ECO 1104 Lecture Notes - Lecture 7: Income Approach, Government Spending, Macroeconomics

• School: University of Ottawa
• Department: Economics
• Course: ECO 1104
• Professor: Serge Nadeau

Document Summary

Chapter 7 measuring the wealth of nations. Major elements of chapter: circular flow model gives basic structure of macroeconomy, major components of national income, national accounting, nominal versus real quantities. Circular flow model: gives the structure, or the skeleton, of the macroeconomy, the textbook gives a simple version, which is fine with me. Basic concept: flows of expenditures and incomes circulating through the markets that comprise the macroeconomy, analogous to the cardio-vascular system of blood circulating through the human body. In the diagram coming up: the green arrows denote financial flows: the red arrows denote the real flows of either factors being rendered or goods and services being exchanged. In the factor market (on the left: households are the sellers and earn income, firms are the buyers and spend. In the goods and services market (on the right: households are the buyers and spend, firms are the sellers and earn income.