One-at-a-Time: Consumers (Households)

16. Agents: Firms, the producers

17. Another agent: Government

18. The Last Agent: ROW

19. Goods markets

20. Another Look: Financial Markets

21. Putting it altogether.